HIGHLIGHTS:

  • The U.S. Department of Labor (DOL) has proposed changes to its existing joint employer regulation to provide workers and organizations with more certainty regarding the determination of joint employer status under the Fair Labor Standards Act.
  • DOL has proposed to adopt a four-factor balancing test that clarifies the current standard for joint employer status. It also clarifies that a joint employer must be acting, directly or indirectly, "in relation to" those employees to be jointly liable for them.

The U.S. Department of Labor (DOL) announced on March 29, 2019, proposed changes to its existing joint employer regulation in Part 791 of Title 29, Code of Regulations. Specifically, the DOL's proposed rule will provide additional guidance for determining joint employer status.

The Fair Labor Standards Act (FLSA or Act) generally requires employers to pay their employees at least the federal minimum wage for all hours worked and overtime for hours worked over 40 in a workweek. The Act contemplates the existence of joint employers who are jointly and severally liable for an employee's wages under the FLSA. The DOL's current standard determines joint employer status by inquiring whether two or more persons "are not completely disassociated with respect to the employment of a particular employee." 29 CFR 791.2. This standard, however, is not helpful for determining joint employer status where an employer suffers, permits or otherwise employs an employee to work one set of hours in a workweek, and that work simultaneously benefits another person.

The DOL's proposed rule would clarify the current standard by incorporating a four-factor balancing test largely derived from the U.S. Court of Appeals for the Ninth Circuit's opinion in Bonnette v. California Health & Welfare Agency, 704 F.2d 1465 (9th Cir. 1983). The DOL's proposed test would assess whether the potential joint employer: a) hires or fires the employee; b) supervises and controls the employee's work schedule or conditions of employment; c) determines the employee's rate and method of payment; and d) maintains the employee's employment records. These proposed factors focus on the actual actions of the potential joint employer (not the potential actions), and would provide workers and organizations with more certainty regarding the determination of joint employer status under the FLSA.

In addition to proposing a new framework for determining joint employer status, the DOL has also expressed its intention to clarify that mere business practices – such as providing a sample employee handbook or other forms to an employer as part of a franchise arrangement, allowing an employer to operate a facility on its premises, or offering or participating in an association health or retirement plan – do not make joint employer status more or less likely under the Act. Similarly, the DOL's proposed rule would add language to clarify that an employer's business model, such as a franchise model, in and of itself does not make joint employer status more or less likely under the Act.

The proposed rule clarifies that a joint employer must be acting, directly or indirectly, "in relation to" those employees to be jointly liable for them. 29 U.S.C. 203(d). The DOL's proposed rule is indicative of the DOL's emphasis on providing greater certainty to the public in determining more accurately who is and is not a joint employer under the FLSA.

Next Steps

DOL encourages the public to submit comments about the proposed rule in the rulemaking docket RIN 1235-AA26. The public is able to submit comments for consideration for 60 days after the proposed rule is published in the Federal Register. More information about the proposed rule is available on the DOL website.