The unsettled and thus often-litigated “joint employer” issue remains in flux as we head into the New Year. The business community continues to wait for further action from the U.S. Department of Labor (DOL) on its revised regulations on this subject – the first in more than 50 years. The proposed regulations provide for a standard that would be more difficult for plaintiffs to meet and, for many employers, suggest new arguments against the imposition of joint and several liability for wage-hour obligations.
The new DOL regulations’ “notice and comment” period ended months ago; they generated massive interest and tens of thousands of comments. Publication of the new regulations is widely expected in the next few months, with little if any change from the text the agency initially proposed.
Readers will recall that the DOL’s pending regulations introduce a four-factor balancing test as well as guidance that certain business arrangements do not, just by their very nature, establish joint employer relationships. First, DOL is poised to introduce a balancing test that examines whether the putative joint employer (1) has the power to hire and fire the employee, (2) supervises or controls the employee’s work schedule or conditions of employment, (3) determines the employee’s wage rate and method of payment; and (4) maintains the employee’s records of employment. It would not be necessary for all four factors to exist for a joint employer relationship to exist. However, a company could reserve the right to control the employee’s working conditions, but that right of control would not suffice for a joint employer finding if the company did not actually exercise that control.
Second, the pending regulations are expected to specify that the following factors do not, in and of themselves, influence the joint employer analysis: (a) the existence of a franchisee-franchisor relationship, even if the franchisor provides its franchisees a sample employee handbook; (b) one company allowing another company to perform business on its property, (c) one company requiring its business partners to comply with minimum wage laws and to maintain compliant policies regarding sexual harassment prevention and workplace safety; (d) one company allowing another company’s employees to participate in its apprenticeship program; and (e) one company offering employees of another the right to participate in its health and retirement plans.
The DOL’s new balancing test, and its guidance about factors that should not enter the joint employer analysis, are eagerly anticipated among businesses most often challenged as joint employers under the FLSA, including franchisors in all industries. The new DOL regulations seem likely to be good news for the business community by introducting greater predictability and more employer-friendly outcomes into this volatile area of the law.