In December 2021, we discussed anticipated shifts in employment law under the Biden administration, particularly regarding the Department of Labor’s (DOL) Joint Employer Rule. Since then, several key developments have reshaped wage and hour regulations, independent contractor classifications, and joint employment liability. Below is a recap of the Joint Employer Rule and a summary of recent legal changes affecting employers.
Joint Employer Rule Update
As of March 17, 2025, the Department of Labor’s (DOL) 2020 Joint Employer Rule is no longer in effect. This rule, which took effect in March 2020, had narrowed the definition of joint employment under the Fair Labor Standards Act (FLSA). However, on July 29, 2021, the DOL announced a final rule rescinding the 2020 Joint Employer Rule, with the rescission originally set to take effect on September 28, 2021, but later extended to October 5, 2021.
The rescission reinstated the broader joint employer standard that existed before the 2020 rule, making it easier for businesses to be held liable as joint employers under the FLSA. This change primarily impacts franchisors, staffing agencies, and companies using third-party contractors, which may now face increased liability for wage and hour violations.
Although the 2020 rule was rescinded, ongoing legislative proposals continue to seek clarification on joint employment standards. Notably, the Save Local Business Act has been introduced to establish a more employer-friendly standard, stating that a company is only considered a joint employer if it exercises “direct, actual, and immediate” control over key employment terms. However, as of April 25, 2023, this legislation has not been enacted, meaning the broader joint employer standard remains in place.
Other Recent Developments since Last Post
As of early 2025, significant shifts have occurred in employment law:
– Overtime Pay:
In April 2024, the DOL issued a final rule to increase the minimum salary requirements for “white collar” exemptions from minimum wage and overtime pay under the FLSA. The increase was set to take effect in two stages, with the standard salary level rising to $844 per week ($45,888 annually) on July 1, 2024.
However, on November 15, 2024, the U.S. District Court for the Eastern District of Texas vacated the 2024 Overtime Rule nationwide, ruling that the agency exceeded its statutory authority. The DOL has appealed the decision, but the thresholds have reverted to the amounts established by the 2019 Overtime Rule.
– Minimum Wage for Federal Contractors:
Minimum Wage for Federal Contractors: In 2021, President Biden signed an executive order raising the minimum wage for federal contractors to $15 per hour, effective January 30, 2022, with annual adjustments for inflation. The increase applied to new and extended federal contracts, aiming to improve wages for government contract workers. However, in November 2024, a U.S. appeals court ruled that Biden exceeded his authority by imposing a $17.20 minimum wage for federal contractors, siding with several Republican-led states challenging the order.
The court found that wage regulations should be set by Congress, not through executive action. The decision has created legal uncertainty, and further appeals are expected. Businesses with federal contracts should stay informed of any changes affecting wage requirements.
– Independent Contractor Classification:
The DOL issued a new rule in 2024 updating the test for determining whether someone is an employee or an independent contractor under the FLSA. This rule aims to reduce the risk of employees being misclassified as independent contractors while providing a consistent approach for businesses. The new rule replaces the 2021 regulation and reintroduces a multi-factor “economic reality” test that considers factors such as the worker’s level of control over their work, the opportunity for profit or loss, and the degree to which their work is integral to the employer’s business.
The rule removes the emphasis on just two factors—the nature and degree of control over the work and the worker’s opportunity for profit or loss—that the 2021 rule prioritized. This shift makes it more likely that workers will be classified as employees rather than independent contractors, especially in industries like construction, transportation, and gig economy jobs.
Businesses that rely on independent contractors should carefully review their worker classification policies to ensure compliance with the updated standards.
Conclusion
The landscape of employment law continues to evolve, influenced by administrative changes and judicial rulings. Businesses should stay informed about these developments to ensure compliance and adapt to new regulations.