Trump DOL Joint Employer Ambition to Collide With Hostile Courts

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.

The consideration of a new joint employer rule from President Donald Trump’s DOL comes as the number of workers in contract and third-party arrangements has grown, a trend worker advocates say allows corporations to outsource their liability as employers to subcontractors and franchisees.

“The issue here is that you have these relatively small, strongly capitalized, sometimes flight-by-night subcontractors that are not complying with federal wage and hour law,” said Daniel Ocampo, a staff attorney at the National Employment Law Project. “And because of their size, they’re essentially impossible to hold accountable for some of these violations.”

Under the FLSA, employers are required to pay the minimum wage, overtime, keep certain records, and comply with limits on child labor. Employer status may also obligate companies to provide employees certain benefits like leave and health-care.

But, the law doesn’t define who is a “joint employer” or “joint employment,” at all. The DOL has issued various guidance documents to address situations where two companies may both be employers of a single employee, including most recently the Trump administration’s 2020 rule.

That rule was blocked by a New York court and is likely to face even tougher headwinds in the courts now, attorneys say.

The DOL didn’t respond to a request for comment on the potential for rulemaking.

Differing Tests

Whether a company is jointly responsible for an employee of another company varies depending on the legal jurisdiction.

The First, Second, Fifth, and Eighth circuit courts of appeals use an economic realities test, that looks at various factors of the working relationship, although the number of factors considered varies by court. The Sixth and the Tenth Circuits have no set test at all.

The courts evaluate control by looking at elements like “who sets the pay, who has control over the time records, where do employees clock in, who do they have to ask when they request overtime,” explained Jared Speier, a partner at Stradling law firm.

While the tests use similar factors, “there are subtle differences among all of them,” according to Finkel, and “the law would change based on where that case gets filed.”

That disjointedness won’t be resolved by any forthcoming joint employer rule from the DOL, because the courts aren’t inclined to follow it in the wake of Loper Bright and their own circuit precedent, attorneys said.

“If the Trump administration does issue and implement new regulation in this area that regulation won’t be binding on those courts, and it remains to be seen how much those courts would take that regulation into account,” Finkel said.

Control

Labor and employment attorneys expect any rule on joint employment issued by Trump’s Labor Department to take a “direct control” approach, which generally limits the instances where employers could be found liable as a joint employer.

That standard basically says that “an employer can only be considered your employer, if they directly and immediately exercise significant control over the terms and conditions of the employees,” said Ocampo. “It’s a significantly stricter version of the joint employee tests that we have under the common law.”

Such a rule would be similar to the DOL’s joint employment rule issued during the first Trump administration in 2020, which was later partially struck down by a New York federal judge who found it was inconsistent with the law.

That regulation outlined a four-part test that considers whether a company hires or fires an employee; supervises or controls work schedules; sets pay rates; and maintains employment records. A business that exercises any of the four factors wouldn’t necessarily be a joint employer unless there’s some actual exercise of control, the Trump administration said then.

“If we’re to assume that this 2020 ruling from the Southern District of New York is still good law, and that it wouldn’t be overturned on appeal, I think it still would prevent the administration from reissuing this kind of a rule,” Ocampo said.

That hasn’t stopped the Trump administration before.

“That administration, just generally, has taken an aggressive position already even in the face of prior court decisions,” said Speier, of whether the ruling would constrain a joint employer rulemaking. “It’s certainly not afraid of litigation.”