Business Groups Move to Intervene in ‘Joint Employer’ Litigation

June 11, 2020, 2:38 PM

An industry coalition wants to join the Trump administration in defending a new rule narrowing joint-employer liability for wage violations against a lawsuit filed by 18 states.

Six leading business groups late Wednesday asked a federal judge in the U.S. District Court for the Southern District of New York to intervene in the litigation and serve as co-defendants with the federal government in support of the Labor Department’s joint-employer rule. The regulation, which took effect in March, limits the scenarios in which multiple businesses can be liable under the Fair Labor Standards Act for failing to pay minimum wages and overtime to workers.

The motion to intervene, if granted, would allow the business community to advocate for the regulation as part of the blue-state litigation, which may stretch into next year. The strategy would help ensure the rule is supported in the litigation in the event Democrats seize control of the White House in 2021.

The coalition’s request to join the litigation comes after a federal judge in Manhattan on June 2 denied the administration’s bid to dismiss the challenge. The judge held that the group of blue-state attorneys general have sufficient standing to proceed with their suit. The states, led by New York and Pennsylvania, want the court to vacate the rule, returning to a more worker-protective standard.

The groups seeking to intervene are the U.S. Chamber of Commerce, International Franchise Association, National Retail Federation, HR Policy Association, Associated Builders and Contractors, and American Lodging and Hotel Association.

These same trade associations lobbied the White House and the DOL earlier in the Trump administration to adopt a business-friendly approach to joint employment that would make it more difficult to hold multiple companies responsible for paying workers back wages—a major labor and employment concern in numerous industries, particularly for franchise brands.

The industry coalition argued in the Wednesday filing that the government’s defense of the rule alone may not adequately address the business and economic justification for it.

“Certainly the expertise being brought to bear on this issue by the broad-based business groups representing the many diverse business interests of their members will benefit the Court and assist it in addressing the primary questions in this lawsuit,” the motion argued.

States Oppose Motion

The coalition further stated that they’ve consulted with the Trump administration and the state plaintiffs about their intention to join the suit.

“Plaintiffs’ counsel stated they would object to the motion, while Defendants’ counsel has not yet taken a position,” the business groups wrote.

Central to the final rule is DOL’s adoption of a four-part test to assess whether one company is a joint employer of another company’s workers. The test, which considers all factors collectively, probes whether the potential joint employer can hire or fire an employee; supervise or control work schedules; set pay rates; and maintain employment records.

“The DOL’s new joint employer rule is well reasoned, grounded in sound legal principles, and provides needed certainty to complex legal issues relevant to franchising,” Matt Haller, IFA’s senior vice president of government relations and public affairs, said in a statement. “It’s unfortunate that these attorneys general have chosen to focus their mid-pandemic time, energy, and taxpayer money into a lawsuit that will hurt business reopening and economic growth in their states.”

Media representatives for the administration didn’t immediately respond to a request for comment.

A spokesperson for the New York Attorney General’s office declined comment. The Pennsylvania Attorney General’s office didn’t immediately respond to a request for comment.

The case is New York v. Scalia, S.D.N.Y., No. 20-01689, motion filed 6/10/20.

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com

To contact the editors responsible for this story: John Lauinger at jlauinger@bloomberglaw.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com

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