On July 29, 2021, the U.S. Department of Labor (“DOL”) announced the withdrawal of the “Joint Employer Rule”, which was established during the Trump Administration. This rule, which took effect on March 16, 2020, was intended to clarify the definition of who may be held jointly liable as an employer under the Fair Labor Standards Act (“FLSA”) by emphasizing whether the proposed employer:

1.      Hires or fires the employee;
2.      Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
3.      Determines the employee’s rate and method of payment; and
4.      Maintains the employee’s employment records.

In withdrawing the Joint Employer Rule, the DOL broadens the scope of who could be potentially liable as a joint employer for wage and hour violations, including minimum and overtime wage issues. It is now more likely that utilizing independent contractors or an outside business to provide services could result in liability for wage and hour violations as a joint employer.

While the DOL acknowledges that it “appreciates employers’ desire for clarity and certainty regarding compliance under the Act,” the DOL is not proposing to replace the withdrawn Rule with new guidance. Rather, the DOL stated in the Rescission Final Rule that, it “will continue to consider legal and policy issues relating to FLSA joint employment before determining whether alternative regulatory or sub[-]regulatory guidance is appropriate.”

Employers should be mindful of the rule change and its impact on potential liability. The withdrawal of the Rule may be an indication that the Biden Administration is likely to take a much tougher stance on wage and enforcement actions.