DOL final rule: Employers get “joint employer” clarification

The DOL issued a final rule, including a four-factor test, to help guide employers in determining joint employer relationships under the FLSA.

Posted January 15, 2020

On January 12, 2020, the Department of Labor (DOL) announced a final rule on the definition of a “joint employer” under the Fair Labor Standards Act (FLSA). These regulations have not been updated in more than 60 years.

In the final rule, the DOL provides a four-factor test for determining joint employer status in cases where an employee does work for one employer that simultaneously benefits another. The test looks at whether a potential joint employer:

  • Hires or fires the employee;
  • Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
  • Determines the employee’s rate and method of payment; and
  • Maintains the employee’s employment records.

The FLSA requires covered employers to pay their employees at least the federal minimum wage for every hour worked, and overtime for every hour worked over 40 in a workweek. Besides his or her own employer, an employee may have one or more joint employers — other individuals or entities that are jointly responsible for the employee's wages.

If one or more employers are responsible for wages and there is a violation, such as failure to pay minimum wage or overtime, then the joint employers could be sued. However, if they are not joint employers, then only the business directly controlling employees would be liable.

In addition to the four-factor test, the final rule clarifies when other factors may be relevant to determining joint employer status and identifies certain business models, contractual agreements with the employer, and business practices that do not make joint employer status more or less likely.

The bottom line is, these updates will likely give employers more clarity regarding what business practices may result in joint employer status. The final rule also promotes more uniformity among court decisions by providing a clearer interpretation. These benefits, in turn, likely will improve employers’ ability to remain in compliance with the FLSA and will help reduce litigation costs.

This article was written by Michelle Higgins, of J. J. Keller & Associates, Inc.

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