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Biden DOL Clinches Rollback of Trump-Era Joint Employer Rule (1)

July 29, 2021, 12:56 PM; Updated: July 29, 2021, 2:07 PM

The Biden administration voided a signature Trump-era regulation that limited the circumstances under which multiple businesses share liability for wage violations.

In a final rule released Thursday, the U.S. Labor Department rescinded the 2020 measure, which had been a top priority for the business lobby—particularly franchising brands—and Republican lawmakers.

The result creates an avenue for potential federal wage crackdowns on corporate relationships involving workers at affiliated businesses, a major issue for franchise brands such as McDonald’s Corp.

“Joint employment is part of our longstanding federal labor laws,” Jessica Looman, acting administrator of DOL’s Wage and Hour Division, said in a prepared statement. “The U.S. Department of Labor’s Wage and Hour Division will continue to follow the law and judicial precedent when evaluating joint employer relationships to enforce worker protections.”

The final rule will take effect Sept. 28.

The legality of the Trump rule is pending before the U.S. Court of Appeals for the Second Circuit. A U.S. district court judge struck down the most significant parts of the rule last year. Having repealed the regulation, Biden administration attorneys may now seek dismissal of the case, but business groups have intervened in the litigation to defend the earlier rule and are likely to fight such an effort.

‘Significant Departure’

Rep. Virginia Foxx (R-N.C.), ranking member on the House Education and Labor Committee, and fellow GOP member Fred Keller (R-Pa.) issued a statement Thursday slamming the Biden DOL for eliminating the Trump-era four-factor test for determining joint employment, in favor of a “heavy-handed, one-size-fits-all regulatory” approach.

“While we know better than to expect common-sense policymaking from the Biden administration, we strongly urge the DOL to reinstate the four-factor test for determining joint employment and end its crusade against American ingenuity,” the Republican lawmakers said in a joint statement.

In the final rule’s text, the department outlined its reasons for rolling back the Trump-era model, noting that it differed from the DOL’s prior guidance on joint employment.

In repealing the measure, the DOL cited the district court’s concerns “that the Rule did not adequately explain the reasons for the significant departure.” It also said courts have “generally” not applied the rule’s “vertical joint employment analysis as a replacement for their existing analyses, indicating that the Rule had not provided the intended clarity and that rescinding the Rule would not be disruptive to stakeholders.”

The department also explained what it viewed as the Trump rule’s “negative effect” on workers’ rights under the Fair Labor Standards Act.

“Finally, the Department was concerned that the Rule may not have sufficiently considered the negative effect that it would have on employees by reducing the number of businesses who were FLSA joint employers from which employees may be able to collect back wages due to them under the FLSA,” the text of the rule said.

(Updated with additional reporting throughout.)

To contact the reporters on this story: Ben Penn in Washington at bpenn@bloomberglaw.com; Austin R. Ramsey in Washington at aramsey@bloombergindustry.com

To contact the editors responsible for this story: John Lauinger at jlauinger@bloomberglaw.com; Travis Tritten at ttritten@bgov.com; Andrew Harris at aharris@bloomberglaw.com

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