FLSA Joint Employment Rule Not Coming Any Time Soon

Author: Michael Cardman, HR & Compliance Center Senior Legal Editor

April 21, 2023

The US Department of Labor (DOL) currently has no plans to issue a new Fair Labor Standards Act (FLSA) joint employer rule.

During a hearing before the Senate Health, Education, Labor and Pensions Committee yesterday, Sen. Bill Cassidy, R-La., asked Labor Secretary nominee Julie Su to "give assurances" that she would not make changes to the joint employer rule if confirmed.

"There's not a joint employer rule on our regulatory agenda," she replied. "It was not on our agenda that came out last year [and] it will not be on our agenda that comes out in June."

Su's statement appears to leave the door open for the DOL to issue a joint employment rule at a later date. But for now, it looks like the DOL has no intention of moving forward on this issue any time soon.

Joint Employment Background

The FLSA statute does not define joint employment - generally considered to mean when an employee performs work for an employer that simultaneously benefits another individual or entity.

In the decades since the FLSA was enacted in 1938, the courts have developed a legal framework for determining joint employment status known as the economic realities test.

Under the Obama administration, the DOL aimed its enforcement efforts at businesses that use franchising, subcontractors or third-party intermediaries such as temporary employment agencies or labor brokers - claiming that they should be considered joint employers in many cases and held jointly liable for any violations of the FLSA.

In 2020, under the Trump administration, the DOL issued a new joint employment rule with a simple four-factor test for determining joint employer status. Many business groups had welcomed the Trump-era rule, saying it provided "much-needed clarity" around the often-ambiguous criteria for joint employment.

But in 2021, under the Biden administration, the DOL repealed the rule.

At the time, the DOL said it "would continue to consider legal and policy issues relating to FLSA joint employment before determining whether alternative regulatory or subregulatory guidance is appropriate." But, as Su's statements suggest, new regulatory guidance will not be coming any time soon.

No ABC Test

In other news, Su also reaffirmed that the DOL will not include a strict "ABC test" like the one California enacted in 2019 in its final independent contractor rule. The DOL proposed a new independent contractor rule last fall and plans to finalize it next month.

"It cannot include the ABC test, because only Congress can adopt that test, and our rule is meant to be in full compliance with the Fair Labor Standards Act and decades of federal law on the issue," Su told the committee.