On Sept. 8, a U.S. District Court for the Southern District of New York judge ruled that parts of the U.S. Department of Labor’s joint employer final rule, which was issued on Jan. 16, 2020, are illegal. Associated Builders and Contractors had applauded the 2020 joint employer final rule, which promised to make the joint employment test more narrow and focused when it went into effect on March 16. 

“The Trump administration’s joint employer regulation promised to bring additional clarity to a confusing area of the law, help alleviate unnecessary barriers to and burdens on contractor and subcontractor relationships throughout the construction industry, reduce needless litigation and encourage innovation in the economy,” said Ben Brubeck, ABC vice president of regulatory, labor and state affairs. “We are disappointed that the Obama-appointed judge misapplied precedent in failing to defer to the DOL’s guidance and refusing to uphold the new rule in its entirety. We believe the judge got it wrong on both procedural and substantive grounds, strongly suggesting the need for an appeal.”

The court struck down the rule as it applies to “vertical” employment, which occurs when an employee works for one company but may be economically dependent on or controlled by another company. The decision does not affect “horizontal” employment, which occurs when the employee has employment relationships with two or more employers and the employers are sufficiently associated.

“Unfortunately, vertical joint employment, which occurs when an employee works for one company but may be economically dependent on or controlled by another company (staffing, contracting, franchising, etc.) is the type of relationship that caused so much confusion under the previous rule,” said Brubeck.

In February, 18 blue states sued DOL in federal court to strike down its final rule updating and clarifying its interpretation of joint employment, officially titled Joint Employer Status Under the Fair Labor Standards Act. A business coalition that includes ABC intervened in the case, in part to defend the construction industry against unwarranted attacks on the industry’s long-established methods of doing business by the state plaintiffs. ABC’s general counsel, Littler Mendelson P.C., handled the intervention filings.

Read ABC’s comments in support of DOL’s 2020 joint employer proposed rule.