Federal Register / Vol. 86, No. 144 / Friday, July 30, 2021 / Rules and Regulations 40939 

1See 29 U.S.C. 206(a). 2See 29 U.S.C. 207(a). 3See 29 U.S.C. 211(c). 4 29 U.S.C. 203(d). 

5 29 U.S.C. 203(e)(1). 

6See 29 U.S.C. 203(e)(2)–(5). 7 29 U.S.C. 203(g). 

8See Interpretative Bulletin No. 13, ‘‘Hours 

Worked: Determination of Hours for Which 

Employees are Entitled to Compensation Under the 

Fair Labor Standards Act of 1938,’’ ¶¶ 16–17. In 

October 1939 and October 1940, WHD revised other 

portions of the Bulletin that are not pertinent here. 

9See id. 

10 Id. ¶ 17. 

11 Id. 

12See 23 FR 5905 (Aug. 5, 1958). 

13 29 CFR 791.2(a) (1958). 

available at the addresses specified in 

paragraphs (k)(3) and (4) of this AD. 

(k) Material Incorporated by Reference 

(1) The Director of the Federal Register 

approved the incorporation by reference 

(IBR) of the service information listed in this 

paragraph under 5 U.S.C. 552(a) and 1 CFR 

part 51. 

(2) You must use this service information 

as applicable to do the actions required by 

this AD, unless this AD specifies otherwise. 

(i) MHI RJ Service Bulletin 670BA–53–060, 

Revision A, dated September 17, 2020. 

(ii) [Reserved] 

(3) For service information identified in 

this AD, contact MHI RJ Aviation ULC, 12655 

Henri-Fabre Blvd., Mirabel, Que ́bec J7N 1E1 

Canada; Widebody Customer Response 

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+1–844–272–2720 or direct-dial telephone 

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email thd.crj@mhirj.com; internet https://

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(4) You may view this service information 

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Operational Safety Branch, 2200 South 216th 

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availability of this material at the FAA, call 

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Issued on June 10, 2021. 

Ross Landes, 

Deputy Director for Regulatory Operations, 

Compliance & Airworthiness Division, 

Aircraft Certification Service. 

[FR Doc. 2021–16238 Filed 7–29–21; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF LABOR 

Wage and Hour Division 

29 CFR Part 791 

RIN 1235–AA37 

Rescission of Joint Employer Status 

Under the Fair Labor Standards Act 

Rule 

AGENCY: Wage and Hour Division 

(WHD), Department of Labor (DOL). 

ACTION: Final rule; rescission. 

SUMMARY: This action finalizes the 

Department’s proposal to rescind the 

final rule titled ‘‘Joint Employer Status 

Under the Fair Labor Standards Act,’’ 

which published on January 16, 2020, 

and took effect on March 16, 2020. This 

rescission removes the regulations 

established by that rule. 

DATES: This final rule is effective on 

September 28, 2021. 

FOR FURTHER INFORMATION CONTACT: 

Amy DeBisschop, Division of 

Regulations, Legislation, and 

Interpretation, Wage and Hour Division, 

U.S. Department of Labor, Room S– 

3502, 200 Constitution Avenue NW, 

Washington, DC 20210; telephone: (202) 

693–0406 (this is not a toll-free 

number). Copies of this final rule may 

be obtained in alternative formats (Large 

Print, Braille, Audio Tape or Disc), upon 

request, by calling (202) 693–0675 (this 

is not a toll-free number). TTY/TDD 

callers may dial toll-free 1–877–889– 

5627 to obtain information or request 

materials in alternative formats. 

Questions of interpretation and/or 

enforcement of the agency’s regulations 

may be directed to the nearest WHD 

district office. Locate the nearest office 

by calling WHD’s toll-free help line at 

(866) 4US–WAGE ((866) 487–9243) 

between 8 a.m. and 5 p.m. in your local 

time zone, or logging onto WHD’s 

website for a nationwide listing of WHD 

district and area offices at http://

www.dol.gov/whd/america2.htm. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Fair Labor Standards Act (FLSA 

or Act) requires all covered employers 

to pay nonexempt employees at least the 

Federal minimum wage for every hour 

worked in a non-overtime workweek.1

In an overtime workweek, for all hours 

worked in excess of 40 in a workweek, 

covered employers must pay a 

nonexempt employee at least one and 

one-half times the employee’s regular 

rate.2 The FLSA also requires covered 

employers to make, keep, and preserve 

certain records regarding employees.3

The FLSA does not define ‘‘joint 

employer’’ or ‘‘joint employment.’’ 

However, section 3(d) of the Act defines 

‘‘employer’’ to ‘‘include[ ] any person 

acting directly or indirectly in the 

interest of an employer in relation to an 

employee.’’ 4 Section 3(e) generally 

defines ‘‘employee’’ to mean ‘‘any 

individual employed by an employer’’ 5

and identifies certain specific groups of 

workers who are not ‘‘employees’’ for 

purposes of the Act.6 Section 3(g) 

defines ‘‘employ’’ to ‘‘include[ ] to suffer 

or permit to work.’’ 7

A. Prior Guidance Regarding FLSA Joint 

Employment 

In 1939, a year after the FLSA’s 

enactment, the Department’s Wage and 

Hour Division (WHD) issued 

Interpretative Bulletin No. 13, 

addressing, among other topics, whether 

two or more companies may be jointly 

and severally liable for a single 

employee’s hours worked under the 

FLSA.8 WHD recognized in the Bulletin 

that there is joint employment liability 

under the FLSA and provided examples 

of situations where two companies 

would or would not be joint employers 

of an employee.9 For situations where 

an employee works hours for one 

company and works separate hours for 

another company in the same 

workweek, WHD focused on whether 

the two companies ‘‘are acting entirely 

independently of each other with 

respect to the employment of the 

particular employee’’ (in which case 

they would not be joint employers) or, 

‘‘on the other hand, the employment by 

[the one company] is not completely 

disassociated from the employment by 

[the other company]’’ (in which case 

they would be joint employers and the 

hours worked for both would be 

aggregated for purposes of the Act).10

WHD stated in the Bulletin that it ‘‘will 

scrutinize all cases involving more than 

one employment and, at least in the 

following situations, an employer will 

be considered as acting in the interest of 

another employer in relation to an 

employee: If the employers make an 

arrangement for the interchange of 

employees or if one company controls, 

is controlled by, or is under common 

control with, directly or indirectly, the 

other company.’’ 11

In 1958, the Department published a 

rule introducing 29 CFR part 791, titled 

‘‘Joint Employment Relationship under 

Fair Labor Standards Act of 1938.’’ 12

Section 791.2(a) reiterated that there is 

joint employment liability under the Act 

and stated that the determination 

‘‘depends upon all the facts in the 

particular case.’’ 13 It further stated that 

two or more employers that ‘‘are acting 

entirely independently of each other 

and are completely disassociated’’ with 

respect to the employee’s employment 

are not joint employers, but joint 

employment exists if ‘‘employment by 

one employer is not completely 

disassociated from employment by the 


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14 Id. 

15 29 CFR 791.2(b) (1958) (footnotes omitted). 

16See 26 FR 7730, 7732 (Aug. 18, 1961). 

17See Administrator’s Interpretation No. 2014–2, 

‘‘Joint Employment of Home Care Workers in 

Consumer-Directed, Medicaid-Funded Programs by 

Public Entities under the Fair Labor Standards Act’’ 

(June 19, 2014), available at 2014 WL 2816951. 

18 Id. at *2. 

19 Id. at *2 n.4. 

20 Id. at *2 n.5 (quoting Zheng v. Liberty Apparel 

Co., 355 F.3d 61, 69 (2d Cir. 2003)). 

21See id. at *7–14; see also id. at *3 (‘‘[A]ny 

assessment of whether a public entity is a joint 

employer necessarily involves a weighing of all the 

facts and circumstances, and there is no single 

factor that is determinative[.]’’) (citing Rutherford 

Food Corp. v. McComb, 331 U.S. 722, 730 (1947)). 

22See Administrator’s Interpretation No. 2016–1, 

‘‘Joint Employment Under the Fair Labor Standards 

Act and Migrant and Seasonal Agricultural Worker 

Protection Act’’ (Jan. 20, 2016), available at 2016 

WL 284582; see also 29 U.S.C. 1802(5) (‘‘The term 

‘employ’ [under MSPA] has the meaning given such 

term under section 3(g) of the [FLSA].’’). 

23 Id. at *3 (citing, inter alia, Torres-Lopez v. May, 

111 F.3d 633, 639 (9th Cir. 1997); Antenor v. D & 

S Farms, 88 F.3d 925, 929 (11th Cir. 1996)). 

24 Id. 

25 Id. (quoting Antenor, 88 F.3d at 929 n.5). 

26 Id. 

27 Id. at *4. 

28 Id. at *4–8. 

29 Id. at *2. 

other employer(s).’’ 14 Section 791.2(b) 

explained that, ‘‘[w]here the employee 

performs work which simultaneously 

benefits two or more employers, or 

works for two or more employers at 

different times during the workweek, a 

joint employment relationship generally 

will be considered to exist in situations 

such as: 

(1) Where there is an arrangement 

between the employers to share the 

employee’s services, as, for example, to 

interchange employees; or 

(2) Where one employer is acting 

directly or indirectly in the interest of 

the other employer (or employers) in 

relation to the employee; or 

(3) Where the employers are not 

completely disassociated with respect to 

the employment of a particular 

employee and may be deemed to share 

control of the employee, directly or 

indirectly, by reason of the fact that one 

employer controls, is controlled by, or is 

under common control with the other 

employer.’’ 15

In 1961, the Department amended a 

footnote in § 791.2(a) to clarify that a 

joint employer is also jointly liable for 

overtime pay.16 Over the next several 

decades, WHD issued various guidance 

documents including Fact Sheets, 

opinion letters, as well as legal briefs 

reiterating the Department’s position 

concerning joint employment. See, e.g., 

WHD Opinion Letter FLSA2005–15, 

2005 WL 2086804 (Apr. 11, 2005) 

(addressing joint employment in a 

health care system comprised of 

hospitals, nursing homes, and parent 

holding company); WHD Opinion 

Letter, 1999 WL 1788146 (Aug. 24, 

1999) (advising that private duty nurses 

were jointly employed by a hospital and 

individual patients); WHD Opinion 

Letter, 1998 WL 852621 (Jan. 27, 1998) 

(addressing the joint employment of 

grocery vendor employees stocking 

grocery shelves); WHD Opinion Letter 

FLSA–1089, 1989 WL 1632931 (Aug. 9, 

1989) (advising that workers 

participating in an enclave program 

would be jointly employed by a 

participating business and a supervising 

workshop). 

In 2014, WHD issued an 

Administrator’s Interpretation (Home 

Care AI) addressing how joint 

employment under the FLSA applies to 

certain home care workers.17 The Home 

Care AI explained that the FLSA’s 

definitions of ‘‘employer,’’ ‘‘employee,’’ 

and ‘‘employ,’’ ‘‘and therefore the scope 

of employment relationships the Act 

covers, are exceedingly broad.’’ 18 The 

Home Care AI discussed application of 

29 CFR 791.2 and stated that its ‘‘focus 

. . . is the degree to which the two 

possible joint employers share control 

with respect to the employee and the 

degree to which the employee is 

economically dependent on the 

purported joint employers.’’ 19 WHD 

recognized that, ‘‘when making joint 

employment determinations in FLSA 

cases, the exact factors applied may 

vary,’’ but also stated that ‘‘a set of 

factors that addresses only control is not 

consistent with the breadth of 

employment under the FLSA’’ because 

an analysis based solely on the potential 

employer’s joint control ‘‘ ‘cannot be 

reconciled with [FLSA section 3(g)’s 

‘‘suffer or permit’’ language], which 

necessarily reaches beyond traditional 

agency law.’ ’’ 20 Accordingly, the Home 

Care AI applied a non-exclusive set of 

‘‘economic realities factors’’ relating to 

the potential joint employer’s control 

and other aspects of the relationship to 

provide guidance regarding the 

possibility of joint employment in 

numerous hypothetical scenarios 

specific to the home care industry.21

WHD withdrew the Home Care AI on 

March 10, 2020. 

In 2016, WHD issued an 

Administrator’s Interpretation (Joint 

Employment AI) addressing joint 

employment generally under the FLSA 

and the Migrant and Seasonal 

Agricultural Worker Protection Act 

(MSPA), which uses the same definition 

of ‘‘employ’’ as the FLSA.22 Relying on 

the text and history of FLSA section 3(g) 

and case law interpreting it, the Joint 

Employment AI explained that joint 

employment, like employment 

generally, is expansive under the FLSA 

and ‘‘notably broader than the common 

law concepts of employment and joint 

employment.’’ 23 The Joint Employment 

AI further explained that ‘‘the expansive 

definition of ‘employ’ as including ‘to 

suffer or permit to work’ rejected the 

common law control standard and 

ensures that the scope of employment 

relationships and joint employment 

under the FLSA and MSPA is as broad 

as possible.’’ 24 The AI described how 

‘‘suffer or permit’’ or ‘‘similar phrasing 

was commonly used in state laws 

regulating child labor and was ‘designed 

to reach businesses that used 

middlemen to illegally hire and 

supervise children.’ ’’ 25 The AI thus 

concluded that ‘‘the ‘suffer or permit to 

work’ standard was designed to expand 

child labor laws’ coverage beyond those 

who controlled the child laborer,’’ 

‘‘prevent employers from using 

‘middlemen’ to evade the laws’ 

requirements,’’ and ensure joint liability 

in a type of vertical joint employment 

situation (explained below).26

The Joint Employment AI described 

and discussed two types of joint 

employment. It discussed horizontal 

joint employment, which exists where 

an employee is separately employed by, 

and works separate hours in a 

workweek for, more than one employer, 

and the employers ‘‘are sufficiently 

associated with or related to each other 

with respect to the employee’’ such that 

they are joint employers.27 The Joint 

Employment AI explained that ‘‘the 

focus of a horizontal joint employment 

analysis is the relationship between the 

two (or more) employers’’ and that 29 

CFR 791.2 provided guidance on 

analyzing that type of joint employment, 

and the AI provided some additional 

guidance on applying § 791.2.28 The 

Joint Employment AI also discussed 

vertical joint employment, which exists 

where an ‘‘employee has an 

employment relationship with one 

employer (typically a staffing agency, 

subcontractor, labor provider, or other 

intermediary employer),’’ another 

employer is ‘‘receiv[ing] the benefit of 

the employee’s labor,’’ and ‘‘the 

economic realities show that [the 

employee] is economically dependent 

on, and thus employed by,’’ the other 

employer.29 The Joint Employment AI 

explained that the vertical joint 

employment analysis does not focus on 

examining the relationship between the 

two employers but instead ‘‘examines 

the economic realities’’ of the 

relationship between the employee and 

the other employer that is benefitting 


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30 Id. at *4. 31 Id. 32 Id. at *5 (citing WHD’s multi-factor economic 

realities analysis for joint employment under MSPA 

set forth at 29 CFR 500.20(h)(5)). The Department 

issued its current MSPA joint employment 

regulation in 1997 via a final rule following noticeand-comment rulemaking. See 62 FR 11734 (Mar. 

12, 1997). 33See 2016 WL 284582, at *8–12. 34See News Release 17–0807–NAT, ‘‘US 

Secretary of Labor Withdraws Joint Employment, 

Independent Contractor Informal Guidance’’ (June 

7, 2017), available at https://www.dol.gov/ 

newsroom/releases/opa/opa20170607. 

35See 85 FR 2820 (Jan. 16, 2020). The Department 

had published a notice of proposed rulemaking 

(NPRM) requesting comments on a proposed rule. 

See 84 FR 14043 (Apr. 9, 2019). The final rule 

adopted ‘‘the analyses set forth in the NPRM largely 

as proposed.’’ 85 FR 2820. 

36See 29 CFR 791.1, 791.2, and 791.3 (2020). 

37 29 CFR 791.2(a)(1) (2020) (citing 29 U.S.C. 

203(d)) (emphasis added). 

38See generally 85 FR 2825–28. 

39 Id. at 2827. 

40 Id. (citing 29 U.S.C. 203(d)); see also id. (‘‘This 

language from section 3(d) makes sense only if there 

is an employer and employee with an existing 

employment relationship and the issue is whether 

another person is an employer.’’). 

41 Id. 

42 414 U.S. 190 (1973). 

43 704 F.2d 1465 (9th Cir. 1983), abrogated on 

other grounds, Garcia v. San Antonio Metro. Transit 

Auth., 469 U.S. 528 (1985). 

44 85 FR 2827. 

45 29 CFR 791.2(a)(1) (2020). 

46See 29 CFR 791.2(a)(1)(i)–(iv) (2020). 

47 85 FR 2830. 

48See 704 F.2d at 1469–1470. 

49Compare 29 CFR 791.2(a)(1)(i) (2020) with 

Bonnette, 704 F.2d at 1469–1470. 

50 29 CFR 791.2(a)(3)(i) (2020) (citing 29 U.S.C. 

203(d)). 

51Compare 29 CFR 791.2(a)(1)(ii) (2020) with 

Bonnette, 704 F.2d at 1469–1470. 

52Compare 29 CFR 791.2(a)(2) (2020) with 

Bonnette, 704 F.2d at 1469–1470. 

from the worker’s labor.30 The AI noted 

that ‘‘several Circuit Courts of Appeals 

have also adopted an economic realities 

analysis for evaluating vertical joint 

employment under the FLSA,’’ and that, 

‘‘[r]egardless of the exact factors, the 

FLSA and MSPA require application of 

the broader economic realities analysis, 

not a common law control analysis, in 

determining vertical joint 

employment.’’ 31 The AI advised that, 

‘‘because of the shared definition of 

employment and the coextensive scope 

of joint employment between the FLSA 

and MSPA,’’ the non-exclusive, multifactor economic realities analysis set 

forth by the Department in its MSPA 

joint employment regulation should be 

applied in FLSA vertical joint 

employment cases to analyze the 

relationship between the employee and 

the other employer, and that doing so 

‘‘is consistent with both statutes and 

regulations.’’ 32 The AI provided 

additional guidance on applying the 

analysis.33 WHD withdrew the Joint 

Employment AI on June 7, 2017.34

B. 2020 Joint Employer Rule 

In January 2020, the Department 

published a final rule titled ‘‘Joint 

Employer Status Under the Fair Labor 

Standards Act,’’ which became effective 

on March 16, 2020 (Joint Employer Rule 

or Rule).35 The Joint Employer Rule 

revised 29 CFR part 791 so that: § 791.1 

contained an introductory statement; 

§ 791.2 contained the substance of the 

Rule and addressed both vertical joint 

employment (which it referred to as 

‘‘the first joint employer scenario’’) and 

horizontal joint employment (which it 

referred to as ‘‘the second joint 

employer scenario’’); and § 791.3 

contained a severability provision.36

1. Joint Employer Rule’s Vertical Joint 

Employment Standard 

For vertical joint employment, 

§ 791.2(a)(1) stated that ‘‘[t]he other 

person [that is benefitting from the 

employee’s labor] is the employee’s 

joint employer only if that person is 

acting directly or indirectly in the 

interest of the employer in relation to 

the employee,’’ and then cited FLSA 

section 3(d)’s definition of 

‘‘employer.’’ 37 The Joint Employer Rule 

provided that section 3(d) is the sole 

statutory provision in the FLSA for 

determining ‘‘joint employer status’’ 

under the Act—to the exclusion of 

sections 3(e) and 3(g).38 The Joint 

Employer Rule further provided that the 

definitions of ‘‘employee’’ and 

‘‘employ’’ in sections 3(e) and 3(g) 

‘‘determine whether an individual 

worker is an employee under the 

Act.’’ 39 Citing section 3(d)’s definition 

of ‘‘employer’’ as including ‘‘any person 

acting directly or indirectly in the 

interest of an employer in relation to an 

employee,’’ the Rule stated that ‘‘only 

this language from section 3(d) 

contemplates the possibility of a person 

in addition to the employer who is also 

an employer and therefore jointly liable 

for the employee’s hours worked.’’ 40

The Rule concluded that this language 

from section 3(d), ‘‘by its plain terms, 

contemplates an employment 

relationship between an employer and 

an employee, as well as another person 

who may be an employer too—which 

exactly fits the [vertical] joint employer 

scenario under the Act.’’ 41 The Rule 

relied on the Supreme Court’s decision 

in Falk v. Brennan 42 and the Court of 

Appeals for the Ninth Circuit’s decision 

in Bonnette v. California Health & 

Welfare Agency 43 to ‘‘support focusing 

on section 3(d) as determining joint 

employer status.’’ 44

Section 791.2(a)(1) of the Joint 

Employer Rule stated that ‘‘four factors 

are relevant to the determination’’ of 

whether the other employer is a joint 

employer in the vertical joint 

employment situation.45 Those four 

factors were whether the other 

employer: (1) Hires or fires the 

employee; (2) supervises and controls 

the employee’s work schedule or 

conditions of employment to a 

substantial degree; (3) determines the 

employee’s rate and method of payment; 

and (4) maintains the employee’s 

employment records.46 The Joint 

Employer Rule stated that its four-factor 

test was ‘‘derived from’’ Bonnette.47 In 

Bonnette, the Ninth Circuit affirmed a 

finding of vertical joint employment 

after considering whether the other 

employer: (1) Had the power to hire and 

fire the employees, (2) supervised and 

controlled employee work schedules or 

conditions of employment, (3) 

determined the rate and method of 

payment, and (4) maintained 

employment records.48

The Joint Employer Rule’s four-factor 

analysis deviated from the analysis in 

Bonnette in several ways. First, the Rule 

articulated the first factor as whether the 

other employer ‘‘[h]ires or fires the 

employee’’ as opposed to whether it had 

‘‘the power’’ to hire and fire.49 Section 

791.2(a)(3)(i) stated that the ‘‘potential 

joint employer must actually exercise 

. . . one or more of these indicia of 

control to be jointly liable under the 

Act,’’ and that ‘‘[t]he potential joint 

employer’s ability, power, or reserved 

right to act in relation to the employee 

may be relevant for determining joint 

employer status, but such ability, 

power, or right alone does not 

demonstrate joint employer status 

without some actual exercise of 

control.’’ 50 Second, the Joint Employer 

Rule modified the Bonnette factor 

requiring consideration of whether the 

potential joint employer supervises and 

controls work schedules or conditions 

of employment by adding the phrase ‘‘to 

a substantial degree.’’ This phrase was 

absent from the test articulated in 

Bonnette (although Bonnette found that, 

on the factual record before it, the 

potential joint employers ‘‘exercised 

considerable control’’ in that area).51

Third, § 791.2(a)(2) stated that 

‘‘[s]atisfaction of the maintenance of 

employment records factor alone will 

not lead to a finding of joint employer 

status,’’ however, Bonnette did not 

include this limitation to a finding of 

joint employer status.52 Finally, 

§ 791.2(b) stated that ‘‘[a]dditional 

factors may be relevant for determining 

joint employer status in this scenario, 

but only if they are indicia of whether 


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53 29 CFR 791.2(b) (2020). 

54 704 F.2d at 1470 (quoting Rutherford Food, 331 

U.S. at 730). 

55 29 CFR 791.2(c) (2020) (‘‘[T]o determine joint 

employer status, no factors should be used to assess 

economic dependence.’’). 

56 85 FR 2821. 

57 Id. at 2836. 

58 Id. at 2823; see also id. at 2844–45. 

59 29 CFR 791.2(e)(1)–(2) (2020). 

60 29 CFR 791.2(e)(2) (2020). 

61Compare 29 CFR 791.2(e)(2)(i)–(iii) (2020) with 

29 CFR 791.2(b)(1)–(3) (1958). 

62 29 CFR 791.2(f) (2020). 

63 29 CFR 791.2(g) (2020). 

64See New York v. Scalia, No. 1:20–cv–01689 

(S.D.N.Y. filed Feb. 26, 2020). The APA requires 

courts to hold unlawful and set aside agency 

actions that are ‘‘arbitrary, capricious, an abuse of 

discretion, or otherwise not in accordance with 

law.’’ 5 U.S.C. 706(2)(A). 

65See 464 F. Supp. 3d 528. 

66See 2020 WL 3498755. 

67See 490 F. Supp. 3d 748. 

68 Id. at 795. 

69See id. at 774. 

70See id. at 774–92. 

71See id. at 792–95. 

72 Id. at 795–96. 

73 Id. 

74See New York v. Scalia, 490 F. Supp. 3d 748, 

appeal docketed, No. 20–3806 (2d Cir. Nov. 6, 

2020). 

75See 86 FR 14038. 

76See 86 FR 14042–46. 

the potential joint employer exercises 

significant control over the terms and 

conditions of the employee’s 

work.’’ 53 Bonnette, however, stated that 

its four factors ‘‘provide a useful 

framework for analysis in this case,’’ but 

‘‘are not etched in stone and will not be 

blindly applied,’’ and that ‘‘[t]he 

ultimate determination must be based 

‘upon the circumstances of the whole 

activity.’ ’’ 54

In addition to generally excluding 

factors that are not indicative of the 

potential joint employer’s control over 

the employee’s work, the Joint Employer 

Rule specifically excluded any 

consideration of the employee’s 

economic dependence on the potential 

joint employer.55 The Rule asserted that 

‘‘[e]conomic dependence is relevant 

when applying section 3(g) and 

determining whether a worker is an 

employee under the Act; however, 

determining whether a worker who is an 

employee under the Act has a joint 

employer for his or her work is a 

different analysis that is based on 

section 3(d).’’ 56 The Rule further 

asserted that, ‘‘[b]ecause evaluating 

control of the employment relationship 

by the potential joint employer over the 

employee is the purpose of the 

Department’s four-factor balancing test, 

it is sensible to limit the consideration 

of additional factors to those that 

indicate control.’’ 57

2. Joint Employer Rule’s Horizontal 

Joint Employment Standard 

To determine horizontal joint 

employment, the Joint Employer Rule 

adopted the longstanding standard 

articulated in the prior version of 29 

CFR 791.2 with ‘‘non-substantive 

revisions.’’ 58 Section 791.2(e)(2) stated 

that, in this ‘‘second joint employer 

scenario,’’ ‘‘if the employers are acting 

independently of each other and are 

disassociated with respect to the 

employment of the employee,’’ they are 

not joint employers.59 It further stated 

that, ‘‘if the employers are sufficiently 

associated with respect to the 

employment of the employee, they are 

joint employers and must aggregate the 

hours worked for each for purposes of 

determining compliance with the 

Act.’’ 60 It identified the same three 

general examples of horizontal joint 

employment provided in the prior 

version of 29 CFR 791.2.61

3. Joint Employer Rule’s Additional 

Provisions 

The Joint Employer Rule adopted 

additional provisions that apply to both 

vertical and horizontal joint 

employment. Section 791.2(f) addresses 

the consequences of joint employment 

and provided that ‘‘[f]or each workweek 

that a person is a joint employer of an 

employee, that joint employer is jointly 

and severally liable with the employer 

and any other joint employers for 

compliance’’ with the Act.62 Section 

791.2(g) provided 11 ‘‘illustrative 

examples’’ of how the Rule may apply 

to specific factual situations implicating 

both vertical and horizontal joint 

employment.63

C. Decision Vacating Most of the Joint 

Employer Rule 

In February 2020, 17 States and the 

District of Columbia (the States) filed a 

lawsuit in the United States District 

Court for the Southern District of New 

York against the Department asserting 

that the Joint Employer Rule violated 

the Administrative Procedure Act 

(APA).64 The Department moved to 

dismiss the lawsuit on the grounds that 

the States did not have standing. The 

district court denied that motion on 

June 1, 2020.65 The district court issued 

an order on June 29, 2020, permitting 

the International Franchise Association, 

the Chamber of Commerce of the United 

States of America, the National Retail 

Federation, the Associated Builders and 

Contractors, and the American Hotel 

and Lodging Association (Intervenors) 

to intervene as defendants in the case.66

The parties filed cross-motions for 

summary judgment, which the district 

court decided on September 8, 2020.67

The district court vacated the Joint 

Employer Rule’s ‘‘novel standard for 

vertical joint employer liability’’ 

because its ‘‘revisions to that scenario 

are flawed in just about every 

respect.’’ 68 The district court found that 

the Rule violated the APA because it 

was contrary to the law—specifically, it 

conflicted with the FLSA.69 The district 

court identified three conflicts: The 

Rule’s reliance on the FLSA’s definition 

of ‘‘employer’’ in section 3(d) as the sole 

textual basis for joint employment 

liability; its adoption of a control-based 

test for determining vertical joint 

employer liability; and its prohibition 

against considering additional factors 

beyond control, such as economic 

dependence.70 In addition, the district 

court found that the Rule was ‘‘arbitrary 

and capricious’’ in violation of the APA 

for three reasons: The Rule did not 

adequately explain why it departed 

from the Department’s prior 

interpretations; the Rule did not 

consider the conflict between it and the 

Department’s MSPA joint employment 

regulations; and the Rule did not 

adequately consider its cost to 

workers.71

The district court concluded that the 

Joint Employer Rule’s ‘‘novel 

interpretation for vertical joint employer 

liability’’ was unlawful under the APA 

and vacated all of § 791.2 except for 

§ 791.2(e).72 The court determined that, 

because the Rule’s ‘‘non-substantive 

revisions to horizontal joint employer 

liability are severable,’’ § 791.2(e) 

‘‘remains in effect.’’ 73

In November 2020, the Department 

and the Intervenors appealed the district 

court’s decision vacating most of the 

Joint Employer Rule, and the appeal 

remains pending before the Court of 

Appeals for the Second Circuit, as 

discussed further below.74

D. Proposal To Rescind the Joint 

Employer Rule 

On March 12, 2021, the Department 

issued a notice of proposed rulemaking 

(NPRM) proposing to rescind the Joint 

Employer Rule.75 The NPRM explained 

that the Department was considering 

rescinding the Joint Employer Rule for 

several reasons.76 The Department 

decided to further consider the concerns 

raised by the district court in New York 

v. Scalia that the Rule’s reliance on 

section 3(d) alone among the FLSA’s 

provisions may be contrary to the 

FLSA’s text and Congressional intent, 

particularly as the Department had 

never previously excluded FLSA 

sections 3(e) and (g) from the joint 

employment analysis and had instead 


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77See 86 FR 14042–43. 

78See 86 FR 14043. 

79See 86 FR 14043–44 (quoting Scalia, 490 F. 

Supp. 3d at 790). 

80See 86 FR 14044. 

81See 86 FR 14044–45. 

82See 86 FR 14045. 

83See 86 FR 14045–46. 

84Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 

318, 326 (1992). 

85 In addition, some commenters provided 

political or ideological statements that did not 

specifically support or oppose the proposed 

rescission. For example, some comments were 

limited to offering support for working people 

without suggesting how best to do so in the context 

of this rulemaking. A few other commenters 

appeared to confuse the proposed rescission of the 

Joint Employer Rule with the proposed withdrawal 

of the Department’s rule related to independent 

contractors. See 86 FR 14027 (Mar. 12, 2021) 

(proposing withdrawal of the final rule, 

‘‘Independent Contractor Status under the Fair 

Labor Standards Act,’’ previously published on 

January 7, 2021 at 86 FR 1168). The Department 

finalized withdrawal of the Independent Contractor 

Rule on May 6, 2021. See 86 FR 24303. 

applied an economic realities 

framework that included the definitions 

of ‘‘employ’’ or ‘‘employee’’ when 

determining joint employer liability, 

consistent with the approach taken by 

courts.77 The Department was similarly 

concerned that the Rule’s use of section 

3(d) alone as the statutory basis for joint 

employment might not ‘‘easily 

encompass all scenarios in which joint 

employment may arise; multiple 

employers may ‘suffer or permit’ an 

employee to work and could thus be 

joint employers under section 3(g) 

without one [employer] working ‘in the 

interest of an employer’ under section 

3(d).’’ 78

The Department also believed that it 

should consider and address the district 

court’s conclusion that the Joint 

Employer Rule ‘‘unlawfully limits the 

factors the Department will consider in 

the joint employer inquiry’’ by focusing 

on a control-based test to the exclusion 

of economic dependence generally, 

certain economic dependence factors, 

and certain other considerations, as this 

approach is not consistent with the 

totality-of-the-circumstances economic 

realities standard that has generally 

been used by the courts.79 The Rule’s 

approach was also different than the 

Department’s prior guidance on joint 

employment, and the Department 

acknowledged in the NPRM the district 

court’s concerns that the Rule did not 

adequately explain the reasons for the 

significant departure.80 Relatedly, the 

Department recognized in the NPRM 

that courts have generally declined to 

adopt the Rule’s vertical joint 

employment analysis as a replacement 

for their existing analyses, indicating 

that the Rule had not provided the 

intended clarity and that rescinding the 

Rule would not be disruptive to 

stakeholders.81 Finally, the Department 

was concerned that the Rule may not 

have sufficiently considered the 

negative effect that it would have on 

employees by reducing the number of 

businesses who were FLSA joint 

employers from which employees may 

be able to collect back wages due to 

them under the FLSA.82 For all of these 

reasons, the Department proposed in the 

NPRM to rescind the entire Joint 

Employer Rule.83

E. Status of Pending Appeal of Decision 

Vacating Most of the Joint Employer 

Rule 

Although its filing deadline was not 

until February 19, 2021, the Department 

filed an opening brief in support of the 

Rule on January 15, 2021. The 

Intervenors filed their opening brief on 

the same day. On March 31, 2021, the 

Department filed a motion seeking to 

hold the appeal in abeyance in light of 

the published NPRM proposing to 

rescind the Joint Employer Rule. The 

Second Circuit denied the motion 

without explanation. The States filed 

their response brief on April 16, 2021. 

The Intervenors filed their reply brief on 

May 7, 2021. On May 28, 2021, the 

Department filed a reply brief. In its 

reply brief, the Department explained 

that the rulemaking proposing to 

rescind the Joint Employer Rule may 

moot the States’ challenge to the Rule, 

making any resolution of the appeal 

unnecessary. The Department took no 

position on the merits of the Rule in its 

reply brief. The Department argued that 

if the Second Circuit resolves the 

appeal, it should reverse the district 

court’s decision on the grounds that the 

States had no standing to challenge the 

Rule. 

II. Comments and Decision 

The Department received over 290 

comments in response to the NPRM. 

State officials, members of Congress, 

labor unions, social justice 

organizations, worker advocacy groups, 

and individual commenters wrote in 

support of the Department’s proposal to 

rescind the Joint Employer Rule, 

including a number of commenters who 

submitted comments with similar 

template language. These commenters 

supported rescission of the Rule 

predominantly on the basis that, in their 

view, the Rule improperly narrowed the 

test for joint employer status and 

conflicted with decades of Department 

interpretation, the text of the FLSA, and 

Congressional intent. Some suggested 

that the Rule did not align with the 

Supreme Court’s observation that the 

FLSA’s conception of employment is of 

‘‘striking breadth.’’ 84 Commenters also 

noted detrimental effects of the Rule on 

vulnerable workers employed by 

contractors. Others pointed out that a 

court had vacated the Rule’s vertical 

joint employment analysis and asserted 

that the horizontal joint employment 

test was intertwined with the vacated 

vertical joint employment provisions. 

Commenters also raised numerous other 

legal and policy criticisms of the Rule, 

discussed in greater detail below. 

Various trade associations, business 

advocacy organizations, law firms, and 

individual commenters submitted 

comments opposing the Department’s 

proposal to rescind the Joint Employer 

Rule. These commenters generally 

supported the Rule for, in their view, 

providing a clearer, common-sense 

standard for determining joint employer 

status. Several expressed the view that 

the Department was relying too much 

on a district court decision which the 

commenters believe to be erroneous, 

and encouraged the Department to stay 

this rulemaking pending the outcome of 

the appeal to the Second Circuit. They 

raised numerous other legal and policy 

arguments in defense of the Rule (or in 

objection to the proposed rescission), 

discussed in greater detail below.85

Having considered the comments 

submitted in response to the NPRM, the 

Department has decided to finalize the 

rescission of the Joint Employer Rule. 

The Rule was inconsistent with the 

FLSA’s text and purpose. The Rule’s 

vertical joint employment analysis had 

never before been applied by WHD, was 

different from the analyses applied by 

every court to have considered the issue 

prior to the Rule’s issuance, and has 

generally not been adopted by courts. 

The Rule’s horizontal joint employment 

analysis, although consistent with prior 

guidance, was intertwined with the 

vertical joint employment analysis, and 

thus the Department is rescinding the 

entire Rule as explained below. The 

Department’s response to commenter 

feedback on specific aspects of the 

proposed rescission is also provided 

below. 

A. Statutory Analysis and Control-Based 

Test for Vertical Joint Employment 

The NPRM observed that the statutory 

analysis and control-based test for 

vertical joint employment set forth in 

the Joint Employer Rule was different, 

to varying degrees, from the analyses 

and tests applied by every court to have 

considered joint employer questions 


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86 85 FR 2825, 2827–28. 

87 86 FR 14042. 88Quoting 85 FR 2857. 

89 85 FR 2825. 

90 29 U.S.C. 203(d). 

91 Id. (emphases added). 

92Compare, for example, sections 203(a), 203(b), 

and 203(e), which use the word ‘‘means’’ to define 

‘‘person,’’ ‘‘commerce,’’ and ‘‘employee,’’ 

respectively, with sections 203(d) and 203(g), which 

use the word ‘‘includes’’ to define ‘‘employer’’ and 

‘‘employ,’’ respectively. ‘‘It is a well-established 

canon of statutory interpretation that the use of 

different words or terms within a statute 

demonstrates that Congress intended to convey a 

different meaning for those words.’’ SEC v. 

McCarthy, 322 F.3d 650, 656 (9th Cir. 2003); see 

also Race Tires Am., Inc. v. Hoosier Racing Tire 

Corp., 674 F.3d 158, 165 (3d Cir. 2012) (‘‘If possible, 

we must give effect to every clause and word of a 

statute, . . . and be reluctant to treat statutory terms 

as surplusage.’’) (internal quotation marks omitted). 

93 29 CFR 791.2(a)(1) (2020) (citing 29 U.S.C. 

203(d)) (emphasis added). 

prior to the Rule’s issuance, as well as 

WHD’s previous enforcement approach. 

The NPRM further noted that the Rule 

may have been impermissibly narrow 

due to its exclusive focus on control. 

1. The Rule’s Reliance on Section 3(d) 

as the Sole Textual Basis for 

Determining Joint Employer Status 

In the Rule, the Department stated 

that section 3(d) of the FLSA, which 

contains the definition of employer, is 

the sole statutory basis for determining 

joint employer status under the Act, and 

asserted that sections 3(e) and 3(g), 

which define ‘‘employee’’ and 

‘‘employ,’’ respectively, are not relevant 

to determining joint employer status.86

In the NPRM, the Department explained 

its concern that, upon further 

consideration, the text of section 3(d) 

alone may not easily encompass all 

scenarios in which joint employment 

may arise under the Act.87

Multiple commenters representing 

employees agreed that by limiting the 

statutory basis of the vertical joint 

employment analysis to section 3(d) and 

ignoring the ‘‘suffer or permit’’ language 

of section 3(g)’s definition of ‘‘employ,’’ 

the Joint Employer Rule’s test for 

vertical joint employment was unduly 

narrow and contrary to law and the Act. 

See, e.g., National Employment Lawyers 

Association. The North Carolina Justice 

Center, for example, stated that the 

‘‘rule’s narrow definition of who is 

responsible as an employer is contrary 

to the plain language of the statute’s 

definition of ‘employ’ contained in 

section 203(g) of the Act.’’ The 

International Brotherhood of Teamsters 

noted that the Rule impermissibly 

ignored the statutory definitions of 

‘‘employ’’ and ‘‘employee,’’ which they 

asserted ‘‘are integral to the ‘employer’ 

definition.’’ The Northwest Workers’ 

Justice Project commented on the Rule’s 

‘‘novel’’ interpretation and asserted that 

‘‘the Secretary is unable to point to a 

single authority for its unusual assertion 

that this section [3(d)] is the sole source 

of joint employment.’’ The Project’s 

comment further criticized the Rule’s 

statutory interpretation, observing that 

‘‘[t]he word ‘joint’ does not appear in 

§ 203(d)’’ and opining that ‘‘the word 

‘includes’ in 29 U.S.C. 203(d) would 

suggest that there are other types of 

employers under the FLSA than those 

that meet the statutory definition of 

§ 203(d).’’ Texas RioGrande Legal Aid 

noted that the Rule ‘‘grew from the 

belief that section 3(d) of the FLSA ‘is 

the touchstone for joint employer 

status’ ’’ 88 but section 3(d) ‘‘is circular 

and provides little or no guidance as to 

the extent of employer-employee 

relationships.’’ A coalition of State 

Attorneys General (State AGs) 

commented that the Rule’s vertical joint 

employment test ‘‘conflicted with the 

statutory text of the FLSA’’ because its 

‘‘narrow interpretation of the term 

‘employer’ and its assertion that the 

definition of ‘employer’ is the sole 

textual basis to determine joint 

employment were not faithful to the 

Act’s definitions and Congress’ intent in 

enacting them.’’ 

Employers and trade associations 

generally commented that the Joint 

Employer Rule was consistent with the 

FLSA and case law and should be 

upheld. See, e.g., U.S. Chamber of 

Commerce, Littler Workplace Policy 

Institute (WPI). The Associated Builders 

and Contractors, for example, stated that 

it ‘‘strongly supports the [D]epartment’s 

clarification [in the Rule] that only the 

definition of an ‘employer’ in section 

3(d) of the FLSA, 29 U.S.C. 203(d), 

determines joint employer status, not 

the definition of ‘employee’ in section 

3(e)(1) or the definition of ‘employ’ as 

‘to suffer or permit work’ in section 3(g) 

of the FLSA, 29 U.S.C. 203(e)(1), (g).’’ 

This commenter further stated that 

‘‘Section 3(d) of the FLSA is the sole 

section that defines ‘employer’ (as a 

person ‘acting directly or indirectly in 

the interest of an employer in relation 

to an employee’), while Section 3(g)’s 

separate definition of ‘employ’ (to 

‘suffer or permit’ to work) has been 

improperly cited by some courts as a 

basis for finding joint employer status.’’ 

The Society for Human Resource 

Management (SHRM) supported the 

Rule’s statutory analysis, and 

commented that ‘‘by distancing itself 

from prior pronouncements espousing 

‘economic dependence’ as the hallmark 

for joint employment (or suggesting that 

certain business models are inherently 

joint employment), the Department 

appropriately returned the focus of the 

joint employment inquiry to the FLSA’s 

statutory language.’’ Similarly, the 

Center for Workplace Compliance stated 

that ‘‘[w]hile sections 3(e)(1) and 3(g) 

would be relevant for determining 

whether an individual was an employee 

or independent contractor, they do not 

appear to be relevant to [the] 

determination of whether a second 

employer should be jointly liable under 

the FLSA.’’ The U.S. Chamber of 

Commerce supported the focus on 

section 3(d) and stated that ‘‘[u]nlike the 

broad definition of ‘employ’, the 

definition of ‘employer’ contains an 

active requirement that an entity be 

‘acting directly or indirectly in the 

interest of an employer in relation to an 

employee.’ ’’ 

Having reviewed the comments and 

considered the issue further, the 

Department has concluded that the 

Rule’s interpretation that section 3(d) is 

the ‘‘sole’’ textual basis for determining 

joint employer status in vertical joint 

employment scenarios 89 potentially 

excluded important aspects of joint 

employment arrangements. 

As an initial matter, the statutory 

language of section 3(d) itself raises 

concerns as to whether relying on that 

provision as the sole textual basis 

encompasses all scenarios in which 

joint employment may arise. Section 

3(d) uses the word ‘‘includes’’ rather 

than the word ‘‘means.’’ 90 Under the 

Act, an ‘‘employer’’ ‘‘includes any 

person acting directly or indirectly in 

the interest of an employer in relation 

to an employee,’’ ‘‘includes a public 

agency,’’ but ‘‘does not include any 

labor organization (other than when 

acting as an employer) or anyone acting 

in the capacity of officer or agent of 

such labor organization.’’ 91 Thus, by its 

own terms, section 3(d) is not 

exhaustive. Throughout section 3—the 

‘‘definitions’’ section of the FLSA— 

Congress chose to vary its language for 

each definition between ‘‘means’’ and 

‘‘includes,’’ and its use of ‘‘includes’’ 

when defining ‘‘employer’’ indicates 

that the definition that follows 

‘‘includes’’ is not an exhaustive 

definition of ‘‘employer.’’ 92

Furthermore, the Joint Employer Rule 

limited joint employment in the vertical 

context to persons ‘‘acting directly or 

indirectly in the interest of the employer 

in relation to the employee,’’ confining 

joint employment to persons acting in 

the interest of a single employer.93 In 

other words, the Rule assumed that an 

employee had one employer and that 

any other person that was liable was a 


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94 29 U.S.C. 203(d) (emphasis added). 

95 29 CFR 791.2(a)(1) (2020). The Joint Employer 

Rule preamble acknowledged the possibility that 

‘‘multiple employers [may] suffer, permit, or 

otherwise employ an employee to work,’’ but only 

in the horizontal scenario involving ‘‘separate sets 

of hours.’’ 85 FR 2823. 

96 29 U.S.C. 203(d). 

97See Greenberg v. Arsenal Bldg. Corp., 144 F.2d 

292, 294 (2d Cir. 1944) (explaining that ‘‘the section 

would have little meaning or effect if such were not 

the case’’). The Supreme Court reversed an 

unrelated part of the Second Circuit’s holding in 

Greenberg. See 324 U.S. 697, 714–16 (1945). 

Greenberg is not alone in concluding that section 

3(d)’s ‘‘includes’’ language was intended to impose 

liability on an employer’s agents. See, e.g., Donovan 

v. Agnew, 712 F.2d 1509, 1513 (1st Cir. 1983) 

(noting that section 3(d) was ‘‘intended to prevent 

employers from shielding themselves from 

responsibility for the acts of their agents’’); Dole v. 

Elliott Travel & Tours, Inc., 942 F.2d 962, 965–66 

(6th Cir. 1991) (relying on section 3(d) to hold 

individually liable the owner/officer who exercised 

operational control of the employer); Arias v. 

Raimondo, 860 F.3d 1185, 1191–92 (9th Cir. 2017) 

(observing that section 3(d) ‘‘clearly means to 

extend [the FLSA’s] reach beyond actual 

employers.), cert. denied, 138 S. Ct. 673 (2018); see 

also Thompson v. Real Estate Mortg. Network, 748 

F.3d 142, 153–54 (3d Cir. 2014) (holding that ‘‘a 

company’s owners, officers, or supervisory 

personnel may also constitute ‘joint employers’ ’’ 

with the company under 3(d)). 

98 85 FR 2826. 

99See Rutherford Food, 331 U.S. at 728; Salinas 

v. Commercial Interiors, Inc., 848 F.3d 125, 136– 

140 (4th Cir. 2017). When Congress enacted the 

Migrant and Seasonal Agricultural Worker 

Protection Act, 29 U.S.C. 1801 et. seq., it provided 

that ‘‘[t]he term ‘employ’ has the meaning given 

such term under section 3(g) of the Fair Labor 

Standards Act of 1938 (29 U.S.C. 203(g)) for the 

purposes of implementing the requirements of that 

Act.’’ 29 U.S.C. 1802(5). The committee report 

provides that ‘‘the Committee’s use of [section 3(g)] 

was deliberate and done with the clear intent of 

adopting the ‘joint employer’ doctrine as a central 

foundation of this new statute.’’ H.R. Rep. No. 97– 

885, at 6 (1982). 

100See Rutherford Food, 331 U.S. at 728 & n.7. 

101See generally People ex rel. Price v. Sheffield 

Farms-Slawson-Decker Co., 225 N.Y. 25, 29–31 

(1918). 

102Notably, the district court in New York v. 

Scalia concluded that ‘‘Falk cuts against the 

Department’s argument that section 3(d) is the sole 

textual basis for joint employer liability’’ because 

Falk cited to the statutory definition of ‘‘employee’’ 

as well as ‘‘employer’’ and observed that the FLSA’s 

definition of employer is expansive. See 490 F. 

Supp. 3d at 783–84. 

joint employer. However, section 3(d) of 

the Act specifically defines a person 

‘‘acting directly or indirectly in the 

interest of an employer in relation to the 

employee’’ as an ‘‘employer’’ itself.94

Thus, while the Rule allowed only a 

single employer—‘‘the employer’’—to 

‘‘suffer[ ], permit[ ], or otherwise 

employ[ ] the employee to work’’ in the 

vertical scenario,95 section 3(d) itself 

provides for any number of other 

employers that can suffer, permit, or 

otherwise employ employees.96 In light 

of this, the Joint Employer Rule did not 

even adhere to the statutory text— 

section 3(d)—which was its cited basis. 

Additionally, there is case law 

indicating that section 3(d) was 

intended for the purpose of imposing 

responsibility upon the agents of 

employers, rather than to provide an 

exhaustive definition of joint employers 

under the Act.97 The Rule 

acknowledged commenter arguments 

regarding this distinction within the 

Act’s ‘‘definitions’’ section, as well as 

the import of section 3(d)’s ‘‘includes’’ 

language,98 but did not address these 

arguments. Confining the analysis to 

only the Act’s definition of ‘‘employer’’ 

resulted in an incomplete analysis of 

some potential joint employment 

scenarios. 

The Department has also evaluated 

the Rule’s singular focus on section 3(d) 

against the backdrop of the history and 

purpose of the ‘‘suffer or permit’’ 

language in section 3(g). As the Rule 

acknowledged, the Act’s definition of 

‘‘employ’’ was a rejection of the 

common law standard for determining 

who is an employee under the Act in 

favor of a broader scope of coverage. See 

Nationwide Mut. Ins. Co. v. Darden, 503 

U.S. 318, 326 (1992) (‘‘[T]he FLSA . . . 

defines the verb ‘employ’ expansively to 

mean ‘suffer or permit to work.’ This 

. . . definition, whose striking breadth 

we have previously noted, stretches the 

meaning of ‘employee’ to cover some 

parties who might not qualify as such 

under a strict application of traditional 

agency law principles.’’) (citations 

omitted); Walling v. Portland Terminal 

Co., 330 U.S. 148, 150–51 (1947) (‘‘But 

in determining who are ‘employees’ 

under the Act, common law employee 

categories or employer-employee 

classifications under other statutes are 

not of controlling significance. This Act 

contains its own definitions, 

comprehensive enough to require its 

application to many persons and 

working relationships, which prior to 

this Act, were not deemed to fall within 

an employer-employee category.’’) 

(citations omitted). 

Section 3(g)’s ‘‘suffer or permit’’ 

language was intended to include as 

employers entities that used 

intermediaries to shield themselves 

from liability.99 Rather than being 

derived from the common law of 

agency, the FLSA’s definition of 

‘‘employ’’ and its ‘‘suffer or permit’’ 

language originally came from state laws 

regulating child labor.100 This language 

was ‘‘designed to reach businesses that 

used middlemen to illegally hire and 

supervise children.’’ Antenor v. D & S 

Farms, 88 F.3d 925, 929 n.5 (11th Cir. 

1996). This standard was intended to 

expand coverage beyond employers who 

control the means and manner of 

performance to include entities who 

‘‘suffer’’ or ‘‘permit’’ work.101

Accordingly, the Rule’s reliance solely 

on section 3(d), to the exclusion of 

section 3(g), was in tension with 

Congress’ well-understood intent in 

enacting those provisions. 

Moreover, the Joint Employer Rule’s 

textual analysis needlessly bifurcated 

the statutory terms ‘‘employ’’ and 

‘‘employer’’ in the vertical context. 

Specifically, it interpreted section 3(g) 

as defining who is an ‘‘employer’’ 

(person A is an employer of person B 

because person A suffers, permits, or 

otherwise employs person B to work), 

and section 3(d) as defining someone 

who is a ‘‘joint employer’’ (person C is 

a joint employer of employee B because 

person C acts directly or indirectly in 

the interest of employer A in relation to 

employee B). The Rule thus applied a 

different analytical framework to 

different employers. This bifurcated 

approach has not been used by any 

court nor is this stratification of 

employers supported by the text of the 

Act. Instead, all employers under the 

Act—joint employers or otherwise—are 

jointly and severally liable for wages 

owed. If anything, the Rule’s section 

3(d) analysis was backwards to the 

extent that it inquired whether entities 

which are higher in the ‘‘vertical’’ 

structure of a particular industry (such 

as a general contractor or staffing agency 

client) are ‘‘acting . . . in the interests 

of’’ acknowledged employers which are 

lower in the structure (such as a 

subcontractor or staffing agency). This 

bifurcation also makes it unclear which 

standard—‘‘suffer or permit’’ under 

section 3(g) or the control-based 

standard under section 3(d)—should 

apply to which entity if, for example, 

both potential employers deny any 

employment relationship with a worker. 

The Joint Employer Rule discussed 

the Supreme Court’s decision in Falk v. 

Brennan 102 at length, relying on it to 

buttress its statutory interpretation 

argument. Upon further consideration, 

while the Court did address a joint 

employment situation in Falk v. 

Brennan, the Department now believes 

that the case’s utility is limited. In its 

four-sentence discussion of joint 

employment, the Court explicitly noted 

the Act’s definitions in both section 3(d) 

(‘‘employer’’) and section 3(e) 

(‘‘employee’’), and based its conclusion 

that a management company was a joint 

employer ‘‘[i]n view of the 

expansiveness of the Act’s definition of 

‘employer’ and the extent of the 

[purported joint employer’s] managerial 


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103 414 U.S. at 195. 

104Shultz v. Falk, 439 F.2d 340, 344 (4th Cir. 

1971). 

105 414 U.S. at 195. 

106Brief for Respondent Secretary of Labor, Falk 

v. Brennan, 414 U.S. 190 (1973) (No. 72–844), 1973 

WL 173856, at *10 (‘‘The Act clearly defines an 

‘employer’ to include ‘any person acting directly or 

indirectly in the interest of an employer in relation 

to an employee * * *’ (Section 3(d)), a description 

plainly applicable to petitioners in their relation to 

the building personnel. The definition of the term 

‘employ’ in Section 3(g) as including ‘to suffer or 

permit to work’ confirms this conclusion, since it 

is petitioners, not the building owners, who have 

control over the hiring, job assignments, and 

discharge of the building workers.’’). 

107 Id. at *26. 

108 Id.; see Rutherford Food, 331 U.S. at 728; 

Salinas, 848 F.3d at 136–140. 

109See, e.g., Baystate Alternative Staffing, Inc. v. 

Herman, 163 F.3d 668, 675 (1st Cir. 1998); In re 

Enterprise Rent-A-Car Wage & Hour Emp’t Practices 

Litig., 683 F.3d 462, 469–470 (3d Cir. 2012); Gray 

v. Powers, 673 F.3d 352, 357 (5th Cir. 2012); 

Bonnette, 704 F.2d at 1469. 

110 29 CFR 791.2(b) and (c) (2020). 

111 86 FR 14043. 

112 Id. 

responsibilities at each of the buildings, 

which gave it substantial control of the 

terms and conditions of the work of 

these employees.’’ 103 Moreover, Falk 

was an affirmance of a Fourth Circuit 

case, which noted that the Act’s 

definitions (both 3(d) and 3(g)) were 

‘‘very broadly cast’’ and that ‘‘courts 

have accordingly found an employment 

relationship for purposes of the Act far 

more readily than would be dictated by 

common law doctrines.’’ 104 The Court 

commented favorably on the Fourth 

Circuit’s holding, stating that ‘‘the Court 

of Appeals was unquestionably correct 

in holding that [the management 

company] is also an employer 

. . . . ’’ 105 The Department’s brief 

before the Supreme Court in Falk v. 

Brennan also argued that the petitioner 

building management company was a 

joint employer of the building’s 

maintenance workers based on both 

section 3(d) and section 3(g).106 The 

brief further stated that ‘‘[s]ince 

petitioners do the hiring and firing, they 

‘employ’ the workers within the plain 

meaning of this statutory definition.’’ 107

The Department’s brief thus concluded 

that it is preferable to read the relevant 

statutory provisions of section 3(d) and 

section 3(g) together because, among 

other reasons, section 3(g) defined 

‘‘employ’’ as it did with the intent of 

including as an employer entities that 

used intermediaries that employed 

workers but disclaimed that they 

themselves were employers of the 

workers.108

Similarly, all of the circuit courts of 

appeals to have considered joint 

employment under the FLSA have 

looked to the economic realities test as 

the proper framework, and none have 

explicitly identified section 3(d) as the 

sole textual basis for joint employment. 

In particular, the case law heavily relied 

upon in the Joint Employer Rule from 

the First, Third, and Fifth Circuits, as 

well as the Bonnette decision itself, all 

apply an economic realities analysis 

when determining joint employment 

under the FLSA.109 The Rule’s approach 

also represented a significant shift from 

WHD’s longstanding analysis; WHD had 

never excluded sections 3(e) and (g) 

from the joint employment analysis and 

had instead consistently applied an 

economic realities framework that did 

not exclude the definitions of ‘‘employ’’ 

or ‘‘employee’’ when determining joint 

employer liability, as discussed above. 

In view of the foregoing, limiting the 

statutory basis for joint employment 

analyses solely to section 3(d), to the 

exclusion of the other highly relevant 

definitions of ‘‘employee’’ in section 

3(e) and ‘‘employ’’ in section 3(g), was 

problematic and inhibited compliance 

with the Act. 

2. The Vertical Joint Employment Test’s 

Singular Emphasis on Control 

For vertical joint employment 

scenarios, the Joint Employer Rule 

adopted a four-factor test focused on the 

actual exercise of control. Generally, it 

excluded factors that were not 

indicative of a potential joint employer’s 

control, directed that additional factors 

may be considered ‘‘only if they are 

indicia of whether the potential joint 

employer exercises significant control 

over the terms and conditions of the 

employee’s work,’’ and specifically 

excluded any consideration of the 

employee’s economic dependence on 

the potential joint employer.110 The 

NPRM questioned whether the fourfactor test’s emphasis on control was 

unduly narrow.111 While recognizing 

that the tests for vertical joint 

employment differ among the circuit 

courts of appeals, the NPRM observed 

that ‘‘all courts consistently use a 

totality-of-the-circumstances economic 

realities approach to determine the 

scope of joint employment under the 

FLSA, rather than limiting the focus 

exclusively to control.’’ 112

Organizations representing employee 

interests generally opposed the fourfactor test’s emphasis on control and, in 

particular, criticized the Joint Employer 

Rule’s requirement that actual control 

be exercised. The Shriver Center, for 

example, commented that ‘‘[e]ven under 

the more restrictive common-law 

employment test, the [Department]’s 

rule is too narrow: it fails to consider 

the right to control, a cornerstone of 

common-law employment 

determinations under long-standing 

Supreme Court and FLSA law.’’ See also 

Workplace Justice Project. The 

Construction Employers of America 

stated that the Rule’s analysis ‘‘replaced 

the historic focus on economic 

dependence for determining joint 

employment with a four-factor test for 

assessing the level of control the 

potential joint employer has over the 

workers at issue.’’ The Northwest 

Workers’ Justice Project noted that there 

is case law that presents a broader 

analysis than solely control, stating, 

‘‘[o]f course, both Real [v. Driscoll 

Strawberry Assocs., 603 F.2d 748 (9th 

Cir. 1979)] and Rutherford [Food Corp. 

v. McComb, 331 U.S. 722 (1947)] 

articulate broader factors beyond control 

to be considered in determining 

employment under the FLSA.’’ The 

State AGs also commented that the 

control-based test for vertical joint 

employment set forth by the Rule was 

‘‘contrary to the FLSA’s text and case 

law’’ and that requiring the exercise of 

actual control was ‘‘inconsistent with 

the ‘suffer or permit’ language of the 

statute.’’ 

Organizations representing employers 

generally supported the Joint Employer 

Rule’s four-factor test, and specifically 

commented that the requirement for an 

actual exercise of control would provide 

much-needed clarity for employers. The 

National Association of Home Builders, 

for instance, stated that the Rule 

‘‘provides a clearer methodology for 

determining joint employer status with 

the focus on the actual exercise of 

power.’’ The U.S. Chamber of 

Commerce also supported the test’s 

emphasis on the exercise of control, 

explaining that ‘‘contractual 

reservations of control are not probative 

of the relationship between the 

employer and the putative employee— 

the touchstone of the joint employer 

analysis—if the putative employer never 

exercises such control.’’ The National 

Restaurant Association and Restaurant 

Law Center also praised the test for 

similar reasons, commenting that the 

Rule ‘‘created a more appropriate and 

reliable standard using a multifactor 

balancing test that focuses on the 

economic realities of the potential joint 

employer’s exercise of control over the 

employee’s terms and conditions of 

employment. Because this test focuses 

on the actual and direct control over the 

employee’s terms and conditions of 

employment, there is greater 

predictability and uniformity in the 

joint employment analysis.’’ See also 

Associated Builders and Contractors 

(‘‘ABC therefore supports the 


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113 503 U.S. at 326. 114See, e.g., Baystate, 163 F.3d at 675; Enterprise, 

683 F.3d at 469; Gray, 673 F.3d at 354–55. 115See, e.g., Zheng, 355 F.3d at 69–75; Salinas, 

848 F.3d at 142–43; Torres-Lopez, 111 F.3d at 639– 

644 (noting that an economic realities analysis 

applies when determining joint employment and 

that the concept of joint employment, like 

employment generally, ‘‘should be defined 

expansively’’ under the FLSA). 

116See Baystate, 163 F.3d at 675; Enterprise, 683 

F.3d at 468–69. 

117Enterprise, 683 F.3d at 469 (emphasis in 

original) (quoting Bonnette, 704 F.2d at 1469–1470). 

118 29 CFR 791.2(b) (emphasis added). 

119 85 FR 2834. 

120 Id. 

121See, e.g., Zheng, 355 F.3d at 69 (‘‘Measured 

against the expansive language of the FLSA, the 

four-part test [based on Bonnette] employed by the 

District Court is unduly narrow, as it focuses solely 

on the formal right to control the physical 

performance of another’s work. That right is central 

to the common-law employment relationship, see 

Restatement of Agency section 220(1) (1933) (‘A 

servant is a person employed to perform service for 

another in his affairs and who, with respect to his 

physical conduct in the performance of the service, 

is subject to the other’s control or right to 

control.’)’’). 

122See Falk, 439 F.2d at 344 (observing that 

courts find employment under the FLSA ‘‘far more 

readily than would be dictated by common law 

doctrines’’); Portland Terminal Co., 330 U.S. at 

150–51 (noting that the FLSA’s definitions are 

‘‘comprehensive enough to require its application’’ 

to many working relationships which, under the 

common law control standard, may not be 

employer-employee relationships); Darden, 503 

U.S. at 326 (stating that the FLSA’s ‘‘suffer or 

permit’’ standard for employment ‘‘stretches the 

meaning of ‘employee’ to cover some parties who 

might not qualify as such under a strict application 

of traditional agency law principles’’). 

123See 86 FR 14044. 

124See id. 

125See id. 

[D]epartment’s rule codifying the 

Bonnette test, with an additional 

emphasis on ‘actual,’ as opposed to 

reserved but unexercised control by one 

employer over another’s employees, as 

the test that is most consistent with the 

statutory definition of ‘employer.’ ’’); 

SHRM (‘‘Ultimately, by ensuring that 

the inquiry is directed [at] a putative 

joint employer’s actual control over 

critical terms of employment, the [Joint 

Employer Rule] stands on solid ground 

statutorily, and is consistent with the 

relevant Supreme Court authority.’’). 

Upon consideration of the comments 

received, the Department has concluded 

that the four-factor test’s exclusive focus 

on control—and specifically, its 

mandate for an actual exercise of 

control—was not the most appropriate 

standard for vertical joint employment 

scenarios in view of the Act and case 

law. It is well-settled that in enacting 

the FLSA, Congress rejected the 

common law control standard for 

employment. In Darden, the Supreme 

Court stated that the FLSA defines 

‘‘employ’’ ‘‘expansively’’ and with 

‘‘striking breadth’’ and ‘‘stretches the 

meaning of ‘employee’ to cover some 

parties who might not qualify as such 

under a strict application of traditional 

agency law principles.’’ 113

Although the specific factors may 

vary, all courts consistently use a 

totality-of-the-circumstances economic 

realities approach to determine the 

scope of joint employment under the 

FLSA. In addition to Bonnette, upon 

which the Rule heavily relied, multiple 

other circuit court decisions relied upon 

by the Rule also ground their joint 

employment analyses in the overarching 

totality-of-the-circumstances economic 

realities standard.114 Court decisions 

that have not applied the Bonnette 

factors generally ground their joint 

employment analyses in the totality-ofthe-circumstances economic realities 

standard as well.115 Although some 

courts have applied an analysis that 

addresses only, or primarily, the 

potential joint employer’s control,116

these cases have nonetheless recognized 

that the control factors considered ‘‘do 

not constitute an exhaustive list of all 

potentially relevant facts’’ and ‘‘should 

not be ‘blindly applied’ ’’; rather, a joint 

employment determination must 

consider the employment situation in 

totality, including the economic realities 

of the working relationship.117 In 

contrast, the Rule provided that 

‘‘[a]dditional factors may be relevant for 

determining joint employer status in 

this scenario, but only if they are indicia 

of whether the potential joint employer 

exercises significant control over the 

terms and conditions of the employee’s 

work.’’ 118 While the exercise of 

‘‘significant control’’ may certainly 

establish joint employment under the 

Act, no court has set this standard as the 

requirement for a finding of joint 

employment. 

Especially problematic was the Rule’s 

requirement for the actual exercise of 

control, a standard adopted by no court. 

The Rule stated that it was ‘‘not the 

Department’s intent’’ to promulgate a 

rule narrower than the common law.119

However, the Rule also plainly required 

an actual exercise of control, stating that 

‘‘the regulation now makes clear that an 

actual exercise of control, directly or 

indirectly, is required for at least one of 

the factors and is the clearer indication 

of joint employer status.’’ 120 Under the 

common law standard, the mere right to 

control indicates a common law 

employment relationship; in contrast, 

the Rule required an actual exercise of 

control for at least one factor.121 For this 

reason too, the Rule’s test for vertical 

joint employment was in tension with 

the economic realities analysis used by 

courts across the country, which was 

intended to be more comprehensive 

than the common law standard.122

The Department appreciates 

employers’ desire for clarity and 

certainty regarding compliance under 

the Act. The Rule’s narrowing of the 

analysis of control, however, was 

contrary to the Act and longstanding 

case law and thus did not guarantee 

enhanced clarity. Because the Rule’s test 

(including the requirement for the 

actual exercise of control) conflicted 

with the tests used from every circuit, 

there likely was more uncertainty under 

this new interpretation. 

B. Taking Into Account Prior WHD 

Guidance 

The Department’s NPRM noted that 

the Joint Employer Rule’s vertical joint 

employment analysis, in addition to 

having never before been applied by a 

court, had never before been applied by 

WHD.123 The Department indicated that 

it tentatively shared the concern that the 

Rule did not sufficiently take into 

account and explain departures from 

WHD’s prior joint employment 

guidance, including its MSPA joint 

employment regulation and the 

withdrawn Home Care AI and Joint 

Employment AI.124 The Department 

further indicated that this concern 

provided additional support for 

rescinding the Rule.125

Texas RioGrande Legal Aid 

commented that the Joint Employer 

Rule conflicted with the MSPA joint 

employment regulation and that, ‘‘under 

the Rule, many agricultural employers 

could have been deemed joint 

employers under the MSPA but not 

under the FLSA,’’ causing ‘‘immense 

confusion’’ in its view ‘‘among the 

regulated community in the agricultural 

sector.’’ The State AGs stated that the 

Joint Employer Rule ‘‘departed from 

decades of agency interpretation of and 

guidance on [the] joint employer 

analysis,’’ including the Department ’s 

vertical joint employment standard in 

its MSPA regulation, its Home Care AI, 

and its Joint Employment AI. According 

to the AGs, WHD’s prior guidance had 

‘‘rejected a ‘control-based test’ like the 

one adopted by the Rule,’’ and the Rule 

did not adequately explain its departure 

from WHD’s prior interpretations. The 

National Women’s Law Center added 

that the Rule ‘‘set forth a new joint 

employment standard’’ that was 

different from WHD’s previous 

enforcement approach and ‘‘departed 

from longstanding . . . [WHD] 

interpretations of covered employment 

and employer under the FLSA.’’ 


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40948 Federal Register / Vol. 86, No. 144 / Friday, July 30, 2021 / Rules and Regulations 

126The International Franchise Association 

described the ‘‘30-day window for public 

comment’’ on the NPRM proposing to withdraw the 

Joint Employer Rule as ‘‘insufficient.’’ WPI agreed, 

stating that ‘‘30 days is insufficient time to 

comment on the proposal.’’ The comment period 

was 31 days and was, in any event, a similar 

duration as the comment periods for some other 

recent Department rulemakings. See, e.g., 85 FR 

60600 (Sept. 25, 2020); 86 FR 14027. Additionally, 

because the NPRM was published only a little over 

one year after the Rule was published, interested 

stakeholders should have been familiar with the 

Rule that was proposed for rescission as well as the 

implications of any rescission. 

127Encino Motorcars, LLC v. Navarro, 136 S. Ct. 

2117, 2125 (2016) (citing Nat’l Cable & Telecomm. 

Ass’n v. Brand X internet Servs., 545 U.S. 967, 981– 

82 (2005); Chevron, U.S.A., Inc. v. Natural 

Resources Defense Council, Inc., 467 U.S. 837, 863– 

64 (1984)). 

128 FCC v. Fox Television Stations, Inc., 556 U.S. 

502, 515 (2009). 

129Encino, 136 S. Ct. at 2126 (quoting Fox 

Television, 556 U.S. at 515, and removing 

emphasis). 

130 Fox Television, 556 U.S. at 515. 

131Encino, 136 S. Ct. at 2126 (quoting Fox 

Television, 556 U.S. at 515). 

132 Fox Television, 556 U.S. at 515–16. 

133Encino, 136 S. Ct. at 2126 (quoting Brand X, 

545 U.S. at 981). 

134See Scalia, 490 F. Supp. 3d at 795 (making 

clear that its decision to vacate most of the Rule did 

‘‘not imply that the Department cannot engage in 

rulemaking to try to harmonize joint employer 

standards’’). 

135See 29 CFR 500.20(h)(5). 

136See 62 FR 11745–46. 

137See note 99, supra. 

138See 29 CFR 500.20(h)(5)(i). 

139See 29 CFR 500.20(h)(5)(iv). 

140See 2016 WL 284582, at *2–4 & 9; 2014 WL 

2816951, at *2 & n.5. 

Other commenters disputed the 

concerns raised by the Department in 

the NPRM. The Texas Public Policy 

Foundation, for example, asserted that it 

was ‘‘arbitrary for WHD to point to 

‘inconsistencies’ between the old agency 

guidance and the new agency guidance 

and assert that those inconsistencies, by 

themselves, justify rescission’’ because 

‘‘[o]therwise, an agency would never be 

able to offer new or updated regulatory 

guidance.’’ Noting that the Department 

had described its concern as tentative in 

the NPRM, this commenter added that 

‘‘[i]t is impermissible for WHD to 

withdraw the Joint Employer Rule based 

on WHD’s ‘tentative’ concern.’’ 

Some commenters contrasted the 

Department’s brief before the Second 

Circuit with the NPRM. The National 

Association of Home Builders 

commented that the Department’s 

‘‘rationale [in the NPRM] is contrary to 

the arguments’’ that the Department 

made in its opening brief to the Second 

Circuit in the appeal of the district 

court’s decision vacating most of the 

Rule. Associated Builders and 

Contractors stated that the NPRM’s 

reliance on the district court’s decision 

‘‘is arbitrary in light of the fact that, less 

than three months ago, the [D]epartment 

filed a brief to the court of appeals 

declaring that each of the same aspects 

of the district court decision was wrong 

and should be reversed.’’ It added that, 

‘‘[i]n light of the pending nature of the 

appeal from the district court decision, 

at a minimum the NPRM should be held 

in abeyance pending the outcome of the 

appeal.’’ The International Franchise 

Association agreed, stating that 

‘‘[n]otwithstanding the [Department’s] 

own pending appeal from the district 

court’s decision, the [Department] has 

proposed to rescind its [Joint Employer] 

Rule by relying on the same district 

court’s opinion that it seeks to challenge 

on appeal at the Second Circuit.’’ It 

added that the Department’s proposal to 

withdraw the Rule ‘‘should be 

withdrawn, or at the very least, held in 

abeyance until a final ruling in the 

pending Second Circuit appeal.’’ WPI 

also agreed, stating that ‘‘[e]ach aspect 

of the district court decision on which 

[the Department] now relies in 

proposing to rescind the [R]ule is 

refuted by [the Department]’s own brief 

to the Second Circuit.’’ It asserted that 

it was ‘‘arbitrary and capricious for [the 

Department] to rely on a court decision 

which it has only recently declared to 

be wrong, while that decision remains 

pending on appeal’’ and suggested that 

the Department ‘‘hold its NPRM in 

abeyance pending the appeal’s 

outcome.’’ 126

In response, the Department agrees 

that ‘‘[a]gencies are free to change their 

existing policies as long as they provide 

a reasoned explanation for the 

change.’’ 127 When an agency changes its 

position, ‘‘it need not demonstrate . . . 

that the reasons for the new policy are 

better than the reasons for the old 

one.’’ 128 ‘‘But the agency must at least 

‘display awareness that it is changing 

position.’ ’’ 129 The agency’s explanation 

is sufficient if ‘‘the new policy is 

permissible under the statute, . . . there 

are good reasons for it, and . . . the 

agency believes it to be better, which the 

conscious change of course adequately 

indicates.’’ 130 When explaining a 

changed position, ‘‘an agency must also 

be cognizant that longstanding policies 

may have ‘engendered serious reliance 

interests that must be taken into 

account.’ ’’ 131 In such cases, the policy 

change itself does not need ‘‘further 

justification,’’ but ‘‘a reasoned 

explanation is needed for disregarding 

facts and circumstances that underlay or 

were engendered by the prior 

policy.’’ 132 For these reasons, ‘‘ ‘an 

unexplained inconsistency’ in agency 

policy is ‘a reason for holding an 

interpretation to be an arbitrary and 

capricious change from agency 

practice.’ ’’ 133

Having considered the comments and 

reviewed the issue further, the 

Department believes that the Joint 

Employer Rule did not provide a 

reasoned explanation for the new FLSA 

vertical joint employment standard that 

it adopted. As explained above in 

Section II.A.1., there was not a 

reasonable basis for relying exclusively 

on section 3(d) and completely 

excluding sections 3(e) and (g) when 

interpreting who is a joint employer 

under the FLSA. As further explained in 

Section II.A.2., there was not a 

reasonable basis for adopting a narrow 

standard limited to control for 

determining who is a joint employer 

under the FLSA. The Rule’s stated 

desire to provide a uniform vertical joint 

employment standard may have been 

valid,134 and the Department recognizes 

that there may be more than one 

permissible interpretive vertical joint 

employment standard under the FLSA; 

however, the standard that the Rule 

adopted was not permissible under the 

FLSA. 

The Department also believes that the 

Joint Employer Rule did not sufficiently 

take into account prior WHD guidance. 

The Department’s MSPA joint 

employment regulation 135 and its 1997 

final rule 136 implementing it have been 

in effect for about 24 years. In keeping 

with MSPA and its legislative 

history,137 the MSPA regulation 

expressly ties its joint employment 

analysis to the FLSA. The MSPA 

regulation provides that ‘‘[j]oint 

employment under the Fair Labor 

Standards Act is joint employment 

under the MSPA’’ 138 and sets forth a 

multi-factor analysis for determining 

vertical joint employment that is 

different than the Rule’s analysis.139

The Joint Employer Rule, however, did 

not address or account for any 

differences between its new regulatory 

standard and MSPA’s existing 

regulatory standard or any effects that it 

may have on joint employment under 

MSPA. In addition, the Department’s 

interpretive guidance in the Home Care 

AI and the Joint Employment AI 

rejected a joint employment analysis 

that was limited to control, and those 

AIs relied on FLSA sections 3(e) and (g) 

in addition to section 3(d).140 Although 

the Home Care AI and the Joint 

Employment AI were withdrawn before 

the effective date of the Joint Employer 

Rule, the Department did not address or 

sufficiently account for its departures 


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141See 86 FR 14044–45 (citing cases, including 

two exceptions). 

142See 86 FR 14045. 

143See id. 

144See Reyes-Trujillo v. Four Star Greenhouse, 

Inc., No. 20–11692, — F. Supp. 3d —, 2021 WL 

103636, at *6–9 (E.D. Mich. Jan. 12, 2021) (agreeing 

that the Joint Employer Rule’s exclusive focus on 

the potential joint employer’s control runs counter 

to the FLSA’s expansive definition of ‘‘employer’’ 

and thus declining to adopt the Rule’s analysis); 

Elsayed v. Family Fare LLC, No. 1:18–cv–1045, 

2020 WL 4586788, at *4 (M.D.N.C. Aug. 10, 2020) 

(finding ‘‘it unnecessary to wade into whether the 

DOL’s [Joint Employer] Rule is entitled to Brand X 

deference or whether the [Rule] is lawful under the 

APA’’ and instead ‘‘rely[ing] on established Fourth 

Circuit precedent’’ regarding joint employment). 

145See Clyde v. My Buddy The Plumber Heating 

& Air, LLC, No. 2:19–cv–00756–JNP–CMR, 2021 WL 

778532 (D. Utah Mar. 1, 2021); Sanders v. Glendale 

Rest. Concepts, LP, No. 19–cv–01850–NYW, 2020 

WL 5569786 (D. Colo. Sept. 17, 2020). In Clyde, the 

district court found it ‘‘appropriate to rely upon the 

factors listed in the federal regulations interpreting 

the FLSA for guidance.’’ 2021 WL 778532, at *2 

(citing Skidmore v. Swift & Co., 323 U.S. 134, 139– 

40 (1944)). It also relied on additional joint 

employment factors from the Fourth Circuit’s 

decision in Salinas. See id. at *3. In Sanders, the 

district court actually articulated the four factors as 

Bonnette did but applied them as a result of the 

Joint Employer Rule and the parties’ agreement that 

those four factors applied instead of the factors from 

the Fourth Circuit’s decision in Salinas, which 

some of the courts in that district ‘‘favored.’’ 2020 

WL 5569786, at *3–4. In addition to these two 

district court decisions, there is the Sixth Circuit’s 

decision in Rhea v. West Tennessee Violent Crime 

& Drug Task Force, 825 F. App’x 272 (6th Cir. 

2020). In that case, the Sixth Circuit, after applying 

the Bonnette factors to determine that one 

defendant was not the employee’s employer under 

the FLSA, listed the Rule’s vertical joint 

employment factors in a footnote, asserted that the 

Rule’s factors ‘‘focus[] on the same factors as that 

of determining employer status,’’ and stated that 

‘‘[n]either would [the defendant] be a ‘joint 

employer’ under the FLSA.’’ Id. at 275–77 & n.4. 

However, the Sixth Circuit did not engage in any 

substantial analysis of the Rule’s factors or 

meaningfully apply them. See id. at 277 n.4. 146See 85 FR 2831 (comparing the Rule’s fourfactor analysis to the various analyses adopted by 

circuit courts of appeals). 

147See, e.g., Hamm v. Acadia Healthcare Co., No. 

20–1515, 2021 WL 1212539, at *5–6 (E.D. La. Mar. 

31, 2021) (reciting Fifth Circuit’s vertical joint 

employment analysis); Zhao v. Ke Zhang Inc., No. 

18–CV–6452 (EK) (VMS), 2021 WL 1210369, at *4– 

6 (E.D.N.Y. Mar. 31, 2021) (applying Second 

Circuit’s vertical joint employment analysis); Gil v. 

Pizzarotti LLC, No. 1:19-cv-03497–MKV, 2021 WL 

1178027, at *4–13 & n.2 (S.D.N.Y. Mar. 29, 2021) 

(applying Second Circuit’s vertical joint 

employment analysis although noting in footnote in 

response to employer’s argument that it would have 

reached the same result had it applied the Rule’s 

analysis); Blan v. Classic Limousine Transp., LLC, 

Continued 

from their analyses in the Rule. In 

summary, the Department was and is 

allowed to change its interpretation of 

joint employment under the FLSA; 

however, the Rule failed to account for 

and address inconsistences with WHD’s 

prior and existing guidance, which is an 

additional reason to rescind the Rule. 

In response to comments asserting an 

inconsistency between the Department’s 

opening brief to the Second Circuit in 

the appeal of the district court’s 

decision vacating most of the Joint 

Employer Rule and its NPRM proposing 

to rescind the Rule, the Department’s 

filings with the Second Circuit have 

been consistent with the status of this 

rescission rulemaking. The Department 

filed its opening brief with the Second 

Circuit on January 15, 2021—prior to 

any reconsideration of the Rule and well 

before the deadline for filing the brief. 

Following the Department’s NPRM in 

March proposing to rescind the Rule, 

the Department requested that the 

Second Circuit hold the appeal in 

abeyance while this rulemaking 

progressed. Although the Second Circuit 

denied the request, asking it to hold the 

appeal in abeyance was consistent with 

this rulemaking. 

In addition, the Department filed a 

reply brief with the Second Circuit on 

May 28, 2021, in which it took ‘‘no 

position’’ regarding ‘‘the merits of the 

Joint Employer Rule’’ in light of this 

pending rulemaking. In the reply brief, 

the Department noted that completion 

of this rulemaking may moot the States’ 

challenge to the Rule and requested that 

the Second Circuit, if it resolves the 

appeal at all, reverse the district court’s 

decision solely on the grounds that the 

States lacked standing to challenge the 

Rule. Accordingly, the Department’s 

position in the pending Second Circuit 

appeal has been consistent with the 

status of this rescission rulemaking; the 

Department stopped defending the 

merits of the Rule before the Second 

Circuit consistent with its concerns with 

the Rule as set forth in the NPRM 

proposing to rescind the Rule. Finally, 

issuing this final rule now rather than 

waiting for the Second Circuit to resolve 

the appeal is consistent with the 

Department’s position in its reply brief. 

Although the district court’s decision 

vacating the Rule’s vertical joint 

employment analysis was a primary 

consideration for proposing rescission 

as noted in the NPRM, the Department’s 

decision to rescind the Rule as set forth 

herein is independent from the district 

court’s decision and represents its 

reasoned interpretation of the FLSA as 

supported by case law, regardless of the 

Second Circuit’s ultimate resolution of 

the appeal. 

C. The Joint Employer Rule’s Vertical 

Joint Employment Analysis Did Not 

Significantly Impact Judicial Analysis of 

FLSA Cases 

The NPRM stated that courts have 

generally declined to adopt the Joint 

Employer Rule’s vertical joint 

employment analysis since its 

promulgation.141 The NPRM further 

stated that, in light of this judicial 

landscape, rescinding the Joint 

Employer Rule would not be 

disruptive.142 The NPRM added that 

WHD does not believe that it would be 

difficult or burdensome to educate and 

reorient its enforcement staff if the Rule 

is rescinded.143

The State AGs agreed in their 

comment that, ‘‘based on the judicial 

landscape,’’ rescinding the Joint 

Employer Rule ‘‘would not be 

disruptive.’’ They added that it was ‘‘not 

surprising’’ that only two district court 

decisions had adopted the Rule’s 

vertical joint employment analysis given 

that, in their view, the Rule’s analysis 

‘‘runs counter to Supreme Court 

precedent’’ and ‘‘conflicts with 

numerous court of appeals decisions 

interpreting joint employment.’’ Texas 

RioGrande Legal Aid added that, ‘‘aware 

of the Rule’s mismatch with the FLSA’s 

text and purpose, courts would have 

been likely to continue to eschew the 

Rule’s framing in favor of their 

established formulations of the multifactor analysis.’’ 

Having considered the comments and 

reviewed the issue further, the 

Department believes that courts’ general 

non-adoption of the Joint Employer 

Rule’s vertical joint employment 

analysis provides additional support for 

rescinding the Rule. As a general matter, 

courts have declined to adopt the Joint 

Employer Rule’s analysis. In addition to 

the Southern District of New York’s 

decision to vacate the Rule’s vertical 

joint employment analysis, other courts 

have declined to adopt the Rule’s 

analysis for similar reasons.144 The 

Department is aware of two FLSA cases 

in which a court has adopted and 

applied the Rule’s vertical joint 

employment analysis.145 Both cases 

were district court decisions from the 

Tenth Circuit, which has not issued a 

definitive decision regarding the 

analysis to apply in FLSA vertical joint 

employment cases. Neither case applied 

the rule in a uniform manner, relying on 

additional factors or stating them 

differently. 

Moreover, as the Joint Employer Rule 

acknowledged, a number of circuit 

courts of appeals had previously 

established analytical frameworks for 

vertical joint employment cases, and all 

of these analyses are different from the 

analysis in the Joint Employer Rule.146

Notwithstanding the Rule, district 

courts in those circuits have generally 

continued to apply binding precedent 

from their circuit courts of appeals 

when deciding FLSA vertical joint 

employment issues—often with little, if 

any, meaningful discussion of the Rule’s 

analysis.147 In sum, despite the Joint 


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40950 Federal Register / Vol. 86, No. 144 / Friday, July 30, 2021 / Rules and Regulations 

No. 19–807, 2021 WL 1176063, at *8 (W.D. Pa. Mar. 

29, 2021) (applying Third Circuit’s vertical joint 

employment analysis); Yela v. Trending Media 

Grp., Inc., No. 19–21712–CIV, 2020 WL 6271047, at 

*5–7 (S.D. Fla. Sept. 18, 2020) (applying Eleventh 

Circuit’s vertical joint employment analysis); 

Tombros v. Cycloware, LLC, No. 8:19-cv-03548–PX, 

2020 WL 4748458, at *2–3 (D. Md. Aug. 17, 2020); 

Williams v. Bob Evans Restaurants, LLC, No. 2:18- 

cv-01353, 2020 WL 4692504, at *4–6 (W.D. Pa. Aug. 

13, 2020) (applying Third Circuit’s vertical joint 

employment analysis); Elsayed, 2020 WL 4586788, 

at *4–8 (applying Fourth Circuit’s vertical joint 

employment analysis). Cf. Pontones v. Los Tres 

Magueyes, Inc., No. 5:18–CV–87–FL, 2021 WL 

1430793, at *3–10 (E.D.N.C. Apr. 15, 2021) 

(applying Fourth Circuit’s vertical joint 

employment analysis and then the Rule’s analysis 

in the alternative); id. at *8 n.18 (noting that 

because both analyses reached the same result and 

the Department had issued a proposal to rescind the 

Rule, ‘‘the court does not definitively resolve here 

the level of deference merited for the interpretative 

guidance in the [Joint Employer Rule]’’). 

148 85 FR 2823. 

149 85 FR 2853. 

150 Id. 

151See id. 

152 Id. 

153 Id. 

154 Id. 

Employer Rule’s stated purpose of 

‘‘promot[ing] greater uniformity in court 

decisions,’’ 148 there has been no 

widespread adoption of the Rule’s 

vertical joint employment analysis, and 

the Rule has not significantly affected 

judicial analysis of FLSA joint 

employment cases. 

Additionally, rescinding the Joint 

Employer Rule would not be disruptive 

for WHD. WHD has not issued 

subregulatory guidance that would need 

to be withdrawn or modified as a result 

of the rescission. For all of these 

reasons, rescission of the Rule will have 

little effect on courts’ and WHD’s 

analyses in FLSA vertical joint 

employment cases. 

D. Effects on Employees of the Vertical 

Joint Employment Analysis 

The Joint Employer Rule 

acknowledged that, although it would 

not change the wages due an employee 

under the FLSA in the vertical joint 

employment scenario, ‘‘it may reduce 

the number of businesses currently 

found to be joint employers from which 

employees may be able to collect back 

wages due to them under the Act.’’ 149

The Rule further acknowledged that, 

‘‘[t]his, in turn, may reduce the amount 

of back wages that employees are able 

to collect when their employer does not 

comply with the Act and, for example, 

their employer is or becomes 

insolvent.’’ 150 One commenter, the 

Economic Policy Institute (EPI), 

submitted a quantitative analysis of the 

monetary amount that it estimated 

would transfer from employees to 

employers as a result of the Rule.151 In 

response, the Rule stated that, although 

it ‘‘appreciates EPI’s quantitative 

analysis,’’ it ‘‘does not believe there are 

data to accurately quantify the impact of 

this [R]ule.’’ 152 The Rule added that it 

‘‘lacks data on the current number of 

businesses that are in a joint 

employment relationship, or to estimate 

the financial capabilities (or lack 

thereof) of these businesses and 

therefore is unable to estimate the 

magnitude of a decrease in the number 

of employers liable as joint 

employers.’’ 153 The Rule discussed in a 

qualitative manner some potential 

benefits to employees, such as 

‘‘promot[ing] innovation and certainty 

in business relationships’’ and 

encouraging businesses to engage in 

certain practices with an employer that 

‘‘could benefit the employer’s 

employees.’’ 154 The Rule did not 

otherwise consider any potential costs 

to workers. 

Many commenters expressed 

concerns that the Joint Employer Rule 

would incentivize companies to expand 

their use of temporary staffing agencies, 

contractors, and subcontractors rather 

than employing workers directly, which 

is a concern that the Department shares. 

Congressman Bobby Scott and 78 other 

Members of Congress wrote that the 

Rule ‘‘promotes business models that 

rely on subcontracting with businesses 

that pay lower wages to cut costs or 

with thinly capitalized lower level 

businesses that cut corners on FLSA 

compliance.’’ As several commenters 

stated in comments that used template 

language, the number of workers 

employed through temporary staffing 

agencies ‘‘has increased dramatically in 

recent years,’’ especially in ‘‘low-wage, 

‘blue-collar’ occupations.’’ The National 

Employment Law Project (NELP) stated 

that ‘‘[t]emporary and staffing agency 

work hours have grown 3.9 times faster 

than overall work hours, and temporary 

and staffing agency jobs have grown 4.3 

times faster than jobs overall.’’ Several 

commenters identified particular 

industries that have experienced 

especially high growth in outsourcing 

and subcontracting, including janitorial 

services, construction, agriculture, 

manufacturing, warehousing and 

logistics, hospitality, and waste 

management. In particular, NELP noted 

that outsourcing of janitorial services 

‘‘has grown dramatically over the past 

two decades, resulting in an estimated 

37 percent of janitorial workers hired 

through labor contractors rather than 

directly by the company at which they 

work.’’ NELP also reported that 58 

percent of security guard positions are 

outsourced. 

Several commenters asserted that the 

increase in temporary, staffing agency, 

and subcontracting jobs is detrimental 

to workers, because on average, 

‘‘temporary help agency workers earn 41 

percent less’’ than workers in ‘‘standard 

work arrangements,’’ they ‘‘experience 

large benefit penalties relative to their 

counterparts in standard work 

arrangements,’’ and although their jobs 

tend to be more hazardous than those of 

‘‘permanent, direct hires,’’ ‘‘they often 

receive insufficient safety training and 

are more vulnerable to retaliation for 

reporting injuries than workers in 

traditional employment relationships.’’ 

Some commenters, including the Public 

Justice Center and NELP, noted that 

temporary staffing agencies must 

compete with each other ‘‘on the one 

major cost they can control—labor 

costs,’’ and this ‘‘competitive pressure 

drives down wages and incentivizes 

cutting corners through violating labor 

standards like minimum wage and 

health and safety laws.’’ NELP also 

stated that ‘‘[t]emporary staffing 

agencies consistently rank among the 

worst large industries for the rate of 

wage and hour violations.’’ The Public 

Justice Center described the industry’s 

frequent use of a ‘‘triangular 

employment relationship through which 

the staffing agency acts as temp workers’ 

employer even though the worksite 

company determines the assignments 

and working conditions,’’ thus allowing 

the worksite company to gain the 

benefits of employing workers while 

avoiding many of the legal 

responsibilities. In addition, several 

commenters, including the 

Communications Workers of America, 

the Kentucky Equal Justice Center, and 

the Workplace Justice Project, stated 

that individuals who work for staffing 

agencies or subcontractors often have 

trouble identifying their actual 

employer when a dispute over payment 

or working conditions arises. Other 

commenters, such as the National 

Employment Lawyers Association, 

wrote that holding a company 

responsible as a joint employer 

incentivizes that company to ‘‘provide 

better oversight of working conditions, 

to ensure that child labor, minimum 

wage and overtime rules are followed.’’ 

Many commenters also stated that the 

increased use of temporary staffing 

agencies disproportionately impacts 

people of color and women. NELP, the 

Public Justice Center, and the State AGs 

reported that Black workers comprise 

12.1 percent of the overall workforce, 

but 25.9 percent of temporary help 

agency workers, while Latino workers 

make up 16.6 percent of the total 


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155See Rutherford, 331 U.S. at 726; Wirtz v. Dr. 

Pepper Bottling Co., 374 F.2d 5, 8 (5th Cir. 1967). 

156Carrillo v. Schneider Logistics Trans-Loading 

& Distrib., Inc., No. 2:11–CV–8557–CAS, 2014 WL 

183956, at *6–15 (C.D. Cal. Jan. 14, 2014) (applying 

Bonnette, 704 F.2d at 1470 and Torres-Lopez, 111 

F.3d at 639–40). The court rejected Wal-Mart’s 

attempt to analogize the case to decisions applying 

only the Bonnette factors, explaining that ‘‘the 

Torres-Lopez factors form an important component 

of the joint employer analysis.’’ Id. at *10. 

157 Id. at *6, 16. 

158The case appears to be Silva v. Pastranas 

Produce Inc., No. 4:12–CV–00470 (S.D. Tex. filed 

Feb. 16, 2012); see also Gray, 673 F.3d at 354–55; 

Wirtz v. Lone Star Steel Co., 405 F.2d 668, 669–70 

(5th Cir. 1968). 

workforce, but 25.4 percent of 

temporary help agency workers. NELP 

and the Public Justice Center explained 

that, because temporary workers ‘‘are 

especially vulnerable to illegal conduct 

such as wage theft, unsafe working 

conditions, and discrimination,’’ an 

increase in temporary work can 

‘‘exacerbate occupational segregation, 

income inequality, and the wealth gap 

for people of color.’’ In addition, the 

National Women’s Law Center 

commented that women are ‘‘broadly 

overrepresented in low-paid jobs,’’ and 

noted that women working for ‘‘contract 

firms in full-time jobs typically earn 17 

percent less than women in traditional 

employment arrangements and 42 

percent less than full-time male workers 

provided by contract firms.’’ In 

addition, Congressman Bobby Scott and 

78 other members of Congress noted 

that ‘‘because the Equal Pay Act of 1963 

shares the FLSA’s definitions of 

employment, the [Joint Employer Rule] 

would make it harder for women to hold 

all responsible employers accountable 

when bringing equal pay claims.’’ The 

National Women’s Law Center also 

pointed out that the FLSA requires 

employers to provide breastfeeding 

workers with adequate time and safe 

space to pump at work, but in the case 

of temporary or subcontracted workers, 

the worksite is often controlled by a 

contracting entity, thus creating a 

potential barrier to the worker’s ability 

to pump. 

Numerous organizations that provide 

legal representation to workers shared 

accounts of particular cases where, in 

their view, their clients would not have 

been able to recover back wages owed 

but for the fact that courts applied 

broader joint employer liability 

principles than those set forth in the 

Joint Employer Rule. For example, the 

Equal Justice Center represented 

approximately 30 individuals who 

worked for a small cleaning company to 

provide janitorial services at outlets of 

a big-box store in the Austin area. The 

workers sued for unpaid wages and 

overtime premiums, but the cleaning 

company went out of business. 

However, the workers succeeded in 

establishing that the big-box store was a 

joint employer based on the economic 

realities test derived from Rutherford 

and defined by the Fifth Circuit in Wirtz 

v. Dr. Pepper Bottling Co.155 According 

to the commenter, the workers 

successfully asserted that because they 

‘‘consistently and exclusively cleaned 

the [big box] company’s stores, at hours 

dictated by the stores’ schedules and 

according to standards set by the 

company’s management, the [big box] 

company could be a joint employer 

under the FLSA.’’ In contrast, the 

commenter believed that the big box 

store likely would not have been a joint 

employer under the Joint Employer 

Rule. In another case, the North 

Carolina Justice Center represented 

‘‘hundreds of janitorial workers’’ who 

cleaned public school buildings through 

a subcontractor that went bankrupt, 

failing to pay several weeks of wages. 

According to the Center, the workers 

were able to recover back wages from 

the school district and the contractor as 

joint employers. The Center asserted 

that under the Joint Employer Rule, 

however, ‘‘it is highly unlikely either 

the contractor or the district would be 

liable for the failure to pay minimum 

wage and overtime.’’ In addition, NELP 

discussed a case involving warehouses 

owned by Wal-Mart, which contracted 

with Schneider Logistics to operate the 

warehouses, which in turn contracted 

with two staffing companies to provide 

labor. After the warehouse workers sued 

for violations of the FLSA, Wal-Mart 

moved for summary judgment that it 

was not a joint employer. The district 

court, applying the Bonnette and TorresLopez factors, determined that several 

factors in addition to Wal-Mart’s control 

over the plaintiffs’ working conditions 

suggested that Wal-Mart could be found 

to be a joint employer, including that 

the plaintiffs performed piecework that 

did not require initiative, judgment, or 

foresight; there was permanence in the 

plaintiffs’ work for Wal-Mart; and the 

service performed by the plaintiffs was 

an integral part of Wal-Mart’s 

business.156 Thus, the court denied WalMart’s motion.157 According to NELP, 

the case eventually settled, but the 

staffing companies could afford to pay 

only 7.5 percent of the settlement 

amount. However, ‘‘because the court 

took into account the realities of the 

workers’ relationship with Schneider 

and Wal-Mart, the workers were able to 

obtain damages from these parties.’’ 

Other commenters also emphasized 

the importance that joint employment 

liability plays in the recovery of back 

wages. For example, the Northwest 

Workers’ Justice Project described a case 

in which workers who were employed 

by a contractor to cut, bag, and stock 

fruit at H–E–B grocery stores in Texas 

and who sued for minimum wage and 

overtime violations. According to the 

Project, the workers, mostly immigrants 

and women, worked on location only at 

H–E–B stores, often for 50 hours or more 

per week, and were paid per bag of 

produce sold, which never amounted to 

minimum wage. The case was 

apparently brought in the U.S. District 

Court for the District of Texas, which 

applies the Fifth Circuit’s ‘‘economic 

realities’’ test requiring the 

consideration of several factors to 

determine joint employer liability.158

H–E–B initially denied responsibility as 

a joint employer, but ultimately settled, 

which the Project reported would not 

have been possible ‘‘[w]ithout joint 

employment.’’ In addition, Justice at 

Work (Massachusetts), the Legal Aid 

Society, the Public Justice Center, the 

United Brotherhood of Carpenters and 

Joiners, and the Worker Justice Center of 

New York reported that they have 

brought or observed numerous cases in 

the construction industry where a 

subcontractor labor broker disappears or 

refuses to pay, and the next tier 

contractor denies responsibility, leaving 

workers without pay. 

Some organizations that provide legal 

assistance to agricultural workers 

commented that joint employment is 

particularly important in the 

agricultural industry. Texas RioGrande 

Legal Aid reported that ‘‘[j]oint 

employer issues arise frequently in the 

agricultural sector because the sector is 

riddled with middlemen: 

Undercapitalized farm labor contractors 

who pay the workers while furnishing 

their labor to fixed-site farm operators.’’ 

The organization has found that 

‘‘farmworkers’ attempts to seek unpaid 

wages from farm labor contractors, as 

opposed to fixed-site agricultural 

employers, are frequently futile,’’ in part 

because ‘‘[f]arm labor contractors are 

often undercapitalized and unable to 

meet their wage obligations because of 

disadvantageous deals made with 

growers.’’ NELP pointed to a study 

conducted by EPI that found that from 

2005 to 2019, farm labor contractors 

accounted for 14 percent of agricultural 

jobs, but 24 percent of all employment 

law violations in agriculture. Texas 

RioGrande Legal Aid noted that DOL’s 

H–2A regulations require farm labor 

contractors petitioning for temporary 

labor certification to post bonds as a 


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40952 Federal Register / Vol. 86, No. 144 / Friday, July 30, 2021 / Rules and Regulations 

159Modernizing Regulatory Review: 

Memorandum for the Heads of Executive 

Departments and Agencies (Jan. 20, 2021), 

published at 86 FR 7223 (Jan. 26, 2021). 

160Annette Bernhardt et al., Broken Laws, 

Unprotected Workers: Violations of Employment 

and Labor Laws in America’s Cities (2009), 

available at https://www.nelp.org/wp-content/ 

uploads/2015/03/BrokenLawsReport2009.pdf. 

161The Joint Employer Rule described workplace 

fissuring as the ‘‘increased reliance by employers on 

subcontractors, temporary help agencies, and labor 

brokers rather than hiring employees directly.’’ 85 

FR 2853 n.100. 

162See, e.g., Reyes-Trujillo, 2021 WL 103636, at 

*6–9 (agreeing that the Joint Employer Rule’s 

exclusive focus on the potential joint employer’s 

control runs counter to the FLSA’s expansive 

definition of ‘‘employer’’ and thus declining to 

adopt the Rule’s analysis); Elsayed, 2020 WL 

4586788, at *4 (finding ‘‘it unnecessary to wade 

into whether the DOL’s [Joint Employer] Rule is 

entitled to Brand X deference or whether the [Rule] 

is lawful under the APA’’ and instead ‘‘rely[ing] on 

established Fourth Circuit precedent’’ regarding 

joint employment). 

‘‘ ‘ necessary compliance mechanism’ to 

ensure that the labor contractor pays the 

H–2A workers their wages,’’ because 

many of these contractors are unreliable. 

In addition, the Centro de los Derechos 

del Migrante explained that, while 

MSPA ‘‘protects many farmworkers 

above and beyond the FLSA floor, 

nearly half a million migrant 

agricultural workers in the H–2A 

program are excluded from’’ the 

protections of MSPA, ‘‘and rely instead 

on the FLSA.’’ The organization 

asserted, however, that ‘‘[b]y opening 

loopholes in the FLSA not found in 

[MSPA], the 2020 Rule would 

incentivize employers to sidestep . . . 

[MSPA]’s protections by hiring workers 

to whom only the FLSA applies, driving 

down standards across the entire 

agricultural industry.’’ It further noted 

the history of diminished legal 

protections for agricultural workers, 

which was ‘‘born of a dark history of 

racial discrimination,’’ and argued that 

reducing protections for these workers 

would perpetuate that legacy, as 92 

percent of H–2A workers are Mexican. 

In contrast, several commenters who 

oppose rescinding the Joint Employer 

Rule asserted that the Rule promotes job 

growth. WPI stated that, ‘‘[d]uring the 

‘period in which [the Department] 

consistently applied the ‘right of 

control’ factors identified with the 

Bonnette test of the Ninth Circuit, 

significant job growth took place in the 

industries represented by WPI,’’ 

including temporary staffing, 

construction, retail, and hospitality. It is 

not clear what period of time WPI is 

referring to, as all of the statistics cited 

by WPI predate the effective date of the 

Joint Employer Rule. Moreover, the Joint 

Employer Rule was in effect for only a 

brief period of time, and WPI did not 

present any direct evidence that job 

growth during that short window of 

time was driven, in whole or in part, by 

the adoption of the Rule. Given data 

limitations, it would not be possible to 

determine whether job growth in these 

industries was related to the Joint 

Employer Rule. Further, as the 

comments discussed above indicate, to 

the extent that jobs with temporary 

staffing agencies or thinly capitalized 

subcontractors have replaced standard 

employment arrangements, such a trend 

is disadvantageous to workers in many 

respects, and could have a particularly 

negative effect on people of color and 

women. The Washington Legal 

Foundation also generally asserted that 

the Joint Employer Rule fosters job 

growth, and contended that logically, 

allowing the Rule to remain in place 

would result in increased job creation, 

higher salaries, and no wage theft. 

However, the Department does not 

believe that allowing the Rule to remain 

in effect would have clearly lead to the 

creation of more, higher-paying jobs free 

of wage theft, for the reasons discussed 

by the commenters above. Instead, the 

Department agrees with the commenters 

who stated that the Rule would have 

further incentivized companies to 

source labor through temporary staffing 

firms or subcontractors, rather than 

hiring employees directly, which tends 

to result in lower pay and fewer 

benefits, and can leave employees 

without recourse for unpaid wages 

when the staffing firm or subcontractor 

is unable or unwilling to pay. 

Upon consideration of the comments, 

the Department concludes that the Joint 

Employer Rule did not satisfactorily 

consider the costs to employees. This 

conclusion is premised in part on 

WHD’s role as the agency responsible 

for enforcing the FLSA and for 

collecting back wages due to employees 

when it finds violations, as well as a 

recent Presidential Memorandum 

instructing the Director of the Office of 

Management and Budget to recommend 

new procedures for regulatory review 

that better ‘‘take into account the 

distributional consequences of 

regulations.’’ 159 As noted in the 

economic analysis, rescinding the Joint 

Employer Rule could help protect the 

well-being and economic security of 

workers in low-wage industries, many 

of whom are immigrants, people of 

color, and women, because FLSA 

violations are more severe and 

widespread in low-wage labor 

markets.160 The Department believes 

that the Joint Employer Rule would 

have made it more difficult for workers 

to collect back wages owed and 

incentivized workplace fissuring,161

which are serious concerns that may 

have a disproportionate impact on lowwage and vulnerable workers. The 

Rule’s failure to weigh these concerns is 

an additional reason for its rescission. 

E. Effects on Other Stakeholders of the 

Vertical Joint Employment Analysis 

In addition to discussing the issues 

identified in the NPRM, commenters 

also noted other ways in which 

rescission of the Joint Employer Rule 

would affect various stakeholders. In 

particular, most commenters opposed to 

rescission of the Rule emphasized the 

importance of clarity and predictability 

to the business community. However, 

the Department generally believes that 

the impact of rescission on the business 

community and other stakeholders will 

not be substantial because the Rule has 

not been widely adopted by the courts. 

Furthermore, for the reasons set forth 

above, the Department believes that the 

Rule should be rescinded because it was 

inconsistent with the text and purpose 

of the FLSA. 

Many commenters asserted that the 

Joint Employer Rule provided clarity 

and predictability to the regulated 

community, and argued that rescinding 

the Rule would lead to confusion and 

uncertainty. The U.S. Chamber of 

Commerce stated that the Rule ‘‘brought 

needed clarity and consistency to a key 

issue that had long vexed employers 

and the WHD.’’ The FreedomWorks 

Foundation wrote that a ‘‘lack of clarity 

surrounding issues of joint employment 

[is] especially harmful to small 

businesses, which employ almost half of 

Americans and often do not have the 

resources to secure top-notch legal 

advice,’’ a concern echoed by the 

National Federation of Independent 

Businesses (NFIB). However, the 

Department does not agree that leaving 

the Joint Employer Rule in place would 

have provided increased clarity and 

certainty to the regulated community. 

As discussed above, the Rule conflicted 

with the text and purposes of the FLSA 

and was not widely adopted by the 

courts.162 Thus, even if the Second 

Circuit Court of Appeals were to reverse 

the district court decision vacating the 

Rule on standing grounds, it is likely 

that many courts would still reject the 

Rule and continue to rely on prior 

precedent. As such, leaving the Joint 

Employer Rule in place would not have 

established a uniform standard 

consistently applied by all courts across 

the country. Because it conflicted with 


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163Other commenters expressed concerns about 

the imposition of additional costs on particular 

industries in the wake of the COVID–19 pandemic. 

For example, the American Hotel and Lodging 

Association stated that ‘‘[l]eisure and hospitality 

account for 37% of all jobs lost since the onset of 

the pandemic,’’ and ‘‘hotels are not projected to 

return to pre-pandemic levels until 2024 at the 

earliest,’’ and asserted that rescinding the Rule 

would impose new costs that are particularly 

unwelcome now. However, for the reasons 

discussed in this paragraph, the Department does 

not believe that rescission of the Rule will impose 

substantial new costs on businesses. Moreover, 

workers in industries experiencing financial stress 

(as a result of the pandemic or otherwise) are 

particularly at risk of losing the wages they are 

owed to the extent that liability is confined to 

smaller businesses at the bottom of the industry. 

164Commenters provided various examples of the 

types of assistance that a company might offer a 

related company. The U.S. Chamber of Commerce 

discussed model handbooks, apprenticeship 

programs, and association health plans. The 

Washington Legal Foundation and the American 

Hotel and Lodging Association cited training 

employees to detect human trafficking. SHRM 

mentioned the provision of face coverings and 

protective personal equipment during the COVID– 

19 pandemic. The discussion of whether companies 

will be more or less likely to assist other companies 

after the Rule is rescinded applies equally to the 

various types of assistance noted by the 

commenters. 

165See, e.g., Moreau v. Air France, 356 F.3d 942, 

950–53 (9th Cir. 2004) (holding that Air France was 

not joint employer with ground service operations 

companies, even though it provided some training 

to those companies’ employees, in an FMLA case 

applying FLSA case law); Martin v. Sprint United 

Mgmt. Co., 273 F. Supp. 3d 404, 427, 434 (S.D.N.Y. 

2017) (finding that Sprint was not joint employer 

with subcontractor despite the fact that it trained 

subcontractor’s employees). 

established precedent in the circuits, the 

Rule presented employers with the 

difficult choice of conducting their 

business in a manner consistent with 

circuit precedent or with the Rule. 

Furthermore, because employers had to 

consider circuit precedent as no circuit 

had adopted the Rule, the Rule likely 

provided little clarity. Accordingly, the 

Department does not agree that 

rescinding the Rule will result in 

significantly less clarity and uncertainty 

for the regulated community. More 

fundamentally, because the regulation 

conflicted with the text and purpose of 

the FLSA, it should be rescinded. 

Other commenters expressed 

concerns that rescinding the Joint 

Employer Rule could impose additional 

costs on businesses. The Texas Public 

Policy Foundation asserted generally 

that rescission would ‘‘result in more 

employers being deemed to be joint 

employers, raising operating expenses 

for those employers.’’ Again, because 

the Rule was not widely adopted by 

courts, the Department does not expect 

that the Rule’s rescission will 

substantially increase prospective joint 

employers’ costs. In addition, the 

Department believes that the Rule’s 

rescission will continue to incentivize 

businesses at the top of a vertical 

industry structure to ensure that labor 

suppliers and other potential joint 

employers comply with the FLSA; as 

long as they do so, businesses at the top 

will not incur the additional cost of 

paying the joint employer’s employees. 

Other commenters, such as the National 

Retail Federation, expressed concern 

that rescinding the Rule would 

discourage businesses ‘‘from entering 

into beneficial contractual relationships 

with third-party business parties, 

inhibiting business-to-business 

collaboration.’’ Commenters like the 

National Restaurant Association and 

Restaurant Law Center stated that 

rescinding the Rule could negatively 

impact businesses that use a franchising 

model. But the vast majority of these 

businesses operate in jurisdictions that 

have not adopted the Joint Employer 

Rule, so their calculation of potential 

liability will not change. Furthermore, 

the current law governing joint 

employment allows businesses to enter 

into beneficial relationships without 

creating joint employment liability. In 

fact, as commenters both supporting and 

opposing rescission noted, the growth of 

temporary staffing, independent 

contractors, and franchise relationships 

outpaced standard employment in many 

respects in the years before the Joint 

Employer Rule was introduced. See, 

e.g., International Franchise Association 

(asserting that after the financial crisis, 

from 2009–12, ‘‘employment in the 

franchise sector grew 7.4%, versus 1.8% 

growth in total U.S. employment’’); 

NELP (asserting that since 2009, 

‘‘[t]emporary and staffing agency work 

hours have grown 3.9 times faster than 

overall work hours, and temporary and 

staffing agency jobs have grown 4.3 

times faster than jobs overall;’’ and 

noting that ‘‘staffing and temporary help 

services provided 11.3 percent of all 

manufacturing employment in 2015, up 

from just 2.3 percent in 1989’’). This 

indicates that the prior legal landscape 

did not pose a significant hindrance to 

the formation of these types of 

relationships.163

Commenters who support the Rule 

also asserted that rescinding the Rule 

would make companies less likely to 

offer assistance to related companies, 

such as a franchisor offering sexual 

harassment training materials to a 

franchisee, for fear of becoming a joint 

employer. These commenters pointed 

out that this type of assistance can 

benefit workers by, for example, 

reducing sexual harassment in the 

workplace or improving workplace 

safety.164 However, the commenters did 

not cite any court decision finding that 

a company is a joint employer primarily 

on this basis, while at least some courts 

have not regarded the provision of 

training assistance as strong evidence of 

a joint employer relationship.165

Furthermore, to the extent that a court 

might consider this type of assistance as 

part of the joint employer analysis, it 

would be merely one aspect of one 

factor among many that the courts use 

to assess whether a joint employer 

relationship exists, and no one factor is 

dispositive. Moreover, as the comments 

discussed above noted, the prospect of 

joint employer liability can incentivize 

a company to ‘‘provide better oversight 

of working conditions, to ensure that 

child labor, minimum wage and 

overtime rules are followed.’’ See, e.g., 

National Employment Lawyers 

Association. The Department agrees 

with this assessment. 

Some commenters expressed 

particular concern as to how rescinding 

the Joint Employer Rule would affect 

the construction industry. The 

Associated Builders and Contractors 

wrote that the construction industry 

consists ‘‘primarily of specialized, 

separate employers who come together 

[to work] on specific construction 

projects,’’ and ‘‘standard construction 

methods require project owners and/or 

prime contractors to exercise routine 

control over the [work] site in ways that 

indirectly affect many employees’ terms 

and conditions of employment,’’ thus 

potentially leading to joint employer 

liability. The National Association of 

Home Builders asserted that the 

uncertainty faced by home builders due 

to their reliance on subcontractors could 

make costs less predictable, which 

could increase the cost of new homes. 

However, as noted previously, because 

the Joint Employer Rule was not 

adopted in most jurisdictions, the 

Department does not expect that the 

Rule’s rescission will significantly 

increase uncertainty or impose 

substantial new costs, including in the 

construction industry. In addition, 

current court precedent requires 

consideration of a variety of factors 

before a company can be held liable as 

a joint employer; a single factor standing 

alone, like supervision of a work site, 

would likely not be enough to establish 

joint employer liability. Furthermore, as 

discussed above, many commenters 

have noted that subcontractors’ failure 

to pay wages owed is a particular 

problem in the construction industry; 

rescinding the Joint Employer Rule will 

further incentivize project managers to 

select and monitor subcontractors with 

an emphasis on ensuring compliance 

with the FLSA. Such a result is 


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166See 86 FR 14045. 

167See 85 FR 2844–45. 

168See 86 FR 14045–46. 

169See 85 FR 2860–62 (29 CFR 791.2(f), (g)) 

(2020)). 

170See 85 FR 2859–60 (29 CFR 791.2(e) (2020)); 

23 FR 5906 (29 CFR 791.2) (1958). 

171 23 FR 5906 (29 CFR 791.2) (1958). 

172See 86 FR 14046. 

173See id. 

174See id. 

175See 58 FR 51735, 51741 (Oct. 4, 1993). 

beneficial to workers and promotes 

compliance with the FLSA, helping to 

ensure a level playing field for 

responsible employers. 

F. Horizontal Joint Employment 

Analysis 

As described in the NPRM, horizontal 

joint employment may be present where 

one employer employs an employee for 

one set of hours in a workweek, and one 

or more other employers employs the 

same employee for separate hours in the 

same workweek. If the two (or more) 

employers jointly employ the employee, 

the hours worked by that employee for 

all of the employers must be aggregated 

for the workweek and all of the 

employers are jointly and severally 

liable.166

For horizontal joint employment, the 

Joint Employer Rule adopted the 

standard in the prior version of 29 CFR 

791.2 with non-substantive revisions 

and set forth that standard in 29 CFR 

791.2(e).167 The Joint Employer Rule’s 

horizontal joint employment standard 

focused on the degree of the employers’ 

association with respect to the 

employment of the employee, reflected 

the Department’s historical approach to 

the issue, and was consistent with the 

relevant case law. The NPRM stated that 

the Department was not considering 

revising its longstanding horizontal joint 

employment standard but proposed to 

rescind the entire Joint Employer Rule 

(including 29 CFR 791.2(e)) because the 

structure of the Joint Employer Rule 

made it impractical for the horizontal 

joint employment provisions to stand on 

their own.168

Few commenters addressed 

horizontal joint employment. The U.S. 

Chamber of Commerce noted that 

horizontal joint employment 

‘‘relationships do not create the same 

level of uncertainty, or present the same 

level of exposure, as vertical joint 

employment relationships, and the 

provisions in the [Joint Employer Rule] 

addressing horizontal joint employment 

relationships have not been 

questioned.’’ The Washington Legal 

Foundation stated that, although the 

Joint Employer Rule made only nonsubstantive revisions to the horizontal 

joint employment standard, ‘‘it was still 

important to issue the Final Rule about 

horizontal joint employment’’ because, 

in its view, the Department ‘‘provided 

regulatory certainty by codifying longstanding practices.’’ It further stated that 

if the Department rescinds the Joint 

Employer Rule, the Department ‘‘will 

inject uncertainty,’’ and ‘‘[i]n these 

trying times the regulated community 

needs certainty,’’ which ‘‘[e]xperts say 

. . . is important to economic growth.’’ 

The State AGs commented that the Joint 

Employer Rule’s ‘‘provisions relating to 

the horizontal joint employment test 

should be rescinded because they are 

inextricably intertwined with the nowvacated vertical joint employment 

provisions.’’ They further commented 

that ‘‘[r]escinding the provisions 

relating to horizontal joint employment 

makes practical sense,’’ ‘‘the horizontal 

joint employment standard has long 

been established,’’ and thus 

‘‘stakeholders can easily refer to DOL’s 

earlier interpretations and relevant case 

law to understand their obligations.’’ 

Having considered the comments and 

the issue further, the Department is 

rescinding the Joint Employer Rule in 

its entirety (i.e., all of 29 CFR part 791, 

including the horizontal joint 

employment standard in § 791.2(e)). The 

Joint Employer Rule intertwined the 

horizontal joint employment provisions 

with the vertical joint employment 

provisions in 29 CFR 791.2. For 

example, § 791.2(f) addressed the 

consequences of joint employment for 

both the vertical and horizontal 

scenarios, and § 791.2(g) provided 11 

‘‘illustrative examples’’ of how the Rule 

may apply to specific factual situations 

implicating both vertical and horizontal 

joint employment.169 Accordingly, it 

would be difficult and impractical for 

§ 791.2(e) to remain alone. In addition, 

§ 791.2(e) would lack context alone and 

potentially be confusing as its references 

to the ‘‘second’’ joint employment 

scenario would not make sense without 

the rest of § 791.2 and the discussion of 

the ‘‘first’’ joint employment scenario 

therein. 

Although the Department is 

rescinding the Joint Employer Rule in 

its entirety, it did not reconsider the 

substance of its longstanding horizontal 

joint employment analysis. The focus of 

a horizontal joint employment analysis 

will continue to be the degree of 

association between the potential joint 

employers, as it was in the Joint 

Employer Rule and the prior version of 

part 791.170 As has been the 

Department’s position for decades, the 

association will be sufficient to 

demonstrate joint employment in the 

following situations, among others: (1) 

There is an arrangement between the 

employers to share the employee’s 

services; (2) one employer is acting 

directly or indirectly in the interest of 

the other employer in relation to the 

employee; or (3) the employers share 

control of the employee, directly or 

indirectly, because one employer 

controls, is controlled by, or is under 

common control with the other 

employer.171

G. Effect of Rescission 

The NPRM stated that, if the Joint 

Employer Rule is rescinded as 

proposed, part 791 of title 29 of the 

Code of Federal Regulations would be 

removed in its entirety and reserved.172

The NPRM also noted that the 

Department was not proposing 

regulatory guidance to replace the 

guidance located in part 791.173 Because 

this final rule adopts and finalizes the 

rescission of the Joint Employer Rule, 

part 791 is removed in its entirety and 

reserved. As stated in the NPRM, the 

Department will continue to consider 

legal and policy issues relating to FLSA 

joint employment before determining 

whether alternative regulatory or 

subregulatory guidance is appropriate. 

174

III. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(PRA), 44 U.S.C. 3501 et seq., and its 

attendant regulations, 5 CFR part 1320, 

require the Department to consider the 

agency’s need for its information 

collections, their practical utility, as 

well as the impact of paperwork and 

other information collection burdens 

imposed on the public, and how to 

minimize those burdens. This final rule 

does not contain a collection of 

information subject to Office of 

Management and Budget (OMB) 

approval under the Paperwork 

Reduction Act. 

IV. Executive Order 12866, Regulatory 

Planning and Review; and Executive 

Order 13563, Improved Regulation and 

Regulatory Review 

A. Introduction 

Under Executive Order 12866, OMB’s 

Office of Information and Regulatory 

Affairs (OIRA) determines whether a 

regulatory action is significant and, 

therefore, subject to the requirements of 

the Executive Order and OMB 

review.175 Section 3(f) of Executive 

Order 12866 defines a ‘‘significant 

regulatory action’’ as a regulatory action 

that is likely to result in a rule that may: 

(1) Have an annual effect on the 


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176Census Bureau, Statistics of U.S. Businesses 

(2017), https://www.census.gov/data/tables/2017/ 

econ/susb/2017-susb-annual.html, 2016 SUSB 

Annual Data Tables by Establishment Industry. 

177Bureau of Labor Statistics, Occupational 

Employment and Wages (May 2020), https://

www.bls.gov/oes/current/oes131141.htm. 

178The benefits-earnings ratio is derived from the 

Bureau of Labor Statistics’ Employer Costs for 

Employee Compensation data using variables 

CMU1020000000000D and CMU1030000000000D. 

economy of $100 million or more, or 

adversely affect in a material way a 

sector of the economy, productivity, 

competition, jobs, the environment, 

public health or safety, or state, local or 

tribal governments or communities (also 

referred to as economically significant); 

(2) create serious inconsistency or 

otherwise interfere with an action taken 

or planned by another agency; (3) 

materially alter the budgetary impact of 

entitlements, grants, user fees or loan 

programs or the rights and obligations of 

recipients thereof; or (4) raise novel 

legal or policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

order. OIRA has determined that this 

rescission is economically significant 

under section 3(f) of Executive Order 

12866. Pursuant to the Congressional 

Review Act (5 U.S.C. 801 et seq.), OIRA 

has also designated this rule as a major 

rule, as defined by 5 U.S.C. 804(2). 

Executive Order 13563 directs 

agencies to, among other things, propose 

or adopt a regulation only upon a 

reasoned determination that its benefits 

justify its costs; that it is tailored to 

impose the least burden on society, 

consistent with obtaining the regulatory 

objectives; and that, in choosing among 

alternative regulatory approaches, the 

agency has selected those approaches 

that maximize net benefits. Executive 

Order 13563 recognizes that some costs 

and benefits are difficult to quantify and 

provides that, when appropriate and 

permitted by law, agencies may 

consider and discuss qualitatively 

values that are difficult or impossible to 

quantify, including equity, human 

dignity, fairness, and distributive 

impacts. The analysis below outlines 

the impacts that the Department 

anticipates may result from this 

rescission and was prepared pursuant to 

the above-mentioned Executive orders. 

B. Costs 

1. Rule Familiarization Costs 

Rescinding the Joint Employer Rule 

will impose direct costs on businesses 

that will need to review the rescission. 

To estimate these regulatory 

familiarization costs, the Department 

determined: (1) The number of 

potentially affected entities, (2) the 

average hourly wage rate of the 

employees reviewing the rescission, and 

(3) the amount of time required to 

review the rescission. It is uncertain 

whether these entities would incur 

regulatory familiarization costs at the 

firm or the establishment level. For 

example, in smaller businesses there 

might be just one specialist reviewing 

the rescission, while larger businesses 

might review it at corporate 

headquarters and determine policy for 

all establishments owned by the 

business. To avoid underestimating the 

costs of this rescission, the Department 

uses both the number of establishments 

and the number of firms to estimate a 

potential range for regulatory 

familiarization costs. The lower bound 

of the range is calculated assuming that 

one specialist per firm will review the 

rescission, and the upper bound of the 

range assumes one specialist per 

establishment. 

The most recent data on private sector 

entities at the time this final rule was 

drafted are from the 2017 Statistics of 

U.S. Businesses (SUSB), which reports 

5,996,900 private firms and 7,860,674 

private establishments with paid 

employees.176 Because the Department 

is unable to determine how many of 

these businesses have workers with one 

or more joint employers, this analysis 

assumes all businesses will undertake 

review. 

The Department believes ten minutes 

per entity, on average, to be an 

appropriate review time here. This 

rulemaking is a rescission and will not 

set forth any new regulations or 

guidance regarding joint employment. 

Additionally, as it believed when it 

issued the Joint Employer Rule, the 

Department believes that many entities 

are not joint employers and thus would 

not spend any time reviewing the 

rescission. Therefore, the ten-minute 

review time represents an average of no 

time for the majority of entities that are 

not joint employers, and potentially 

more than ten minutes for review by 

some entities that might be joint 

employers. 

The Department’s analysis assumes 

that the rescission would be reviewed 

by Compensation, Benefits, and Job 

Analysis Specialists (SOC 13–1141) or 

employees of similar status and 

comparable pay. The median hourly 

wage for these workers was $32.30 per 

hour in 2020, the most recent year of 

data available.177 The Department also 

assumes that benefits are paid at a rate 

of 46 percent 178 and overhead costs are 

paid at a rate of 17 percent of the base 

wage, resulting in a fully loaded hourly 

rate of $52.65. 

The Department estimates that the 

lower bound of regulatory 

familiarization cost range would be 

$52,728,043 (5,996,900 firms × $52.65 × 

0.167 hours), and the upper bound, 

$69,115,369 (7,860,674 establishments × 

$52.65 × 0.167 hours). The Department 

estimates that all regulatory 

familiarization costs would occur in 

Year 1. 

Additionally, the Department 

estimated average annualized costs of 

regulatory familiarization with this 

rescission over 10 years. Over 10 years, 

it would have an average annual cost of 

$7.0 million to $9.2 million, calculated 

at a 7 percent discount rate ($5.8 million 

to $7.6 million calculated at a 3 percent 

discount rate). All costs are in 2020 

dollars. 

2. Other Costs 

As discussed above, some 

commenters asserted that there may be 

other potential costs to the regulated 

community, such as reduced clarity 

from the lack of the Rule’s regulatory 

guidance. Because it lacks data on the 

number of businesses that are in a joint 

employment relationship or those that 

changed their policies as a result of the 

Joint Employer Rule, the Department 

has not quantified these potential costs, 

which are expected to be de minimis. 

Although the rescission removes the 

regulations at 29 CFR part 791, the 

Department believes that this will not 

result in substantial costs or decreased 

clarity for the regulated community 

because, as discussed above, most 

courts apply a vertical joint employment 

analysis different from the analysis in 

the Joint Employer Rule and have not 

adopted the Rule’s analysis. The State 

AGs agree with this assertion in their 

comment. Texas RioGrande Legal Aid 

asserts that the Joint Employer Rule 

would not have created clarity for the 

agricultural sector, because employers 

would face conflicting obligations under 

the different regulatory regimes of FLSA 

and MSPA. 

WPI asserted that using an 

‘‘expanded’’ joint employment standard 

instead of the standard put forth in the 

Joint Employer Rule would result in a 

loss of output of $17.2 billion to $33.3 

billion annually for the franchise 

business sector. WPI cites a comment 

provided by the International Franchise 

Association to the 2019 Joint Employer 

NPRM. In this comment, the 

International Franchise Association 

discusses a study by Dr. Ron Bird, 

looking at the effects of the National 

Labor Relations Board’s re-articulation 

of its joint employer standard in the 

Browning-Ferris case. The National 

Labor Relations Board is responsible for 


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179See 85 FR 2853. 

180Arindrajit Dube & Ethan Kaplan, Does 

Outsourcing Reduce Wages in the Low-Wage 

Service Occupations? Evidence from Janitors and 

Guards, ILR Review 63, no. 2, 287–306 (2010). 

181Celine McNicholas & Heidi Shierholz, EPI 

comments regarding the Department of Labor’s 

proposed joint-employer standard, June 25, 2019, 

available at https://www.epi.org/publication/epicomments-regarding-the-department-of-laborsproposed-joint-employer-standard/. 

182Annette Bernhardt et al., Broken Laws, 

Unprotected Workers: Violations of Employment 

and Labor Laws in America’s Cities (2009), 

available at https://www.nelp.org/wp-content/ 

uploads/2015/03/BrokenLawsReport2009.pdf. 

183Census Bureau, Statistics of U.S. Businesses 

(2017), https://www.census.gov/data/tables/2017/ 

econ/susb/2017-susb-annual.html, 2016 SUSB 

Annual Data Tables by Establishment Industry. 

enforcing the National Labor Relations 

Act (NLRA), which differs from the 

FLSA. The commenters, however, do 

not provide any data or information 

connecting this output loss to rescission 

of the Joint Employer Rule. 

C. Transfers 

In the Joint Employer Rule’s 

regulatory impact analysis, the 

Department acknowledged that the Rule 

could limit the ability of workers to 

collect wages due to them under the 

FLSA because when there is only one 

employer liable, there are fewer 

employers from which to collect those 

wages and no other options if that sole 

employer lacks sufficient assets to 

pay.179 Because the Joint Employer Rule 

provided new criteria for determining 

joint employer status under the FLSA 

and given the specifics of those criteria, 

it potentially reduced the number of 

businesses found to be joint employers 

from which employees may be able to 

collect back wages due to them under 

the Act. This, in turn, potentially 

reduced the amount of back wages that 

employees were able to collect when an 

employer did not comply with the Act 

and, for example, was or became 

insolvent. 

Like the Joint Employer Rule, this 

rescission will not change the amount of 

wages due any employee under the 

FLSA. However, rescinding the Joint 

Employer Rule could result in a transfer 

from employers to employees in the 

form of back wages owed that 

employees would thereafter be able to 

collect. The Department lacks data on 

the current number of businesses that 

are in a joint employment relationship, 

or to estimate the financial capabilities 

(or lack thereof) of these businesses and 

therefore is unable to estimate the 

magnitude of an increase in the number 

of employers liable as joint employers. 

Although the Rule would not have 

changed the amount of wages due to an 

employee, the narrower standard for 

joint employment in the Rule could 

have incentivized ‘‘workplace 

fissuring.’’ Research has shown that this 

type of domestic outsourcing can 

suppress workers’ wages, especially for 

low-wage occupations.180 The State AGs 

asserted, ‘‘[f]issured workplaces result 

in lower wages, greater wage theft, and 

less job security, especially for 

immigrants or people of color who make 

up a disproportionate share of low-wage 

workers in nonstandard work 

arrangements.’’ 

In 2019, the Economic Policy Institute 

(EPI) submitted a comment in response 

to the Joint Employer NPRM in which 

they calculated that the Rule would 

result in transfers from employees to 

employers of over $1 billion.181 They 

again referenced this analysis in their 

comment on the proposed rescission. 

EPI explained that these transfers would 

result from both an increase in 

workplace ‘‘fissuring’’ as well as from 

an increase in wage theft by employers. 

Rescinding this standard could help 

mitigate any increased workplace 

fissuring and wage theft that would 

have resulted. The Department is unable 

to determine to what extent these 

transfers occurred while the Joint 

Employer Rule was in effect, and 

therefore has not provided a 

quantitative estimate of transfers from 

employers to employees because of this 

rescission. The Department is also 

unable to estimate the increase in back 

wages that employees will be able to 

collect because of this change. 

This rescission could also benefit 

some small businesses, because the Joint 

Employer Rule’s narrowing of the joint 

employment standard could have made 

them solely liable and responsible for 

complying with the FLSA without 

relying on the resources of a larger 

business in certain situations. 

The Texas Public Policy Foundation 

commented on the Department’s 

economic analysis, saying that the 

Department did not make any specific 

findings of the Rule’s effect on workers. 

The Department still believes that due 

to lack of data on the number of joint 

employment relationships, as well as 

how these relationships would have 

changed under the Joint Employer Rule, 

it is not possible to quantify the 

magnitude of transfers associated with 

the Rule or with its rescission. Likewise, 

the commenter does not provide any 

data or information about the impact of 

this rescission on workers. 

D. Benefits 

The Department believes that 

rescinding the Joint Employer Rule will 

result in benefits to workers and will 

strengthen wage and hour protections 

for vulnerable workers. Removing a 

standard for joint employment that is 

narrower than the standard applied by 

courts and WHD’s prior standards may 

enable more workers to collect back 

wages to which they would already be 

entitled under the FLSA. This could 

particularly improve the well-being and 

economic security of workers in lowwage industries, many of whom are 

immigrants and people of color, because 

FLSA violations are more severe and 

widespread in low-wage labor 

markets.182

V. Regulatory Flexibility Act (RFA) 

Analysis 

The Regulatory Flexibility Act of 1980 

(RFA), 5 U.S.C. 601 et seq., as amended 

by the Small Business Regulatory 

Enforcement Fairness Act of 1996, 

Public Law 104–121 (1996), requires 

Federal agencies engaged in rulemaking 

to consider the impact of their proposals 

on small entities, consider alternatives 

to minimize that impact, and solicit 

public comment on their analyses. The 

RFA requires the assessment of the 

impact of a regulation on a wide range 

of small entities, including small 

businesses, not-for-profit organizations, 

and small governmental jurisdictions. 

Accordingly, the Department examined 

this rescission to determine whether it 

would have a significant economic 

impact on a substantial number of small 

entities. The most recent data on private 

sector entities at the time this final rule 

was drafted are from the 2017 Statistics 

of U.S. Businesses (SUSB), which 

reports 5,996,900 private firms and 

7,860,674 private establishments with 

paid employees.183 Of these, 5,976,761 

firms and 6,512,802 establishments have 

fewer than 500 employees. Because the 

Department is unable to determine how 

many of these businesses have workers 

with one or more joint employers, this 

analysis assumes all businesses will 

undertake review. 

The per-entity cost for small business 

employers is the regulatory 

familiarization cost of $8.79, or the fully 

loaded mean hourly wage of a 

Compensation, Benefits, and Job 

Analysis Specialist ($52.65) multiplied 

by 1⁄6 hour (ten minutes). Because this 

cost is minimal for small business 

entities, and well below one percent of 

their gross annual revenues, which is 

typically at least $100,000 per year for 

the smallest businesses, the Department 

certifies that this rescission will not 

have a significant economic impact on 

a substantial number of small entities. 


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184See 2 U.S.C. 1501. 

185Calculated using growth in the Gross Domestic 

Product deflator from 1995 to 2019. Bureau of 

Economic Analysis. Table 1.1.9. Implicit Price 

Deflators for Gross Domestic Product. 

186See 2 U.S.C. 1532(a)(4). 

187According to the Bureau of Economic 

Analysis, 2020 GDP was $20.9 trillion. https://

www.bea.gov/sites/default/files/2021-04/gdp1q21_

adv.pdf. 

VI. Unfunded Mandates Reform Act of 

1995 

The Unfunded Mandates Reform Act 

of 1995 (UMRA) 184 requires agencies to 

prepare a written statement for rules 

with a Federal mandate that may result 

in increased expenditures by state, 

local, and tribal governments, in the 

aggregate, or by the private sector, of 

$165 million ($100 million in 1995 

dollars adjusted for inflation) or more in 

at least one year.185 This statement 

must: (1) Identify the authorizing 

legislation; (2) present the estimated 

costs and benefits of the rule and, to the 

extent that such estimates are feasible 

and relevant, its estimated effects on the 

national economy; (3) summarize and 

evaluate state, local, and tribal 

government input; and (4) identify 

reasonable alternatives and select, or 

explain the non-selection, of the least 

costly, most cost-effective, or least 

burdensome alternative. 

Authorizing Legislation 

This final rule is issued pursuant to 

the Fair Labor Standards Act of 1938, 29 

U.S.C. 201–219. 

Assessment of Costs and Benefits 

For purposes of UMRA, this 

rescission is not expected to result in 

increased expenditures by the private 

sector or by state, local, and tribal 

governments of $165 million or more in 

at least one year. As discussed earlier, 

the Department believes that the 

rescission will not result in substantial 

costs for the regulated community 

because most courts apply a vertical 

joint employment analysis different 

from the analysis in the Joint Employer 

Rule and have not adopted the Rule’s 

analysis. More detailed analysis of 

impacts appears above. 

UMRA requires agencies to estimate 

the effect of a regulation on the national 

economy if such estimates are 

reasonably feasible and the effect is 

relevant and material.186 However, OMB 

guidance on this requirement notes that 

such macroeconomic effects tend to be 

measurable in nationwide econometric 

models only if the economic effect of 

the regulation reaches 0.25 percent to 

0.5 percent of Gross Domestic Product 

(GDP), or in the range of $52.3 billion 

to $104.7 billion (using 2020 GDP).187 A 

regulation with a smaller aggregate 

effect is not likely to have a measurable 

effect in macroeconomic terms, unless it 

is highly focused on a particular 

geographic region or economic sector, 

which is not the case with this rule. 

Given OMB’s guidance, the Department 

has determined that a full 

macroeconomic analysis is not likely to 

show that these costs would have any 

measurable effect. 

VII. Executive Order 13132, Federalism 

The Department has (1) reviewed this 

rescission in accordance with Executive 

Order 13132 regarding federalism and 

(2) determined that it does not have 

federalism implications. The rescission 

would not have substantial direct effects 

on the States, on the relationship 

between the National Government and 

the States, or on the distribution of 

power and responsibilities among the 

various levels of government. 

VIII. Executive Order 13175, Indian 

Tribal Governments 

This rescission would not have 

substantial direct effects on one or more 

Indian tribes, on the relationship 

between the Federal Government and 

Indian tribes, or on the distribution of 

power and responsibilities between the 

Federal Government and Indian tribes. 

List of Subjects in 29 CFR Part 791 

Wages. 

PART 791—[REMOVED AND 

RESERVED] 

■ For the reasons set forth in the 

preamble, and under the authority of the 

FLSA, 29 U.S.C. 201–219, the 

Department removes and reserves 29 

CFR part 791. 

Jessica Looman, 

Principal Deputy Administrator, Wage and 

Hour Division. 

[FR Doc. 2021–15316 Filed 7–29–21; 8:45 am] 

BILLING CODE 4510–27–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 117 

[Docket No. USCG–2020–0034] 

RIN 1625–AA09 

Drawbridge Operation Regulation; 

Chicago River, Chicago, IL 

AGENCY: Coast Guard, DHS. 

ACTION: Final rule. 

SUMMARY: The Coast Guard is revising 

the operating schedule that governs the 

Amtrak Railroad Bridge, mile 3.77, 

across the South Branch of the Chicago 

River, at Chicago, Illinois to be operated 

remotely and establish an intermediate 

opening position. 

DATES: This rule is effective August 30, 

2021. 

ADDRESSES: To view documents 

mentioned in this preamble as being 

available in the docket, go to https://

www.regulations.gov. Type USCG– 

2020–0034 in the ‘‘SEARCH’’ box and 

click ‘‘SEARCH.’’ Click on Open Docket 

Folder on the line associated with this 

rule. 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this rule, call or 

email Mr. Lee D. Soule, Bridge 

Management Specialist, Ninth Coast 

Guard District; telephone 216–902– 

6085, email Lee.D.Soule@uscg.mil. 

SUPPLEMENTARY INFORMATION: 

I. Table of Abbreviations 

CFR Code of Federal Regulations 

DHS Department of Homeland Security 

FR Federal Register 

IGLD85 International Great Lakes Datum of 

1985 

LWD Low Water Datum based on IGLD85 

NPRM Notice of Proposed Rulemaking 

(Advance, Supplemental) 

OMB Office of Management and Budget 

§ Section 

TD Temporary Deviation with Request for 

comments 

U.S.C. United States Code 

II. Background Information and 

Regulatory History 

On April 8, 2020 the Coast Guard 

published a TD in the Federal Register 

(85 FR 19659) to test the proposed rule 

and allow mariners to provide 

comments from June 1, 2020 through 

September 1, 2020. We received one 

unrelated comment. 

On May 4, 2021, the Coast Guard 

published a NPRM in the Federal 

Register (86 FR 23639). There we stated 

why we issued the NPRM, and invited 

comments on proposed regulatory 

action. During the comment period that 

ended on June 3, 2021, we received zero 

(0) comments. 

III. Legal Authority and Need for Rule 

The Coast Guard is issuing this rule 

under authority 33 U.S.C. 499. 

The Amtrak Railroad Bridge, mile 

3.77, over the South Branch of the 

Chicago River provides a vertical 

clearance of 10 feet in the down 

position and 65 feet in the open position 

above LWD and a horizontal clearance 

of 156 feet. The bridge crosses the river 

on a slight skew on an ‘‘S’’ curve in the 


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