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Judge Denies DOL’s Bid to Pause Joint Employer Litigation (1)

April 8, 2021, 6:36 PMUpdated: April 8, 2021, 7:45 PM

A federal appellate judge denied the U.S. Labor Department’s request to pause litigation over the Trump-era joint employer rule, throwing a curveball in the Biden administration’s efforts to unwind the business-friendly regulation.

Attorneys for DOL asked the U.S. Court of Appeals for the Second Circuit for a six-month delay of the administration’s May 7 deadline to file a brief in an appeal the agency originally pursued late in the Trump administration to defend the rule. That regulation, a top priority for franchise corporations, limited the scenarios in which a business shares liability with an affiliated company for wage violations.

By rejecting that request Thursday, without explanation, the court is forcing the Biden administration to file a brief by May 7 on the legality of the regulation—unless the department opts not to file at all. The Biden DOL last month proposed withdrawing the Trump administration rule.

The judge scored an incremental win for a business coalition that’s intervened in the lawsuit to support the Trump rule in the event the Biden administration flips the government’s position and refuses to defend the regulation. The industry intervenors opposed the agency’s move to postpone the appeal.

“The Second Circuit’s action is important as it undercuts DOL’s heavy reliance on the district court’s decision in NY v. Scalia in proposing to rescind the JE rule,” said Maury Baskin, the lead attorney for the intervenors, in an email. “DOL should hold its NPRM in abeyance pending the outcome of the appeal, not the other way around.”

Baskin was referring to the district court decision in 2020 that vacated a significant portion of the Trump joint employment standard, and the proposed rule that DOL issued in March to rescind the Trump rule.

DOL spokespeople didn’t immediately respond to a request for comment.

The agency can still proceed with its rulemaking to repeal the Trump rule; it is now under a public comment period and would then need to be finalized. But the litigation poses a delicate situation for Biden’s attorneys at the Justice Department, working in tandem with DOL on the appeal.

The Trump administration filed an opening brief in support of the rule on Jan. 15, several months before the court-imposed deadline, signaling an effort to tie its successor’s hands before a judiciary that can frown on presidential transitions leading to an about-face on legal interpretations.

The case is New York v. Walsh, 2d Cir., No. 20-03806, Motion Denied 4/8/21.

(Updated with additional reporting, starting in 5th paragraph.)

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com

To contact the editors responsible for this story: John Lauinger at jlauinger@bloomberglaw.com; Travis Tritten at ttritten@bgov.com

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