Federal Judge Strikes Down FLSA Joint-Employer Rule

September 8th the U.S. District Court for the Southern District of New York struck down the essential elements of the U.S. Department of Labor’s (DOL) January joint-employer regulation under the Fair Labor Standards Act (FLSA). The FLSA joint-employer rule took effect in March, narrowing the scenarios in which multiple businesses can be held liable under the FLSA for failing to pay minimum wages and overtime to workers.

The Obama era judge’s ruling vacates the agency’s new test for vertical employment, referring to when a worker enters an employment relationship with one company, such as at a staffing agency or subcontractor, but is economically dependent on another employer.

While there is uncertainty regarding what steps will be taken next by the DOL and Justice Department, who may appeal the decision, the business community will likely be a key stakeholder in supporting and possibly intervening in a legal appeal. The DOL’s top wage-hour official, Cheryl Stanton, reportedly still supports her agency’s narrowed joint-employer test and asked staff in a recent email to report all pending cases that are affected by the opinion.

IWLA submitted comments in support of the previously proposed rule, as well as some recommendations to the DOL for ways the rule could be revised to provide additional clarity regarding what business practices may result in joint-employer status. IWLA was pleased to see that the DOL included further clarification examples in response to IWLA and other organization’s comments in the final publication.

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