A federal court placed the final nail in the coffin for the Trump Department of Labor’s joint employer rule, clearing the way for the current administration to craft its own joint employer policy that will likely create more liability for employers.
The rule would have clarified the joint employer legal standard and limited employer liability for the violations of franchisees, contractors, suppliers, and other third-party relationships, and has been the subject of litigation since 2020 when a coalition of Democratic state attorneys general challenged it in court. A district court judge originally invalidated most parts of the rule, a decision which was then appealed by the Trump DOL. HR Policy joined several other business groups to intervene in the case in support of the rule, which was subsequently rescinded by the Biden administration in July 2021.
Now, the Second Circuit has determined that the Biden administration’s recission of the rule made the case moot, officially bringing an end to the litigation and the Trump rule. The decision finally clears the way for the Biden administration to craft its own joint employer policy, which could mean a new rulemaking in the coming months. However, DOL could pursue the same strategy as the Obama administration on this issue, and instead issue guidance in the form of opinion letters coupled with aggressive enforcement measures, eschewing a formal regulation altogether.
Notably, during the Future Workplace Policy Council’s second installment of its Fall Conference discussion series last week, Solicitor of Labor Seema Nanda appeared to convey that the DOL has no immediate plans to issue a new joint employer rule—a potential regulation in this area was also conspicuously missing from the Department’s most recent regulatory agenda.
Outlook: Forgoing a formal rulemaking would still allow the Biden DOL to target employers for joint employer liability under a more expansive standard last seen during the Obama administration. Continued ambiguity in this area presents significant issues for employers who may find themselves on the hook for labor and employment violations unrelated to their own employees and/or operations. Notably, however, the Second Circuit's decision also paved the way for a future Republican administration to simply reissue the rule.
