Today, the Department of Labor (DOL) announced that it has withdrawn the January 16, 2020 final rule and corresponding regulations (29 C.F.R. Part 791) that had adopted a new test for determining whether two employers were joint employers under the Fair Labor Standards Act (FLSA).

That original rule was promulgated by the DOL under the Trump Administration and made it more difficult for employees, or the DOL, to argue that two employers (like a staffing company and its client company) were joint employers. Establishing joint employment is important under the FLSA because if two companies are held to be joint employers, an employee can sue one or both of them for wage violations under the FLSA and both can be held liable for money damages. The effective date of that final rule was March 16, 2020. We issued a report about that final rule on January 14, 2020.  

Now, with a new administration under President Biden, the DOL has withdrawn that rule and its regulations. It did so because, in this Administration’s view, the rule failed to consider certain factors when deciding whether two companies were joint employers—factors that the DOL and courts had relied upon in the past but the new rule had allegedly ignored. For instance, the Trump Administration’s rule looked at whether one company actually hired or fired employees rather than whether the company simply had the power to do so. And the rule had excluded any consideration of the employee’s economic dependence on the potential joint employer, which the Biden Administration felt was improper. For those and other reasons, the DOL has withdrawn the final rule effective September 28, 2021. After that date, the Trump Administration’s final rule and the regulations at 29 C.F.R. Part 791 are withdrawn.

With the rule withdrawn, factors like the power to hire and fire are now relevant again when analyzing joint employment status, as is an employee’s economic dependence on an employer for work. These and other factors will make it easier to prove that two companies are joint employers for purposes of the FLSA. Employers should therefore re-assess any potential joint employer issues that may arise going forward, including reviewing the terms and conditions of their relationship with a staffing company or other business with whom they share employees.

If you have any questions regarding the final rule withdrawal, please feel free to contact Kemp Smith’s Labor and Employment Department at 915-533-4424.