New Federal DOL Joint Employer Rule Questioned by New York State Courts

Effective March 2020, the federal Department of Labor (“DOL”) issued a new final ruling limiting the definition of joint employer under the Fair Labor Standards Act (“FLSA”). The new rule focused on four factors:

1. The hiring & firing of employees;

2. The supervision & control of employees’ work schedules or conditions of employment to a substantial degree;

3. The determination of employees’ rate of pay and method of payment;

4. The maintenance of employment records

The new DOL rule stated that an employer not only needs authority to exercise these rights, but must actually do so, making it far less likely for joint employment to exist. Paul Keneally wrote about this after it was announced in January. You can read that post here: New Federal DOL Joint Employer Rule Good News for Employers.

However, in early September, the U.S. District Court for the Southern District of New York ruled that the DOL regulations, as they pertained to vertical joint employer liability, were inconsistent with the FLSA and arbitrary and capricious. In November 2020, the case was appealed to the Second Circuit, but no decision has been rendered thus far.

As such, the current test for joint employment for vertical joint employers in New York is best determined by the factors outlined in Zheng v. Liberty Apparel Company, 355 F.3d 61, 72 (2d Cir. 2003). The following Zheng factors are broad and provide far less protection to employers then the DOL rules:

1. Whether a putative employer’s premises and equipment were used by its putative joint employees;

2. Whether the putative joint employees are part of a business organization that shifts as a unit from one putative joint employer to another;

3. The extent to which the putative employees performed a discrete line job that was integral to the putative joint employer’s process of production;

4. Whether responsibility under the contracts could pass from one subcontractor to another without material changes;

5. The degree to which the putative employer or its agents supervised the putative employees’ work;

6. Whether the putative employees worked exclusively or predominately for the putative joint employer.

Given the shifting rules and case law in this area, employers are advised to consult with experienced employment counsel in looking at their company relationships for possible joint employment.

If you have any questions regarding the issues discussed above or if you have any other Labor & Employment Law concerns, please contact the Underberg & Kessler attorney who regularly handles your legal matters or Stephanie Hoffmann, the author of this piece, here or at (585) 258-2814.