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DOL’s Final Rule On Joint-Employer Finds Opposition

September 22, 2020

The U.S. District Court for Southern District of New York struck down major portions of the U.S. Department of Labor’s (DOL) joint-employer final rule, which was issued earlier this year. The court found DOL’s new interpretation for vertical joint employer liability conflicts with the Fair Labor Standards Act (FLSA), and the DOL violated the Administrative Procedure Act’s (APA’s) rulemaking requirements.

In the joint-employer final rule, DOL revised the interpretation of joint-employer status under the FSLA to promote certainty for employers and employees and uniformity among court decisions, and to reduce litigation. The decision found that the update narrowed the definition of joint-employer, ignoring the FLSA’s broad definitions making it in direct conflict with FLSA.

Additionally, the DOL failed to adequately justify its departure from its prior interpretations, which violates the Administrative Procedure Act (APA). The APA requires agencies to ‘examine the relevant data and articulate a satisfactory explanation for its action, including a rational connection between the facts found and the choice made.

The DOL is expected to appeal this decision, but regardless of the next steps, employers in potential vertical joint employment scenarios should be aware of the decision and prepared to make changes to workforce and staffing arrangements in support of the final rule.