US DOL rescinds Trump administration’s joint employer rule

On July 29, 2021, the US Department of Labor filed a final rule repealing the Trump-era Joint Employer Status Under the Fair Labor Standards Act (29 CFR part 791) rule, which came into effect on March 16. 2020.

The Trump-Era Rule implemented employer-friendly changes to DOL’s rules regarding joint employer liability under the Fair Labor Standards Act. This rule established two standards for determining whether employers were joint employers for the purposes of the FLSA: a vertical joint employment standard and a horizontal joint employment standard.

The vertical standard applied a four-factor test to determine whether a purported joint employer was acting directly or indirectly in the best interests of the employee’s recognized employer. Focusing primarily on the level of control over the worker, the four-part test assessed the extent to which the putative employer has the power to: (1) hire or fire employees, (2) control their hours or working conditions employment to a substantial degree, (3) determine workers ‘rates of pay and the methods by which they are paid, and (4) whether it maintains workers’ employment records. The rule’s emphasis on effective control has considerably reduced the circumstances giving rise to a joint employer relationship.

The horizontal standard, on the other hand, sought to determine whether the alleged co-employers acted independently of each other or were “sufficiently associated” with each other in relation to the employee’s employment.

In its final rule of July 29, 2021, the DOL repealed the vertical standard, believing that the vertical standard had never been applied before by the DOL’s wages and hours division, it was incompatible with the joint analyzes of the employer enforced by the courts and had so far not been widely adopted by the courts. The DOL further considered that the horizontal standard was ‘intertwined’ with the vertical standard and, although the horizontal standard largely conformed to earlier DOL guidelines, repealed it, along with the entire rule of the era. Trump.

The cancellation of the rule by the DOL means that there is currently very little clear guidance from the DOL regarding joint employment standards. As a result, at the moment, employers have to grapple with a patchwork of various court decisions to seek guidance as to the existence of joint employment status.

Copyright © 2021, Hunton Andrews Kurth LLP. All rights reserved.Revue nationale de droit, volume XI, number 223

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