Department of Labor Kickstarts New Joint Employer Rule

February 26, 2021

The DOL sent a proposed rule to the Office of Management and Budget reviving the Obama administration’s effort to expand large companies’ liability for employment law violations by their contractors and franchisees.

Trump-era joint employer rule replaced:  The Trump DOL issued its own joint employer rule in January 2020 that clarified the law along traditional lines, finding a joint employer relationship only where an employer exercised actual and direct control over another employer’s workers’ terms and conditions of employment.  The Trump-era rule was for the most part subsequently struck down by a federal judge, and the Trump administration’s appeal of the judge's decision was abandoned by the new administration.  The move to send a new proposed joint employer rule to OMB signals that the Trump rule will soon be replaced.

Expansion of joint employer liability:  The substance of the Biden DOL’s proposed rule is currently unknown, but it is likely to mirror interpretations embraced by the Obama-era DOL, under which an employer may become jointly liable for another employer’s workers even if it has only reserved, potential, indirect control over the workers’ terms and conditions of employment.  This theory of liability in particular targets the franchise model, and could potentially make franchisors liable for the actions of their franchisees.  Larger employers with several subcontractor or third-party supplier relationships could become similarly jointly liable. 

Outlook:  This is merely the first step in a lengthy regulatory process before any final rule on joint employer liability rule is implemented, but it serves as yet another example of the Biden administration’s eagerness to quickly implement significant policy changes in the labor and employment area.  Joint employer liability and other potential labor and employment policy changes will be discussed in detail during next week’s HR Policy 2021 CHRO Summit.  Session and registration details can be found here.