AG James: Trump Administration Must Suspend Implementation of Joint Employer Rule Amid Coronavirus Pandemic

Coalition of Attorneys General Argue that Implementing Rule that Strips Protections
from Workers During the COVID-19 Crisis is Irresponsible and Harmful to Workers

NEW YORK – New York Attorney General Letitia James and Pennsylvania Attorney General Josh Shapiro today led a coalition of 18 attorneys general in urging the Trump Administration to immediately stop the implementation of the “Joint Employer Rule,” a new rule that undermines key labor protections for workers.

As New York and the United States grapple with the economic effects of the coronavirus disease 2019 (COVID-19), workers who earn hourly wages—and who would be most negatively affected by the rule—are also those most likely to suffer the adverse economic impacts caused by COVID-19, such as having hours reduced or being laid off. 

“The new rule, which already has a potentially negative and lasting impact for workers, puts those most at risk of suffering financially as a result of the COVID-19 pandemic in even greater economic jeopardy,” said Attorney General James. “In this time of great turmoil and uncertainty, the Trump Administration would be reckless to implement this new rule. Instead, it should focus on addressing the critical issues workers and employers face in responding to the pandemic. I, along with other attorneys general across the nation, will continue to fight for the interests of workers during these trying times.”

The U.S. Department of Labor (DOL) acknowledged last week that the unprecedented 3.28 million Americans who filed for unemployment benefits for the first time was “due to the impacts of the COVID-19 virus.” DOL also acknowledges that under the new rule, workers may not be able to collect back wages when employers become bankrupt. The coalition asserts that the current economic crisis combined with the new rule will seriously impede workers’ ability to collect back wages.

In February 2020, the coalition filed a lawsuit challenging a U.S. Department of Labor (USDOL) rule that unlawfully narrows the joint employment standard under the Fair Labor Standards Act (FLSA). The FLSA is the federal law establishing a baseline of critical workplace protections, such as minimum wage and overtime, for workers across the country. The joint employment standard determines when more than one employer is responsible under FLSA because both exert sufficient influence over a worker’s employment. This change would undermine critical workplace protections for the country’s low-and middle-income workers and could lead to increased wage theft and other labor law violations. The coalition asserts in the lawsuit that the rule directly undermines Congress’ intent for the FLSA, and that the USDOL violated the rulemaking process requirements. Further, they argue that the rule would impose significant regulatory burdens on states and harm states’ economies and residents. Additionally, the complaint argues that the new rule is incompatible with the text of the FLSA and Congress’ purposes in passing it to protect workers from unscrupulous employers. The rule also violates the law by attempting to overturn a 75-year-old Supreme Court precedent via regulation. The coalition is urging the court to declare the rule unlawful and invalidate the rule. 

Over the past few decades, businesses have increasingly outsourced and subcontracted many of their core responsibilities to intermediary entities, instead of hiring workers directly. Because these intermediary entities tend to be less stable, less well-funded, and subject to less scrutiny, they are more likely to violate wage and hour laws. In the suit, the coalition argues that USDOL’s new rule provides an incentive for businesses to offload employment responsibilities to smaller companies, which, under the new rule, will shield them from federal liability for wage and hour obligations under the FLSA. This will result in lower wages and increased wage theft for workers, especially for workers in low-wage jobs. Further, the new rule will make it more difficult to collect unpaid back wages for workers. 

The letter was co-led by New York and Pennsylvania, and joined by California, Colorado, Delaware, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, Virginia, Washington, and the District of Columbia. 

This case is being handled by Deputy Bureau Chief Julie R. Ulmet, Civil Enforcement Section Chief Ming-Qi Chu, General Labor Section Chief Seth Kupferberg, and Assistant Attorneys General Jessica Agarwal and Michael O’Keefe Cowles, all of the Labor Bureau, and Assistant Attorney General Fiona Kaye of the Division of Federal Initiatives, under the supervision of Chief Counsel for Federal Initiatives Matthew Colangelo.