Dive Brief:

• The U.S. Department of Labor’s Wage and Hour Division on Wednesday announced a proposed rule to streamline joint employer status under the Fair Labor Standards Act, the Family and Medical Leave Act, and the Migrant and Seasonal Agricultural Worker Protection Act, according to a department press release.
• The rule would create “a single nationwide standard that both derives from commonalities in federal court precedent where available and resolves significant differences among the circuit courts where they exist,” DOL said, to “ensure employees and employers have a clear, consistent understanding of when multiple employers are jointly responsible for protecting the wages and other rights of an employee.”
• The proposed rule is part of the Trump administration’s efforts to “[simplify] compliance for American employers,” Acting Secretary of Labor Keith Sonderling said. “A clear standard on joint employment would give businesses more confidence to invest in partnerships, help employees understand their rights, and make the department’s investigations more efficient.”

Dive Insight:

DOL’s joint employer regulations apply when an employee is benefiting from or working for multiple employers and those employers control the worker’s terms of employment. 

DOL last changed its regulations on joint employer status in 2021, when the Biden administration rescinded a rule issued by the first Trump administration. 

The previous definition of a joint employer used by the Trump administration relied on a four-factor balancing test. The test considered whether the company hires or fires the employee; supervises and controls the employee’s work schedule or conditions of employment to a substantial degree; determines the employee’s rate and method of payment; and maintains the employee’s employment records. 

The new rule also uses the four-factor analysis for vertical joint employment. While additional factors may be relevant to determining vertical joint employment, “a unanimous finding on the four factors in either direction would establish a ‘substantial likelihood’ regarding whether an individual or entity is a joint employer with another,” DOL said in its notice of the rule.

The rule also would clarify that horizontal joint employment “exists when separate employers are sufficiently associated with respect to the employment of the same employee, but that business relationships which have little to do with the employment of specific employees—such as sharing a vendor or being franchisees of the same franchisor—are alone insufficient to establish joint employment.”

“The rule we propose today would deliver much-needed regulatory clarity in the face of divergent judicial precedent throughout federal courts of appeals,” Wage and Hour Division Administrator Andrew Rogers said in a statement. “The proposal would also reduce compliance and litigation costs for employers while helping Wage and Hour Division investigators identify what is and is not a joint employment relationship.”

The new proposed rule does not address joint employment under the Wagner Act, also known as The National Labor Relations Act of 1935, Rogers specified during a press briefing Wednesday. 

It also differs from the 2020 rule issued by the first Trump administration that met pushback from a federal district court, department officials said during the briefing. One of those changes, for example, is that “unlike the 2020 rule, this proposed rule omits language that an individual or entity actually has to exercise one or more of the four enumerated factors to be a vertical joint employer and provides more nuanced guidance that exercised control is more relevant than reserved control that is rare or never exercised,” the officials said.

The public may submit comments on the proposed rule for 60 days, ending at 11:59 p.m. EDT on June 22, the department said. 

The proposal comes two days after Lori Chavez-DeRemer resigned as Secretary of Labor amid allegations of misconduct. During their confirmation hearings, both Chavez-DeRemer and Sonderling said they planned to revisit the Biden-era joint employer rule.