DOL JOINT EMPLOYER RULE STRUCK DOWN BY COURT

Despite a court ruling striking down the Department of Labor’s “Joint Employer” test, the Department’s top wage and hour official seems to be still trying to enforce the test, requiring staff to report all pending cases affected by the opinion.

Cheryl Stanton sent an email to DOL Wage and Hour Division employees: “We are disappointed in the district court’s decision regarding the Joint Employer Rule. We stand by the Rule and are weighing all options. Please reach out to your Directors of Enforcement if you have cases in process that may be affected by this ruling.”

An early September decision issued by the U.S. District Court for the Southern District of New York declared that part of the rule finalized last March by the DOL limited how multiple businesses can be held liable for failing to pay minimum wages and overtime to employees under the Fair Labor Standards Act (FLSA).

The decision marks a setback for political leadership at the DOL and for employers who had sought to limit their exposure to wage and hour lawsuits. Franchise Brands such as McDonalds and companies who use staffing agencies or subcontract out work had pushed for the regulation.

The Court struck down the rule’s four-part standard for determining shared liability. The test, which considers all factors collectively, looks at whether the potential joint employer hires or fires an employee; supervises or controls work schedules; sets pay rates; and maintains employment records.

In his ruling, Judge Gregory H. Woods wrote that the DOL regulation is “arbitrary and capricious” and that it was inconsistent with the goals of the FLSA.

“If the Department departs from its prior interpretation, it must explain why,” Woods stated in his opinion. “And it must make more than a perfunctory attempt to consider important costs, including costs to workers, and explain why the benefits of the new rule outweigh those costs. Because the Final Rule does none of these things, it is legally infirm.”

The DOL leadership email suggests that the Department may be considering an appeal of the District Court’s decision.