Hunton Retail Law Resource

On July 29, 2021, the US Department of Labor filed a final rule rescinding the Trump-era “Joint Employer Status Under the Fair Labor Standards Act” rule (29 CFR part 791), which went into effect on March 16, 2020.

The Trump-era rule implemented employer-friendly amendments to the DOL’s rules regarding joint employer liability under the Fair Labor Standards Act. That rule established two standards for determining whether employers were joint employers for purposes of the FLSA: a Vertical Joint Employment Standard and a Horizontal Joint Employment Standard.

The Vertical Standard applied a four-factor test to determine whether a purported joint employer was acting directly or indirectly in the interests of the employee’s recognized employer. Focusing primarily on the level of control exercised over the worker, the four-part test assessed the extent to which the putative employer has the authority to: (1) hire or fire employees, (2) control their schedules or conditions of employment to a substantial degree, (3) determine workers’ pay rates and the methods by which they are paid, and (4) whether it maintains workers’ employment records. The rule’s focus on actual control significantly narrowed the circumstances giving rise to a joint employer relationship.

The Horizontal Standard, on the other hand, looked to whether purported joint employers were acting independently of each other, or were “sufficiently associated” with each other with respect to the employment of the employee.

In its July 29, 2021 final rule, the DOL rescinded the Vertical Standard, reasoning that the Vertical Standard had never before been applied by the DOL’s Wage and Hour Division, it was inconsistent with the joint employer analyses applied by courts, and had thus far not been widely adopted by courts. The DOL further reasoned that the Horizontal Standard was “intertwined” with the Vertical Standard and, even though the Horizontal Standard was largely consistent with prior DOL guidance, rescinded it, along with the entire Trump-era rule.

The DOL’s rescission of the rule means that there is currently very little clear guidance from the DOL with respect to joint employment standards. As a result, for the time being, employers are left to grapple with a patchwork of various court decisions for guidance as to the existence of joint employment status.