US: Department of Labor Announces Final Rule on Joint Employment Regulation

A final rule was announced by the US Department of Labor that is intended to ensure more workers have access to minimum wage and overtime protections. The political background and legal aspects of the rule are good examples of the regulatory changes that commonly occur in a transition between one governing administration and the next.

Politically, the final rule rescinds a 2020 rule, more favorable to employers, that had been promulgated by the Trump administration. Parts of that rule had been successfully challenged in Federal Court, and the Trump administration had then appealed the court’s ruling. The Biden administration, rather than defend the rule, rescinded it in its entirety by issuing the new rule, thereby making the litigation irrelevant.

The legal aspect of the rule involves the standard for determining whether two companies should be considered joint employers. The standard issued in the new Biden administration final rule makes it more likely that in certain situations two companies will be found to be joint employers. In particular, the previous rule applied a four-factor test for analyzing joint-employer status, and the new final rule eliminates this four-factor test, which is expected to lead to more findings of joint employment and thereby generally to be more favorable to workers.

Takeaway: Organizations need to be cognizant of the change in standards for determining joint employment (as set out in the final rule as compared to the prior rule) and should expect the Department of Labor to be more active in this area under the Biden administration. A workforce solutions partner can help lower an organization's compliance risk by providing a reliable view into who is being engaged and how they are compensated.

US: Department of Labor Announces Final Rule on Joint Employment Regulation

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