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Court Ruling Against Joint Employer Rule Helps Fight Against Tax Fraud

Yesterday, the United States District Court for the Southern District of New York vacated most of the United States Department of Labor's noxious joint employer rule.

Click here to read the court's memorandum of decision.

The challenge to the rule was brought by state attorney's general, led by the office of New York Attorney General Letitia James, claiming that the rule violated the Administrative Procedure Act.

The rule addressed vertical and horizontal joint employment. Vertical happens when one employer is contracted by another and the two are employers of the employee.  Horizontal occurs when two employers agree to share the services of an employee.  The Court left in place the rule's horizontal joint employment provision (which didn't differ much from the previous rule) and vacated the sections on vertical.

It's a scathing decision.  The Court found that the USDOL's rule conflicted with the language of the FLSA, court precedent and was arbitrary and capricious.  The Court's major argument focuses on the USDOL's contention that joint employment is solely determined the FLSA's definition of "employer." The Court correctly found that the text of the FLSA intertwines the definitions of "employer," "employ" and "employee."  From there, the Court unraveled the rule as being too restrictive, too beholden to common-law control factors and too dismissive of the economic realities test.  

No doubt the USDOL will appeal the decision and seek a stay.  Nevertheless, this is a good outcome for those of us in the construction industry fighting against the increasing number of contractors using law breaking subcontractors and labor brokers.

Learn more: https://news.bloomberglaw.com/daily-labor-report/judge-shoots-down-part-of-labor-department-joint-employer-rule