The DOL has issued a long-awaited final rule addressing the standard for determining joint-employer status in the context of the Fair Labor Standards Act (FLSA). The rule seeks to settle confusion surrounding when a joint employer relationship is created for liability purposes under the FLSA. Prior to the rule issuance, federal circuit courts had been using a variety of tests for determining joint-employer status, often reaching inconsistent results. Typically, a joint employer relationship exists when an employee is working for more than one entity while still working only one job. Common examples include staffing agencies and franchisee-franchisor arrangements.
Because the rule was issued in the FLSA context, it is only intended to help determine liability for FLSA violations. Typically, it is simple to determine which entity should be held responsible for FLSA violations, but things get trickier when trying to determine whether a second entity should also be held liable as a joint employer. The final rule establishes a four factor balancing test for determining when such a joint employment relationship exists. The test considers whether the entity in question has the power to 1) hire or fire the employee, 2) supervise and control the employee’s work schedules or conditions of employment, 3) determine the employee’s rate and method of payment, and 4) maintain the employee’s employment records. As with most tests, no one factor is controlling, and courts will have significant discretion to weigh each factor based on all facts and circumstances of a given case.
The DOL under the Obama administration had previously issued an informal interpretation, which was not subject to the typical rule making process used by the DOL. That interpretation, which included a broader definition of joint employer, left many entities exposed to liability without any wrongdoing.
Other federal government entities charged with oversight of employment laws – including the National Labor Relations Board (NLRB) and the Equal Employment Opportunity Commission (EEOC) – are also considering revisions to the tests used for determining joint employer relationships. As a result, this announcement will almost certainly not be the last change in the joint employer landscape that we can expect to see in 2020.
The attorneys at Fishel Downey Albrecht & Riepenhoff, LLP routinely advise public and private employers on compliance with the FLSA and other state and federal employment regulations. If you have any questions about this or any other matter, please contact us at info@fisheldowney.com or call 614.221.1216.