On July 29, 2021, the United States Department of Labor (“DOL”) announced that it would repeal the Trump-era rule (the “Joint Employer Rule”) relating to the determination of joint employers for the purposes of assigning responsibility for wages and hours violations under the Fair Labor Standards Act (“FLSA”). The Joint Employer Rule, which came into effect on March 16, 2020, was intended to clarify the definition of who can be held jointly liable as an employer under the FLSA by highlighting whether someone:
- Hires or fires the employee;
- Supervises and controls to a large extent the work schedule or conditions of employment of the employee;
- Determines the rate and method of payment of the employee; and
- Maintains employee employment records.
With less emphasis on these four factors, effective September 28, 2021, the DOL expands the scope of who could potentially be liable as a joint employer for wage and time violations, such as labor issues. minimum wage and overtime. As a result of the cancellation, it is now much more likely that hiring independent contractors and / or hiring another company to provide services, such as janitorial and / or payroll services, can lead to liability for violations of wages and hours as a joint employer.
Further, this cancellation follows a series of other reversals carried out by the Biden-era DOL in the wake of the 2020 election, signaling that the agency is likely to take a much tougher stance on the measures to application of wages and hours. (Click here for our previous discussion of DOL’s earlier removal from Trump-era rules that were due to go into effect on May 7, 2021 and which were intended to relax the test for classifying workers as independent contractors).
Ultimately, however, businesses, especially those that regularly hire independent contractors and / or other businesses to provide services, should also keep abreast of state laws regarding these matters, as the law of l The applicable state may be much stricter than the federal law on this subject. . For example, California and Massachusetts have adopted the following three-part ABC test to determine whether workers are independent contractors or employees in the context of wages and hours:
A. That the worker is free from the control and direction of the hiring entity in the performance of the work, both under the contract for the performance of the work and in fact, and
B. That the worker is performing work that is outside the ordinary course of business of the hiring entity, and
C. That the worker is habitually engaged in an independently established trade, occupation or business of the same nature as the work performed.
(Click here for an in-depth discussion of the ABC test in California.) Other states have also adopted this test in at least some contexts, such as UI, while using another test for the purposes of wage laws. and hours (including overtime and calculations). These and many other recent changes in California law have been sudden and retroactive, and entities hiring in other states may also face such abrupt and costly changes in their business operations. Therefore, recruiting entities should continue to actively monitor developments in labor law in each of the states in which they operate, as well as changes at the federal level.
This is particularly the case in California, where employers with potential ABC test violations could be subject to significant penalties, in addition to unpaid taxes, unemployment benefits, meal and rest bonuses, and wage claims. unpaid by state and local governments. that private parties have brought class and representational capacities.