{"id":10718,"date":"2026-05-18T12:44:58","date_gmt":"2026-05-18T12:44:58","guid":{"rendered":"https:\/\/usatrustedlawyers.com\/blog\/department-of-labors-joint-employer-rule-is-struck-down\/"},"modified":"2026-05-18T12:44:58","modified_gmt":"2026-05-18T12:44:58","slug":"department-of-labors-joint-employer-rule-is-struck-down","status":"publish","type":"post","link":"https:\/\/usatrustedlawyers.com\/blog\/department-of-labors-joint-employer-rule-is-struck-down\/","title":{"rendered":"Department of Labor\u2019s \u201cJoint Employer\u201d Rule Is Struck Down"},"content":{"rendered":"\n
\n
\n On September\u00a08, 2020, the Honorable Gregory Woods of the U.S. District Court for the Southern District of New York struck down most of the \u201cjoint employer\u201d rule issued by the Department of Labor (\u201cDOL\u201d) in January 2020.\u00a0 The court held that the DOL\u2019s adoption of significant portions of the rule, which limited the situations in which two or more persons or entities may be held liable for violations of the wage-and-hour provisions of the federal Fair Labor Standards Act (\u201cFLSA\u201d), was \u201carbitrary and capricious\u201d and that the rule conflicted with the FLSA.\u00a0<\/p>\n

The \u201cjoint employer\u201d rule was issued on January\u00a016, 2020 and took effect on March\u00a016, 2020, and impacted \u201cvertical joint employment\u201d relationships, in which employees of an intermediary, such as a staffing company, are contracted to another entity.\u00a0 The rule set forth a four-part test for identifying whether a person or entity may be held liable as a \u201cjoint employer\u201d for violations of the wage-and-hour provisions of the FLSA.\u00a0 If two or more people or entities are \u201cjoint employers\u201d under the FLSA, they are jointly liable to employees for, among other things, wages and overtime pay.\u00a0<\/p>\n

That four-part test would impose liability under the FLSA on a person or entity as a joint employer \u201conly if that person is acting directly or indirectly in the interest of the employer in relation to the employee.\u201d\u00a0 29 C.F.R. \u00a7\u00a0791.2(a)(1).\u00a0 The relevant considerations under the test are whether an alleged joint employer:\u00a0 (1)\u00a0\u201chires or fires the employee\u201d; (2)\u00a0\u201csupervises and controls the employee\u2019s work schedule or conditions of employment\u201d; (3)\u00a0\u201cdetermines the employee\u2019s rate and method of payment\u201d; and (4)\u00a0\u201cmaintains the employee\u2019s employment records.\u201d\u00a0 Id.<\/em>\u00a0 The rule requires the potential joint employer to \u201cactually exercise \u2013 directly or indirectly \u2013 one or more of these indicia of control to be jointly liable under the\u201d FLSA.\u00a0 Id.<\/em> at \u00a7\u00a0791.2(a)(3).\u00a0 According to Judge Woods, \u201ccontrol is the touchstone of the joint employer analysis\u201d under the rule.\u00a0 New York<\/em> v. Scalia<\/em>, 2020 WL 5370871, at *5 (S.D.N.Y. Sept. 8, 2020).<\/p>\n

In reaching his decision, Judge Woods noted that it was \u201caxiomatic that any Department interpretation of the FLSA must begin with the text of the statute\u201d and found that the rule was inconsistent with the FLSA in a number of ways.\u00a0 Id.<\/em> at *16.\u00a0 For example, Judge Woods concluded that the rule \u201capplies different tests for \u2018primary\u2019 and \u2018joint\u2019 employment,\u201d even though \u201c[t]he FLSA does not separately define a \u2018joint employer.\u2019\u201d\u00a0 Id. <\/em>at *17.\u00a0 However, according to the text of the FLSA, \u201c[j]oint employment arises because multiple entities may simultaneously satisfy the FLSA\u2019s definition of \u2018employer,\u2019\u201d so there is \u201cno independent test for joint employment under the FLSA.\u201d\u00a0 Id.<\/em><\/p>\n

In addition, Judge Woods found that the rule converted the FLSA\u2019s text mandating that an employer \u201cincludes any person acting directly or indirectly in the interest of an employer in relation to an employee\u201d into a requirement of direct or indirect action to meet the joint employment standard.\u00a0 Id.<\/em> at *18.<\/p>\n

Finally, Judge Woods concluded that the rule\u2019s focus on control conflicted with the FLSA\u2019s rejection of \u201cthe common-law definition of employment, which is based on limiting concepts of control and supervision,\u201d and instead \u201cdefines the term \u2018employ\u2019 expansively to mean \u2018suffer or permit to work.\u2019\u201d\u00a0 Id.<\/em> at *26.\u00a0 Because the rule defined joint employment consistent with the common law definition of \u201cemployment\u201d instead of the FLSA\u2019s broader definition, Judge Woods found that the rule \u201cis impermissibly narrow.\u201d\u00a0 Id.<\/em><\/p>\n

The rule represented the first rulemaking by the DOL on the joint employment standard under the FLSA since the 1950s.\u00a0 In 2016, under the Obama administration, the DOL issued guidance calling for joint employment to be considered \u201cexpansively\u201d and \u201cas broad as possible.\u201d\u00a0 The next year, the DOL rescinded that guidance after President Trump took office.\u00a0 The \u201cjoint employer\u201d rule issued in January 2020 was considered a key initiative of the Trump administration\u2019s workplace policy reform.<\/p>\n

The DOL has not announced whether it will appeal Judge Woods\u2019s decision.\u00a0 Until the decision is reversed on appeal or a new rule is adopted, courts may apply their pre-existing joint employer tests.\u00a0 A number of circuit courts of appeal\u2014including the First, Third, Fifth and Seventh\u2014currently apply tests similar or identical to the test from which the DOL derived its rule.\u00a0 The Second Circuit, however, has rejected that test, finding that it \u201ccannot be reconciled\u201d with the language of the FLSA and has adopted a broader, six-part test that permits a court to find joint employment when \u201can entity has functional control over works even in the absence of [] formal control[s].\u201d\u00a0 Zheng <\/em>v. Liberty Apparel Co. Inc.<\/em>, 355 F.3d 61, 69, 72 (2d Cir. 2003).\n <\/p>\n<\/div><\/div>\n","protected":false},"excerpt":{"rendered":"

On September\u00a08, 2020, the Honorable Gregory Woods of the U.S. District Court for the Southern District of New York struck down most of the \u201cjoint employer\u201d rule issued […]<\/p>\n","protected":false},"author":1,"featured_media":10719,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[462,371,370,7953,372,5197],"class_list":["post-10718","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-lawyers","tag-department","tag-employer","tag-joint","tag-labors","tag-rule","tag-struck"],"_links":{"self":[{"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/posts\/10718","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/comments?post=10718"}],"version-history":[{"count":0,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/posts\/10718\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/media\/10719"}],"wp:attachment":[{"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/media?parent=10718"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/categories?post=10718"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/usatrustedlawyers.com\/blog\/wp-json\/wp\/v2\/tags?post=10718"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}