In certain circumstances, an employee may have two (or more) employers which are considered “joint employers” under the Fair Labor Standards Act of 1938 (“FLSA”). Under the FLSA, a “joint employer” is any additional individual or entity who is jointly and severally liable with the employer for the employee’s wages.

The Department of Labor’s (“DOL”) regulations regarding joint employer status under the FLSA have not been revised or updated in over 60 years. However, on March 16, 2020, the DOL’s recently announced final rule, which updates these regulations, will take effect.

Specifically, the final rule describes the standards to be used in determining joint employer status when (1) the employee is employed by an employer, but another individual or entity simultaneously benefits from the employee’s work or (2) one employer employs an employee for one set of hours in a workweek and another employer employs the same employee for a separate set of hours in the same workweek, but the jobs and hours worked for each employer are separate.

In the final rule, the DOL:

• Adopts a four-factor balancing test to determine whether the potential joint employer, who simultaneously benefits from the work an employee performs for the employer, is directly or indirectly controlling the employee. Specifically, the balancing test assess whether the potential joint employer:
  • hires or has the ability to fire 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;
• Clarifies that an employee’s “economic dependence” on a potential joint employer does not determine whether it is a joint employer under the FLSA;
• Identifies facts that are not relevant to the determination of joint employer status under the FLSA and identifies other factors that do not make joint employer status more or less likely, including:
  • operating as a franchisor or entering into a brand and supply agreement, or using a similar business model;
  • the potential joint employer’s contractual agreements with the employer requiring the employer to comply with its legal obligations or to meet certain standards to protect the health or safety of its employees or the public;
  • the potential joint employer’s contractual agreements with the employer requiring quality control standards to ensure the consistent quality of the work product, brand, or business reputation; and
  • the potential joint employer’s practice of providing the employer with a sample employee handbook, or other forms, allowing the employer to operate a business on its premises (including “store within a store” arrangements), offering an association health plan or association retirement plan to the employer or participating in such a plan with the employer, jointly participating in an apprenticeship program with the employer, or any other similar business practice; — and –
• Provides several examples of how the DOL’s joint employer guidance should be applied in various factual circumstances.

Of note, the final rule only addresses joint employer status under the FLSA and not any other federal employment laws, such as the National Labor Relations Act (“NLRA”), the Employee Retirement Income Security Act of 1974 (“ERISA”), the Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”), or Title VII of the Civil Rights Act of 1974 (“Title VII”).

What Does This Mean For Employers?

Employers should review their relationships with potential joint employers to determine whether there is, in fact, a joint employment relationship as defined by the FLSA. Overall, the final rule should make it easier for employers to ascertain when there is a joint employment relationship with another individual or entity under the FLSA.

For more information on the DOL’s new Joint Employer Status Rule, please contact the attorneys at York Bowman Law, LLC.