NOTICE: On July 29, 2021, the Department announced a final rule rescinding the “Joint Employer Status Under the Fair Labor Standards Act” final rule (Joint Employer Rule). [86 FR 40939].
On March 12, 2021, the Department issued a notice of proposed rulemaking (NPRM) proposing to rescind the Joint Employer Rule. 86 FR 14038. After reviewing the comments submitted in response to the NPRM, the Department has decided to finalize the rescission of the Joint Employer Rule. As explained in the final rule, the Department believes that the Rule improperly narrowed the test for vertical joint employment and conflicted with decades of Department interpretation, the text of the Fair Labor Standards Act, and Congressional intent. In addition, the Rule’s vertical joint employment standard failed to account for prior Department guidance and did not significantly impact courts’ resolution of vertical joint employment cases while it was in effect.
The Department also agrees with the conclusion of the district court for the Southern District of New York (currently on appeal) that the Joint Employer Rule “unlawfully limits the factors the Department will consider in the joint employer inquiry” by focusing on a control-based test to the exclusion of economic dependence and certain other considerations, as the Rule’s approach is not consistent with the totality-of-the-circumstances economic realities standard that has generally been used by the courts.
As a result of the rescission, part 791 of Title 29 of the Code of Federal Regulations is removed in its entirety and reserved. The Department will continue to consider legal and policy issues relating to FLSA joint employment before determining whether alternative regulatory or subregulatory guidance is appropriate.
The Department has extended the effective date of the rescission until October 5, 2021. [86 FR 52412]. Please note that until October 5, 2021 part 791 of Title 29 of the Code of Federal Regulations remains in effect.