Employment Law Report
Revised Department of Labor Joint Employer Standard
On January 12, 2020, the United States Department of Labor (“DOL”) updated its standard for determining who is a joint employer under the Fair Labor Standards Act (“FLSA”) for the first time in 60 years. Under the FLSA, an employee may be employed by more than one employer, which puts each employer at risk for unpaid wages and overtime.
The new joint employer standard specifies that when an employee performs work for the employer that simultaneously benefits another company, that company will be considered a joint employer if they are acting directly or indirectly in the interest of the employer in relation to the employee. The DOL adopted a balancing test to determine which employers are considered joint employers under the FLSA. The factors to be considered include whether a company:
(1) hires and fires employees;
(2) supervises and controls employees’ work schedules or conditions of employment to a substantial degree;
(3) determines employees’ rate and method of payment; and
(4) maintains employment records.
Merely reserving the right to control the employee’s working conditions does not establish that a company is a joint employer. Instead, to be considered a joint employer, the company would actually have to exercise control over another company’s employees.
The revised joint employment standard clarifies that an employee’s economic dependence on a business does not determine whether that business is a joint employer under the FLSA. In addition, the rule identifies certain factors that do not determine whether a business is a joint employer. These factors include having a franchisor/franchisee business model; providing a sample employee handbook; permitting a company to operate a facility on another company’s grounds; participating with another employer in an apprenticeship program; offering or participating in an association health or retirement plan with other companies; or requiring a business partner to comply with legal obligations, such as minimum wages, workplace safety, or anti-harassment.
The DOL has included several examples of what does and does not constitute joint employment status in the revised regulation. They can be found here: https://www.federalregister.gov/documents/2020/01/16/2019-28343/joint-employer-status-under-the-fair-labor-standards-act In addition, the DOL has published a fact sheet about the revised standard: https://www.dol.gov/agencies/whd/flsa/2020-joint-employment/fact-sheet as well as a list of frequently asked questions: https://www.dol.gov/agencies/whd/flsa/2020-joint-employment/faq
It is important to remember that the revised rule only address joint employment only under the FLSA and does not apply to any other statute or agency. The revised joint employer rule becomes effective on March 16, 2020. Before then, employers should review their relationships with contractors, staffing agencies, and affiliated corporations to minimize their risk for being found to be a joint employer under the FLSA.