Court precedents threaten to sideline the US Labor Department if it attempts to clarify when companies are joint employers through new wage-and-hour rulemaking.
The administration in August published and then deleted a 2025 regulatory plan for the DOL that included a proposal to define joint employment status for purposes of the Fair Labor Standards Act, a highly litigated issue that applies in situations where multiple businesses share liability for minimum wage and overtime obligations.
Businesses have been clamoring for clear guidelines defining who qualifies as a joint employer, a test that typically centers on how much control a parent company has over its contractors’ or franchisees’ employees. Changes to the joint employment standard at the federal level apply to nearly every business that uses contractors or franchises out its brand, from fast food giants McDonald’s Corp and Burger King to gig-economy companies Uber Inc and Lyft.
If the DOL issues a business-friendly joint employer standard—as management-side attorneys expect—it may quickly be struck down by a legal challenge, because the courts are less deferential to the agency’s reading of the law under the US Supreme Court’s ruling in Loper Bright Enterprises v. Raimondo and have been utilizing their own joint employer tests for some time.
“Courts are going to tend not to defer to such a regulation,” said Noah Finkel, of Seyfarth Shaw LLP.
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