Federal Appeals Court Invalidates Portion of Joint Employer Rule

Earlier this week, the Coalition for a Democratic Workplace (CDW) provided the following update on the Joint Employer Rule.

On September 8, the U.S. District Court for the Southern District of New York issued a decision in a case brought by 17 state attorneys general to block the Department of Labor’s (DOL) joint employer final rule. The court determined that DOL’s final rule had two "major flaws”:

1. The Department only considered the definition of “employer” when drafting its Final Rule, ignoring the relevance of the definitions of “employee” and “employ.” The Final Rule adopts its joint employment test based solely on the definition of employer, but all three definitions must be considered when determining joint employer status.

2. The Final Rule uses different tests to determine a “primary" employer and a “joint” employer. The definition of a “primary" employer is broad under the Fair Labor Standards Act (FLSA), but the definition of “joint" employer used by DOL in the Final Rule was much more narrow. The court rejected the idea that there's a distinction between the two and said the test for determining whether there is an employment relationship under the FLSA is the same whether its a primary employment or joint employment relationship. In other words, DOL must rely on the broader employment test when determining joint employer status.

The court reasoned that "There is thus no independent test for joint employment under the FLSA. An entity is an employer if it meets the FLSA’s definition. It is a joint employer if it meets the definition and another entity also meets the definition.”

The Department as well as the six national employer organizations that intervened in the case will likely appeal the decision. They have 60 days to do so. It’s unclear, however, how other courts will view the ruling. NRMCA and CDW will continue to follow and keep you apprised of developments.

For more information, contact Andrew Tyrrell at atyrrell@nrmca.org.