The U.S. Department of Labor issued a final rule Sunday, January 12, 2020 updating the legal framework for analyzing whether workers are jointly employed by affiliated businesses under the Fair Labor Standards Act. The rule will be published in the Federal Register this week and take effect in mid-March. It finalizes a proposal unveiled last year and is one of several regulations governing joint employment that agencies within the Trump administration have recently pursued.
The goal of the rule, per Secretary of Labor Eugene Scalia, is to give clarity to businesses who want to work together and promote economic growth. This is in stark contrast to the DOL under the Obama administration, which had significantly broadened liability for joint employment under the FLSA, calling for greater scrutiny of business relationships in which multiple companies might jointly employ workers. The Trump DOL rescinded that guidance in mid-2017.
The final rule replaces a test that said employers jointly employ workers whose work for one “is not completely disassociated” from their work for the other. The DOL’s revision of the standard marks the first major overhaul of the DOL’s joint employer regulations since the late 1950s. The rule adopts a four-factor balancing test for determining whether two or more affiliated businesses jointly employ workers in situations where workers perform tasks for one employer that simultaneously benefit another business or individual.
The four factors are:
(1) whether a business can hire or fire employees,
(2) whether it controls their schedules or conditions of employment to a substantial degree,
(3) whether it determines workers’ pay rates and the methods by which they are paid,
(4) and if it maintains workers’ employment records.
If two businesses are deemed joint employers under the FLSA, they share responsibility for workers’ wages, including the obligation to properly pay them minimum wages and overtime, and legal liability for wage violations.
It should be noted that the final rule has no bearing on joint employer determinations made by the DOL and other agencies under other employment statutes besides the FLSA, such as the Occupational Safety and Health Act, the National Labor Relations Act or Title VII of the Civil Rights Act. The National Labor Relations Board has proposed its own joint employment rule, which is expected to be finalized soon, and the U.S. Equal Employment Opportunity Commission recently indicated that it, too, will soon propose a joint employer regulation.
No information in this article is intended to constitute legal advice. For specific legal advice, please contact an attorney.