Dive Brief:
- The U.S. Department of Labor’s Wage and Hour Division announced a proposed rule Wednesday to streamline the status of joint employers under the Fair Labor Standards Act, the Family and Medical Leave Act and the Migrant and Seasonal Farmworker Protection Act, according to a department news release.
- The rule would create “a single nationwide rule that derives common ground from federal court precedents when available and resolves significant differences among circuit courts where they exist,” DOL said, to “ensure that employees and employers have a clear and consistent understanding of when multiple employers are jointly responsible for protecting an employee’s wages and other rights.”
- The proposed rule is part of the Trump administration’s efforts to “[simplify] “A clear standard on joint employment would give businesses more confidence to invest in partnerships, help employees understand their rights and make department investigations more efficient.”
Diving knowledge:
DOL’s joint employer regulations apply when an employee benefits from or works for multiple employers and those employers control the employee’s working conditions.
DOL last changed its regulations on joint venturer status in 2021, when the Biden administration rescinded a rule issued by the first Trump administration.
The previous definition of a joint employer used by the Trump administration was based on a four-factor balancing test. The test considered whether the company hires or fires the worker; supervises and controls the employee’s work hours or working conditions to a substantial degree; determines the employee’s rate and form of payment; and maintains the employee’s employment records.
The new rule also uses the four factor analysis for vertical joint employment. While additional factors may be relevant in determining vertical joint employment, “a unanimous finding on all four factors in any direction would establish a `substantial probability’ as to whether an individual or entity is a joint employer with another,” DOL said in its notice of the rule.
The rule also clarifies that horizontal joint employment “exists when the separate employers are sufficiently associated with respect to the employment of the same employee, but that business relationships that have little to do with the hiring of specific employees, such as sharing a vendor or being franchisees of the same franchisor, are insufficient to establish joint employment.”
“The rule we are proposing today will provide much-needed regulatory clarity in the face of divergent judicial precedent in federal appeals courts,” Wage and Hour Division Administrator Andrew Rogers said in a statement. “The proposal would also reduce compliance and litigation costs for employers while helping Wage and Hour Division investigators identify what is and is not a joint employment relationship.”
The proposed new rule does not address joint employment under the Wagner Act, also known as the National Labor Relations Act of 1935, Rogers specified during a news conference Wednesday.
It also differs from the 2020 rule issued by the first Trump administration that was rejected by a federal district court, department officials said during the briefing. One such change, for example, is that “unlike the 2020 rule, this proposed rule omits the language that a person or entity must actually exercise one or more of the four listed factors to be a vertical joint venturer and provides more nuanced guidance that exercised control is more relevant than reserved control that is rarely or never exercised,” officials said.
The public can submit comments on the proposed rule for 60 days, until 11:59 p.m. EDT on June 22, the department said.
The proposal comes two days after Lori Chavez-DeRemer resigned as Labor Secretary amid allegations of misconduct. During their confirmation hearings, both Chavez-DeRemer and Sonderling said they planned to revise the Biden-era joint venture rule.
