On September 8, 2020, the district court for the Southern District of New York entered an order and judgment vacating most of the FLSA Joint Employer Final Rule issued by the Department and effective in March 2020, on the grounds that it is contrary to law and arbitrary and capricious.  The district court vacated all of the substantive provisions of the Rule concerning the scenario in which an employee works one set of hours that simultaneously benefits another individual or entity (including the provisions described in the bullet points below and most of the provisions described in the documents linked below).  An appeal is currently pending before the Second Circuit Court of Appeals.

Joint Employer Final Rule

On January 12, 2020, the Department of Labor (Department) announced a final rule to revise and update its regulations interpreting joint employer status under the Fair Labor Standards Act (FLSA). The final rule provides updated guidance for determining joint employer status when an employee performs work for his or her employer that simultaneously benefits another individual or entity, including guidance on the identification of certain factors that are not relevant when determining joint employer status. The effective date of the final rule is March 16, 2020.

In the final rule, the Department:

  • specifies that when an employee performs work for the employer that simultaneously benefits another person, that person will be considered a joint employer when that person is acting directly or indirectly in the interest of the employer in relation to the employee;
  • provides a four-factor balancing test to determine when a person is acting directly or indirectly in the interest of an employer in relation to the employee;
  • clarifies that an employee’s “economic dependence” on a potential joint employer does not determine whether it is a joint employer under the FLSA; 
  • specifies that an employer’s franchisor, brand and supply, or similar business model and certain contractual agreements or business practices do not make joint employer status under the FLSA more or less likely; and
  • provides several examples applying the Department’s guidance for determining FLSA joint employer status in a variety of different factual situations.

The final rule published on January 16, 2020, in the Federal Register.

Additional Information