By Peter M. Langdon
On January 13, 2020, the Department of Labor (“DOL”) finalized rules governing situations in which two or more employers will be considered joint employers under the Fair Labor Standards Act (“FLSA”). The final rules establish a four-factor balancing test utilized in determining joint-employer status when an employee’s hours worked for one employer simultaneously benefit another employer.
By way of background, the FLSA requires employers to pay employees the federal minimum wage and overtime for hours worked in excess of forty (40) in a workweek. The FLSA defines an employer as “any person acting directly or indirectly in the interest of an employer in relation to an employee.” In certain circumstances, an employee may have more than one employer, also known as a joint employer. The consequences of joint employer status are significant. Joint employers are jointly and severally liable for wage and hour obligations with respect to shared employees.
The new joint employer rules contemplate two joint employment scenarios: (1) where an employee’s hours worked for one employer simultaneously benefit another employer and (2) where an employee works one set of hours for one employer and another set of hours for another employer during the same workweek. The second scenario remains unchanged. However, under the new rules, when an employee performs work for an employer that benefits another employer at the same time, the DOL will now apply a four-factor balancing test to determine joint-employer status. The four-factor test includes whether the joint employer:
1. Hires or fires the employee,
2. Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree,
3. Determines the employee’s rate and method of payment, and
4. Maintains the employee’s employment records.
No single factor is dispositive in determining joint-employer status. Additionally, an employee’s economic dependence on the potential joint employer is no longer relevant in the joint employer analysis. The DOL explained that the application of the four-factor test should determine joint-employer status in most cases. However, additional factors may be relevant for determining joint-employer status. The joint-employer’s ability, power, or reserved right to act in relation to the employee may be relevant as an additional consideration in determining joint-employer status, but such ability, power, or reserved right does not establish joint-employer status without some actual exercise of control.
The final rules discuss certain business models, arrangements, and contractual provisions that are not considered to make a joint employment relationship more or less likely. Such examples include the following:
• Operating as a franchisor in a franchise business model;
• Contractual agreements with another employer regarding compliance with certain legal obligations with respect to employees, such as workplace safety practices, sexual harassment policies, and other agreements encouraging another employer’s compliance with established legal obligations;
• An employer allowing another employer to operate a facility on its premises; and
• An employer’s pattern or policy of providing resources or benefits to another employer, such as sample employee handbooks and other business forms or documents.
The business community generally seems to welcome the new joint employer rules because they provide clarity in application and are more narrow than the previous rules. The current state of the law regarding the test for joint employment varies across the federal circuit courts, but the DOL’s new guidance may be a step towards uniformity on the issue of joint employment. The new rules are set to take effect on March 16, 2020. If you have any questions regarding the new joint employment rules and to stay compliant and up to date on changes in the employment law area, contact Peter Langdon at 402-392-1250 or by email at [email protected].