U.S. Department of Labor Issues Final Ruling To Update Joint Employer Status Interpretation

The U.S. Department of Labor has issued a final ruling updating its joint employer status interpretation under the Fair Labor Standards Act (FLSA). This is the first significant update to this act in over 60 years.

The ruling, issued January 12, 2020, adopts a four-factor balancing test and rejects factors that have fueled recent litigation, such as a worker’s economic dependence on a potential joint employer, the business model of the potential employer, and the potential employer’s unexercised power over the worker. The test is designed to help determine FLSA joint employer status in cases where an employee performs work for one employer that simultaneously benefits another person. The final rule will take effect March 16, 2020.

The U.S. Department of Labor’s four-factor test takes into consideration whether a business:

• Hires and fires employees
• Supervises and controls employees’ work schedules or conditions of employment to a substantial degree;
• Determines employees’ rate and method of payment;
• Maintains employment records.

According to the U.S. Department of Labor’s Wage and Hour Division (WHD), the final rule:

• specifies that when an employee performs work for the employer that simultaneously benefits another person, that person will be considered a joint employer when that person is acting directly or indirectly in the interest of the employer in relation to the employee;
• provides a four-factor balancing test to determine when a person is acting directly or indirectly in the interest of an employer in relation to the employee;
• clarifies that an employee’s “economic dependence” on a potential joint employer does not determine whether it is a joint employer under the FLSA;
• specifies that an employer’s franchisor, brand and supply, or similar business model and certain contractual agreements or business practices do not make joint employer status under the FLSA more or less likely, and
• provides several examples applying the Department’s guidance for determining FLSA joint employer status in a variety of different factual situations.

The final rule outlines potential factors that could also be evaluated to determine joint employment. The rule is expected to be published in the Federal Register January 16, 2020. A PDF version can be found here: https://s3.amazonaws.com/public-inspection.federalregister.gov/2019-28343.pdf