Department of Labor Issues Proposal for Joint Employer Regulation

  • Posted on: May 24 2019
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On April 1, 2019, the Department of Labor (DOL) announced a proposed rule clarifying regulations regarding joint employers status under the Fair Labor Standards Act (FLSA). Some observers believe this is a rollback of regulations that had previously been proposed by the DOL under the Obama administration.

In any event, the proposed rule is particularly relevant for franchises as well as small and midsize businesses that have partnered with professional employment organizations (PEO). Nonetheless, if you have questions about joint-employer status, consult an experienced employment law attorney.

The Backdrop

Under the FLSA, employers are required to pay employees at least the federal minimum wage for all hours worked (employers in New York are required to adhere to the state DOL’s wage and hour guidelines). Additionally, the FLSA requires nonexempt employees to be paid overtime for hours worked in excess of 40 hours per week. The FLSA also recognizes that an employee may have a primary employer as well as one or more joint employers, that are jointly and severally liable for the employee’s wages.

While the FLSA’s joint employer status regulations have not been substantially revised in more than 60 years, more recently, the National Labor Relations Board (NLRB) and federal courts have provided new interpretations of joint-employers relationships. Because of the resulting confusion for employers, the proposed rule is designed to clarify the joint employment status regarding the FLSA wage and hour laws. It is important to note, however, that the proposed rule does not affect the NLRB’s joint employer interpretation under the National Labor Relations Act.

The DOL proposes a four-factor test (adopted from the Ninth Circuit Court of Appeals decision in Bonnette v. California Health & Welfare Agency) to determine joint employer status by assessing whether the potential joint employer exercises 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
  • maintain the employee’s employment records

The proposed rule also offers guidance on applying the four-factor test, and clarifies that certain business models, practices, and agreements, such as franchises, do not make joint employer status more or less likely.
The proposed rule, and the additional examples of joint employer status provided by the DOL, have been published in the Federal Register (here). The comment period ends on June 10, 2019.

Posted in: Employment Agreements

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