Yesterday, a federal judge in New York struck down most of the joint-employer rule that was issued by the Trump Department of Labor (DOL). The challenge to the rule was brought by 18 state attorneys general, led by New York Attorney General Letitia James. This is an important win for workers. EPI estimated that the rule would cost workers more than $1 billion annually by increasing wage theft and by incentivizing workplace fissuring.
EPI strongly opposed the DOL’s proposed rule and applauds the federal judge’s decision. The rule dramatically narrowed the set of circumstances whereby a firm can be found to be a joint employer under the Fair Labor Standards Act (FLSA). The FLSA is our nation’s fundamental worker protection statute, providing wage and hour protections to the vast majority of U.S. workers. It was drafted broadly, creating employer coverage to ensure that companies that use staffing, temp, or subcontractors in their business operations are held accountable for complying with the FLSA’s basic provisions, including minimum wage, overtime, and child labor protections. The Trump DOL’s rule would have made it nearly impossible for many workers to enforce these rights and would have taken away the ability of workers to recover unpaid wages from firms who use low-wage contractors in their work.
The Trump administration rule addressed both “vertical” and “horizontal” joint-employment. Vertical joint-employment is when one firm contracts work out to another firm and both firms are employers of the contracted firm’s workers, whereas horizontal joint employment is when two firms share the services of an employee. The court vacated the rule’s provisions on vertical joint-employment, which were egregious, and left in place the rule’s provisions on horizontal joint employment, which were largely non-substantive.
The decision was scathing and the judge found that “the Department’s novel interpretation for vertical joint employer liability conflicts with the FLSA and is arbitrary and capricious.” The decision also cited DOL’s failure to address EPI’s analysis of the rule’s cost to workers, stating “EPI estimated that the Final Rule would cost workers $1 billion per year. The Department did not have to agree with that estimate… But by ignoring EPI’s estimate, the Department effectively assumed that the Final Rule would cost workers nothing—an obviously unreasonable assumption.”