Last week a federal judge in New York struck down a significant portion of the U.S. Department of Labor (DOL) joint employer rule, which had narrowed the situations in which multiple businesses can be held liable for violations under the federal Fair Labor Standards Act (FLSA) for failing to pay minimum wages and overtime to workers. This ruling effects franchisees, staffing companies, private equity companies, and any company that can have indirect control over another business.
30 SECONDS…WHAT WAS THE REGULATION?
During the Obama administration, the DOL adopted a new vertical test for determining joint employment. The “economic realities” of a business' relationship with a given worker determined if a secondary business is an employer of the worker. One franchise trade association estimated that the broader definition of joint employer costs $33.3 billion annually to franchisors in legal fees and other expenses. In January 2020, the Trump administration released a final rule that would roll back this interpretation of the joint employer test and instead adopted a four-factor balancing test, which became effective in March 2020.
WHAT HAPPENED NOW?
The U.S. District Court of Southern District of New York found the Trump rule conflicted with the FLSA and the new four-factor test was unduly narrow. It also found the rule arbitrary and capricious since it did not adequately explain why it departed from its prior interpretations and did not adequately consider the rule’s cost to workers. One study estimated the rule would cost workers $1 billion per year in lost wages. The court determined that this portion of joint employer rule violated the Administrative Procedures Act (APA) and is invalid.
The ruling preserved the DOL’s standard for horizontal employment, or when a worker has separate employment relationships with multiple businesses that are associated with each other. The ruling now creates uncertainty and confusion for employers on how to determine vertical joint employment. It is anticipated that the DOL will appeal this decision. We’ll keep reporting on any developments.
A federal judge ruled on Monday that Pennsylvania’s coronavirus orders, which shut down the state, closed businesses, and limited gatherings, were unconstitutional. The court found the COVID-19 orders violate the First Amendment right to freedom of assembly and the due process and equal protection clauses of the 14th Amendment. Prior to ruling, Pennsylvania had already lifted most of the coronavirus restrictions but still limited indoor gatherings to 25 people, outdoor gatherings to 250 people, and indoor dining to 25 percent capacity. Gov. Tom Wolf said he will appeal the ruling.
This week New Jersey Gov. Phil Murphy signed a new COVID-19 presumption bill into law. The bill creates a rebuttable presumption that the contraction of COVID-19 by an essential employee is work-related. Essential employees includes health care workers, public safety workers, and any essential worker as defined by executive orders during the pandemic. The law is effective retroactively to March 9, 2020.
Making Our Way Around the Country
The High Court of Justice in London found in favor of policyholders’ arguments on a majority of key issues in a complex business interruption lawsuit. The ruling is estimated to affect 370,000 businesses and billions in insurance claims. Britain’s Financial Conduct Authority (FCA) brought a test case against insurers to clarify the types of business interruption policy wordings should pay out for closures and disruption caused by the pandemic. It is estimated that the case could affect more than 60 insurers and 700 different types of policies because many insurance policies have similar wording. We’ll keep reporting on business interruption ligation as it makes its way through the courts.
DEPT OF LABOR
Last Friday, the U.S. Dept. of Labor (DOL) announced a new temporary rule revising the DOL’s regulations on the Families First Coronavirus Response Act (FFCRA). This follows the Aug. 3, 2020 decision by a federal court invalidating several provisions of the DOL’s original rule. The new rule reaffirms that FFCRA leave is only available to employees if work would otherwise be available to them. It also reaffirms that when intermittent leave is available under FFCRA, the employee must obtain employer approval to take intermittent leave. Under the new rule, employees must provide notice and required documentation as soon as practicable rather than “prior to” taking FFCRA leave. Finally, the new rule provides a new definition of “health care provider.” The new rule goes into effect Sept. 16, 2020 and will continue through Dec. 31, 2020, when entitlement to FFCRA leave currently ends.
HAPPY NEW YEAR
Or Shanah Tovah! The celebration of the Jewish New Year, Rosh Hashanah, begins at sundown on Friday. It begins a period of self-reflection. During these unprecedented times, we wish you an abundance of apples and honey. Stay safe, stay well, and stay connected.