Fri, 09/18/2020
In a rebuke to the large companies that fought hard to change the Department of Labor’s joint employer regulation to evade their responsibility to ensure that workers are paid the minimum wages and overtime to which they are entitled, a federal judge ruled that several provisions of the revised regulation, issued in January 2020, were illegal. The ruling rolls back the changes made to the employee-friendly Obama-era joint employer rule and will make it easier for employees who work for one company (such as a subcontractor or staffing agency), but are economically dependent on another employer, to recover unpaid wages under the Fair Labor Standards Act (FLSA).
The court’s ruling, which concluded that the DOL regulation was “arbitrary and capricious” and inconsistent with the FLSA benefits employees of franchises like fast food chains and those who provide temporary staffing through contractors because it allows those employees to more easily prevail against the parent companies in the event they are denied the pay guaranteed to them by the FLSA’s overtime and minimum wage provisions.
The “legally infirm” rule set forth a four-part test to determine whether an employer is a joint employer (and therefore liable under the FLSA for minimum wage and overtime violations) –whether the employer 1) hires or fires an employee; 2) supervises or controls work schedules; 3) sets pay rates; and 4) maintains employment records. In each case, the invalidated test required that the employer actually perform these actions, as opposed to merely retaining the authority to do so.
Seventeen states and the District of Columbia sued the Department of Labor, arguing that the rule was illegal, and the court agreed concluding that the test was “impermissibly narrow” because it required a showing that an employer had actually taken one of the four actions included in the test, as opposed to reserving the right to do so.
Judge Gregory H. Woods found that DOL’s reinterpretation of the existing joint employer regulation strayed from the FLSA without adequate justification, making the rule “arbitrary and capricious.” Summing up the Court’s disdain for the rule, Judge Woods described it as “flawed in just about every respect.”
If you are an employee who works for a franchise, staffing agency, or other intermediate employer that is contracted with a larger company, and you believe you are not being paid the wages you are owed under the law, contact MSE at info@mselaborlaw.com.
