In a final rule released last Thursday, the Biden administration rescinded a 2020 Trump-era rule titled Joint Employer Status Under the Fair Labor Standards Act. As the final Rule explains, the Trump administration regulation introduced a four-factor test that limited the circumstances under which multiple businesses would share liability for wage violations.
The 2020 measure was a boon for businesses—particularly franchises such as McDonald’s—and was a favorite of Republican lawmakers.
In February 2020, 17 states and the District of Columbia filed suit in the United States District Court for the Southern District of New York, alleging that the Joint Employer Rule violated the Administrative Procedure Act (APA). See New York v. Scalia, 490 F. Supp. 3d 748 (S.D.N.Y. 2020). The court agreed that the Rule violated the APA because it was contrary to law—specifically, it violated the Fair Labor Standards Act. However, the court deemed certain portions of the Rule severable and left them intact.
On March 12, 2021, the U.S. Department of Labor (DOL) issued a notice of proposed rulemaking proposing to rescind the Joint Employer Rule for several reasons, including the outcome of New York v. Scalia, the Rule’s potential negative impact on workers, and a diminished pool of employers from whom employees could collect back wages owed. Following a comment period, the DOL decided to proceed with rescission.
“Joint employment is part of our longstanding federal labor laws,” said a DOL spokesperson in a prepared statement. “The U.S. Department of Labor’s Wage and Hour Division will continue to follow the law and judicial precedent when evaluating joint employer relationships to enforce worker protections.”
“While we know better than to expect common-sense policymaking from the Biden administration, we strongly urge the DOL to reinstate the four-factor test for determining joint employment and end its crusade against American ingenuity,” Republican lawmakers Rep. Virginia Foxx (R-N.C.) Rep. and Fred Keller (R-Pa.) responded via a joint statement.
The final Rule will take effect on September 28.