Labor Department Rescinds Trump-Era Joint Employer Rule; A Democratic Majority at NLRB

This post was updated on Sept. 20.

The U.S. Department of Labor (DOL) today announced it will rescind a joint employer rule that took effect in March 2020.

In a separate development, the Senate yesterday confirmed two of President Biden's nominees to the National Labor Relations Board (NLRB). The two Democratic appointees will give the Democrats a 3-2 majority.

At the beginning of 2020, DOL announced a final rule to provide a clearer methodology for determining joint employer status under the Fair Labor Standards Act (FLSA). The rule offered employers clarity and certainty regarding their responsibility to pay federal minimum wage and overtime for all hours worked over 40 in a work week.

The rule, which became effective in March 2020, was subsequently challenged by 18 states on the grounds that the rule was invalid. On Sept. 8, 2020, the federal district court for the Southern District of New York agreed, stating that the rule was contrary to the FLSA and was "arbitrary and capricious" due to its failure to explain why the DOL had deviated from all prior guidance or consider the effect of the rule on workers.

NAHB viewed the 2020 rule as a positive development because it provided home building firms and small businesses clarity and certainty by restoring the traditional definition of joint employment in which a company must exercise "direct and immediate control" over a worker in a business-to-business-relationship.

Under the broader interpretations utilized previously by the Obama administration, builders faced uncertainty about what level of necessary oversight and coordination of their subcontractors might trigger joint employer liability. DOL said the March 2020 joint employer rule will be rescinded effective Oct. 5, 2021.

NLRB: A More Pro-Labor Slant

The two nominees approved to the NLRB, Gwynne Wilcox and David Prouty, are both union lawyers.

Wilcox, a union attorney, will immediately join the NLRB, filling a current vacant Democratic seat. Prouty, general counsel of New York City SEIU 32BJ, will join the board at the end of August, filling a current Republican seat.

We anticipate that the NLRB will become much more active once both nominees join the board, which will likely lead to more pro-labor, pro-union decisions. When the NLRB was previously under Democratic control in 2015, the agency issued a ruling that greatly expanded the definition of the joint employer standard as well as a 2014 ruling that would have dramatically sped up union elections in the workplace.