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Labor Department Revises FLSA “Joint Employer” Rule for Workers in New Jersey and Nationwide

Federal and New Jersey employment laws protect employees against a variety of actions by their employers, such as discrimination, retaliation, and failure to pay minimum wage or overtime. The Fair Labor Standards Act (FLSA) sets a nationwide minimum wage and establishes overtime compensation rules. For the FLSA and other statutes to apply, an employment relationship must exist between a worker and a business. When multiple individuals or businesses exercise authority over a worker, the “joint employer” rule states that each employer could be liable for wage and hour claims and other employment law violations. The U.S. Department of Labor (DOL) changed its rule regarding joint employment under the FLSA in 2020. This year, new management at the DOL rescinded the new rule and reverted to the old joint-employer rule.

What Is a Joint-Employer?

Joint employers each have control over the terms of an employee’s job, such as job duties, hours, and wages or salary. Examples of joint employment include:
– Business A contracts with Business B to provide services at Business B’s worksite. The contract states that Business B may determine the hours of work and other conditions for employees sent by Business A. Although Business A writes the paychecks, they may both be considered an individual’s “employers.”
– Business 1 operates a franchise under a contract with Business 2, the franchise owner. The franchise agreement gives Business 2 control over many or most of the terms and conditions of employment, while making Business 1 responsible for day-to-day HR matters.

What Is the Joint-Employer Rule?

The joint-employer rule states that the employers are jointly and severally liable for employment law violations. No single rule exists regarding joint employment. Instead, statutes or regulations establish a joint-employer rule for different laws. For the FLSA, the DOL established a rule holding that joint employment existed when:
– Employers have agreed to “share [an] employee’s services”;
– One employer is “acting directly or indirectly in the interest of” another employer regarding the employee; or
– One employer controls the other employer, or they are under “common control,” and they are “deemed to share control of the employee, directly or indirectly.”

These are known as “horizontal joint employment,” since they focus on the relationship between employers. The DOL has also identified “vertical joint employment,” in which more than one employer receives the benefits of the employee’s labor, and the employee economically depends on both employers.

The 2020 Change to the Joint-Employer Rule

The DOL issued a rule modifying the joint-employer rule for the FLSA in 2020, during the previous presidential administration. The new rule limited vertical joint employment to situations where both employers have substantial authority over an employee, including the ability to hire or fire them and management of employment records.

The rule took effect on March 16, 2020. Seventeen states, including New Jersey, and the District of Columbia filed a lawsuit challenging the rule. A New York federal court struck the rule down on September 8, 2020, finding in part that it “ignores the [FLSA’s] broad definitions” and is “arbitrary and capricious.”

The 2021 Change Back to the Previous Rule

The DOL published a rule on July 30, 2021 rescinding the revised FLSA joint-employer rule and restoring the pre-2020 rule. It goes into effect on September 28.

If you are involved in a wage or hour dispute with your employer in New Jersey or New York, the employment lawyers at the Resnick Law Group can answer your questions and discuss your rights and options. Please contact us today online, at 973-781-1204, or at 646-867-7997 to schedule a confidential consultation with a member of our team.

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