Shared employer liability continues to be a controversial labor topic, as it affects a wide range of businesses and employees, particularly those who work in staffing and franchise organizations. The Department of Labor (DOL) will be issuing a new policy by the end of the year that would dictate when businesses would be legally responsible for payroll violations, including those pertaining to minimum wage and overtime. While some believe that the DOL does not have the power to make legally binding legislative rules, others believe it is within their power.
According to a senior counsel for the National Employment Law Project, based on the language of the Fair Labor Standards Act (FLSA), the DOL does not have the authority to make the rule legally binding. They can only publish an interpretive rule, which does not carry the same weight as a legally binding rule. An administrator for the DOL Wage and Hour Division commented that the DOL can issue regulations on joint employment issues in order to clarify parts of the FLSA that may not be clear.
Many large corporations, including McDonald’s Corp. and Microsoft, have had claims filed against them saying that they are responsible for labor violations against franchisee and staffing organization employees. Businesses and legislators have been putting pressure on Secretary of Labor, Alexander Acosta to move forward on the policy. However, the impact of the new policy may be limited in court if the DOL is unable to proceed with creating a rule. Acosta has been quoted saying that agencies should not use interpretive guidance documents to take short cuts and avoid going through the formal rulemaking process.
While the FLSA allows the DOL to draft regulations for certain issues, including overtime exemptions and child labor issues, it does not give them the power to define joint employment. Therefore, unless the language in the FLSA changes, any ruling put out by the DOL will not be legally binding.
In a court of law, legislative regulations carry more weight in the courtroom than interpretive regulations. According to the former administrator for the DOL’s Wage and Hour Division, a legislative regulation may be challenged over minimum wage and overtime disputes, which is when the court may be asked to apply the regulation. The test of a rule will depend on the how the court interprets the rule and the level of deference it gives. Regardless of how the courts view the DOL’s joint employment regulation, it will have an impact on the agency’s ability to enforce minimum wage and overtimes requirements. It will provide much-needed clarity both for internal Wage and Hour enforcement officers and the business community.
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