They Said They Would, and So They Did: DOL Formally Withdraws Joint Employer Regulations

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Joint employment continues to be a hot-button issue, especially as many companies look to contingent workforces to provide flexibility as businesses reopen in this uncertain economic landscape.  Joint employment is found where two different businesses share control and supervision of employees in a workforce.  From time to time, the U.S. Department of Labor (DOL) has issued guidance to help employers navigate this landscape of shared control—and shared liability.  

To that end, in March 2020, the DOL released its proposal to rescind the joint employer regulations that were issued in January 2020 during the Trump administration.  On July 30, 2021, the DOL issued its formal proposal to rescind the guidance and remove the regulations established by the January 2020 rule, effective September 28, 2021.

The 2020 rule was controversial—while it enjoyed strong support from business communities that enjoyed increased protections from being deemed a joint employer, numerous states challenged the rule.  In the meantime, federal courts have chimed in, including one that struck down core elements of the rule, which in turn influenced the Biden administration’s decision to withdraw the guidance. Importantly, the DOL has not proposed an alternative rule at this time.

The result of the withdrawal is a return to the pre-2020 common law regime created by a patchwork of cases, with rules and outcomes varying by jurisdiction. While the DOL may propose an alternative rule for joint employment, the department has not indicated any intent to do so in the near term.

Employers, especially those who rely on staffing agency personnel, should impose additional oversight to ensure these employees are being paid and managed properly.  Under traditional joint employment analysis, both businesses that supervise or control an employee can be liable for any penalties resulting from noncompliance.  Companies can act now by reviewing state and federal wage and hour rules to ensure compliance as well as contracting for indemnification between joint employer parties.  Because penalties for noncompliance are steep, especially with regard to wage and hour noncompliance, employers should brush up on local law to ensure compliance before the effective date of September 28, 2021.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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