By Payroll and Entitlements Editorial Staff
After a federal court in September invalidated part of the Labor Department’s controversial final rule on joint-employer status, Secretary of Labor Eugene Scalia has turned to the Second Circuit Court of Appeals for relief from the ruling. The lawsuit was filed by the State of New York, joined by California, Colorado, Delaware, District of Columbia, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, Mexico, Oregon, Rhode Island, Washington, Vermont, and Virginia.
Finding that the DOL’s interpretation for vertical joint-employer liability conflicted with the FLSA and was arbitrary and capricious, a federal district court in the Southern District of New York granted summary judgment in favor of the states that challenged the final rule (See Court finds that DOL overreached in narrowing definition of joint employment, September 9, 2020). The final rule conflicts with the FLSA because it ignores the statute’s broad definitions, the court concluded. While the DOL reasoned that section "3(d) alone determines" if an employee has a joint employer, the court found that the FLSA’s definition of "employer" cannot be read untethered from its related definitions of "employee" and "employ." Further, the department failed to adequately justify its departure from its prior interpretations. However, the DOL’s non-substantive revisions to horizontal joint-employer liability are severable, so that 29 C.F.R. § 791.2(e) remained in effect.
On November 6, Secretary Scalia filed a notice of appeal to the Second Circuit, seeking review of the district court’s September 8, 2020, judgment. The International Franchise Association, U.S. Chamber of Commerce, HR Policy Association, National Retail Federation, Associated Builders and Contractors, and American Hotel and Lodging Association, which had intervened in the case, also filed a notice of appeal on November 6.
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