On July 30, 2021, the United States Department of Labor (“DOL”) rescinded a rule adopted under the prior Federal administration that limited when more than one company is responsible for wage theft, employee misclassification, or other violations of the Federal Fair Labor Standards Act (“FLSA”). Multiple companies will be held accountable for the violation of employee rights when those companies are a joint employer. A joint employer, also referred to as an integrated enterprise or a single employer, exists when there is a meaningful overlap in the operational, managerial, and/or financial functions of the companies in question. Importantly, the United States Equal Employment Opportunity Commission (“EEOC”), the National Labor Relations Board (“NLRB”), other enforcement agencies at the State and Local levels, and both Federal and State courts have used the joint employer doctrine to hold various companies simultaneously responsible for other legal violations besides wage theft and employee misclassification, including retaliation, race discrimination, and sex harassment.
The DOL’s recent action restores the approach to enforcement that prevailed for many years and until the last Federal administration abruptly imposed a new rule that defined joint employer narrowly. In other words, it will be less difficult now to prove that companies involved in wage theft, employee misclassification, or other violations of the FLSA are responsible for the violations. Given the ability to pursue collective actions and double damages under the FLSA for wage violations, the DOL’s rescission of the rule adopted under the prior Federal administration has even greater significance. In addition, the EEOC’s enforcement of Title VII and similar laws and the NLRB’s enforcement of the National Labor Relations Act should also become more robust now. Based on the broader definition of joint employer, then, individual employees can potentially pursue class actions more effectively to address numerous violations of employment law and civil rights statutes well beyond the FLSA. This more expansive public and private enforcement of employee rights will undoubtedly promote the rule of law going forward.