A New York judge largely overturned a Department of Labor regulation that went into effect in March redefining joint employer status.
Although issued by a New York district court, the decision impacts employers nationwide. Democrat attorneys general in 17 states and the District of Columbia had sued to overturn the rule.
The judge vacated major portions of the rule based on procedural grounds, holding that DOL failed to meet its obligations under the Administrative Procedures Act , which defines the steps federal agencies must take to create new regulations.
Vacated by the judge are parts of the rule that apply to what is called “vertical” joint employment. He said DOL was wrong when it defined joint employer liability based only on the Fair Labor Standards Act definition of “employer.”
He asserted that DOL had ignored the FLSA’s other text and Supreme Court and lower court precedents that defined joint employer liability differently.
Allowed to stand was the rule’s application to a “horizontal” joint employment relationship. Under that, two employers are separate unless there is an agreement to share the employee’s services; one employer acts directly or indirectly in the interest of the other in relation to the employee; or employers share control of the employee, directly or indirectly, because one employer controls, is controlled by, or is under common control with the other employer.
Making matters even more confusing, the decision doesn’t mean returning to the Obama-era DOL joint employer rule, which has been vacated by the Trump DOL. Instead, the previous joint employer definition, which was adopted in 1958, will apply.
Attorneys Susan Harthill and Leni Battaglia of the Morgan Lewis & Bockius law firm, urge companies that relied on DOL’s new control test to restructure their business relationships after consulting with legal counsel about the applicable law because the federal circuit courts have applied different, multifactor tests, and state laws may vary as well.
