DOL Final Rule on Joint Employer Status
January 13, 2020 by Lincoln Derr
THE U.S. DEPARTMENT OF LABOR HAS BEEN HARD AT WORK.
Right on the heels of its Final Rule on Overtime, the DOL just issued its Final Rule on Joint Employer Status. What does that mean for you, Average Joe Employer? Maybe nothing. However, if you’re an employer who routinely works with contractors or you operate as a franchise, complying with this new rule could mean the difference between building your business or spending your time with a DOL investigator.
LET’S START WITH THE BASICS
The Fair Labor Standards Act (FLSA) requires covered employers to pay employees the federal minimum wage (your mileage may vary if you’re in a state with a minimum wage that is higher or lower than the $10.00 per hour federal minimum wage) and time and a half for all hours worked over 40 in a single workweek. Beyond that, some employers may have employees who perform work that also helps another employer.
Sound familiar? If so, I’m talking to you. Let’s go straight to the Rule:
The Final Rule gives employers “a four-factor balancing test for determining FLSA joint employer status in situations where an employee performs work for one employer that simultaneously benefits another entity or individual. The balancing test examines whether the 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 Final Rule also provides additional factors that may (or may not) be relevant in determining whether an employee is jointly employed by more than one employer including certain business models (like franchises) and contractual agreements with the employer (as in the case of a contractor and subcontractor).
WHAT IS THE MOST IMPORTANT FACTOR?
I’m sure you’re wondering what might be the most important factor in determining which (if any) employees might be “jointly employed.” Like a lot of government-issued guidance, it’s really anyone’s guess. In the Rule’s FAQ section, the Department of Labor says it “will depend on all the facts in a particular case, and the appropriate weight to give each factor will vary depending on the circumstances.” Not really very heavy on the guidance part.
It’s been more than 60 years since the DOL revised the Joint Employer regulations. In the meantime, courts all over the country have tried to determine just what it means for employers to jointly employ an employee. The result has been a lot of uncertainty, almost no uniformity, and lots of billable hours for employment lawyers.
According to the Department’s Press Release on the Final Rule, “[by] giving greater clarity to businesses who want to work together, [the DOL] promotes an entrepreneurial culture that has driven American prosperity for decades.” In other words, why not? One caveat – this new Rule does not address “joint employer” status under other federal employment laws (i.e., the National Labor Relations Act, ERISA, or Title VII).
This Final Rule goes live on March 16, 2020. If you’re a fan of OG legislation and have time on your hands, check out the long-form version.
Lincoln Derr can help guide you through the update process to ensure your company has a happy and healthy 2020.