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DOL releases joint employer proposed rule

Four-factor test to help determine

Posted April 2, 2019

On April 1, 2019, the U.S. Department of Labor (DOL) announced a proposed rule to revise and clarify the responsibilities of employers and joint employers to employees in joint employer arrangements. This rule has not been meaningfully revised since 1958.

The Fair Labor Standards Act (FLSA) requires that employees be paid at least the minimum wage and for all hours worked and overtime for hours worked over 40 in a workweek. Multiple employers (joint employers) are jointly responsible for the employee’s wages. A joint employer is any additional individual or entity who is jointly and severally liable with the employer for the employee’s wages.

Where an employee works one set of hours in the workweek for his or her employer, and that work simultaneously benefits another entity, the proposed rule includes a four-factor test that would consider whether the potential joint employer actually exercises the power to:

  • Hire or fire the employee;
  • Supervise and control the employee’s work schedules or conditions of employment;
  • Determine the employee’s rate and method of payment; and
  • Maintain the employee’s employment records.

The DOL proposes several revisions to the current regulation, including the following:

  • Eliminating the “not completely disassociated” standard for situations where an employee works one set of hours for an employer that simultaneously benefit another person and replacing it with a four-factor balancing test derived from Bonnette v. California Health & Welfare Agency.
  • Explaining that additional factors may be used to determine joint employer status, but only if they are indicative of whether the potential joint employer is exercising significant control over interest of the employer in relation to the employee.
  • Explaining that the employee’s “economic dependence” on the potential joint employer does not determine the potential joint employer’s liability under the FLSA and identifying three examples of “economic dependence” factors that are not relevant to the joint employer analysis.
  • Explaining that ability, power, or reserved contractual right to act in relation to the employee is not relevant for determining joint employer status.
  • Clarifying that indirect action in relation to an employee may establish joint employer status.
  • Clarifying that a person’s business model — for example, operating as a franchisor — does not make joint employer status more or less likely.
  • Explaining that certain business practices — for example, providing a sample employee handbook to a franchisee; allowing an employer to operate a facility on one’s premises; jointly participating with an employer in an apprenticeship program; or offering an association health or retirement plan to the employer or participating in such a plan with the employer — do not make joint employer status more or less likely.
  • Explaining that certain business agreements — for example, requiring an employer to institute workplace safety measures, wage floors, or sexual harassment policies — do not make joint employer status more or less likely.

Once published in the Federal Register, the public will have 60 days to comment on the proposed regulation.

This article was written by Darlene M. Clabault, SHRM-CP, PHR, CLMS, of J. J. Keller & Associates, Inc.

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