Tuesday, January 14, 2020

DOL provides employers much needed clarity on joint employment

Joint employment is a legal theory in which the operations of two employers are so intertwined that each is legally responsible for the misdeeds (and the liabilities that flow from those misdeeds) of the other. It’s also a legal theory with which federal agencies and courts have struggled over the past several years.

The struggle started at the NLRB’s broad expansion of the definition of “joint employment”, continued with OSHA, and ended with the Department of Labor, in early 2016, announcing a similar broadening of the definition for wage and hour claims.

More recently, however, more measured and business-friendly federal agencies have ratcheted back these expansions. In December 2017, the NLRB announced that it would require “actual … joint control over essential employment terms” for a finding of joint employment. A few months earlier, the DOL pulled its joint employment rules, leaving the issue in limbo in wage and hour claims.

Earlier this week the DOL announced a final rule to update the regulations interpreting the definition of joint employment under the FLSA.

In the final rule, the department provides 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 DOL adds that this rule “will add certainty regarding what business practices may result in joint employer status”, promote “uniformity among court decisions by providing a clearer interpretation of joint employer status”, and “improve employers’ ability to remain in compliance with the FLSA.” I cannot agree more. 

This rule (available here) becomes effective on March 16, 2020.

* Photo by Sandy Millar on Unsplash