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District Court Strikes Down DOL Rule

Last week, the United States District Court for the Southern District of New York struck most of the elements of the Department of Labor’s new “joint employer” definition. This DOL regulation, which took effect in March, narrows the scenarios in which multiple businesses can be held liable under the Fair Labor Standards Act for failing to pay minimum wages and overtime to workers.

The ruling vacates the agency’s test for vertical employment, which refers to when a worker has an employment relationship with one company but is economically dependent on another employer. This means that prior rules will continue to apply to companies that contract with third parties for services like janitorial services, for example. Typically, the main targets of these types of lawsuits have been large corporations like McDonald’s and Amazon and involve workers’ unpaid minimum wages and overtime.

We do not know yet whether the DOL will appeal the court’s ruling. The case is New York v. Scalia, S.D.N.Y., No. 20-01689.