The US Department of Labour (DOL) has issued proposed revisions to the definition of 'joint employer' under the Fair Labour Standards Act. The revisions are an attempt to clarify the joint employer relationship as codified in 29 CFR § 791.2.

Overview of joint employment rule

The joint employment rule allows multiple employers to be responsible for paying hours worked by a shared employee under certain circumstances. Specifically, the rule provides that no joint employer relationship "exists if two or more employers for which one employee works" are "acting entirely independently" and are "completely disassociated" with respect to "the employment of a particular employee". In contrast, a joint employer relationship will exist if an employee performs work:

  • that simultaneously benefits multiple employers; or
  • for multiple employers at different times during the working week when the employers:
    • have some arrangement to share the employee's services;
    • directly or indirectly act in the interest of the other; or
    • directly or indirectly "share control of the employee".

The result of a determination of joint employer status is that "all of the employee's work for all the joint employers during the workweek is considered as one employment for the purposes of the Act".

Challenges

The problem with this formulation, which has been the law for more than 60 years, is that inconsistent precedent has grown out of different applications of different standards in different jurisdictions. For example, courts in the Second Circuit have applied a 10-factor test,(1) while the Fourth Circuit has used a four-factor test.(2)

In August 2016 the landscape became even more uncertain when the National Labour Relations Board (NLRB) ruled that a Californian employer (Browning-Ferris Industries) and its temporary staffing agency were joint employers. In so doing, the NLRB focused on indirect control rather than direct control. However, in December 2017 the NLRB shifted gears again, overruling the indirect control approach.(3) Further complicating matters, in February 2019 the Browning-Ferris approach was restored as precedent after the Hy-Brand ruling was vacated following the discovery of a board member's conflict of interest.

DOL's proposed revisions

To address the prevailing uncertainties, the DOL has now distinguished between the following two scenarios:

  • where two employers employ the same worker for different hours during the same working week; and
  • where the employee is only employed by one business, but other employer(s) benefit from the work simultaneously.

For the first scenario, the DOL proposes to apply a 'not completely disassociated' test. For the second scenario, the DOL proposes to weigh four factors – specifically, which of the employers:

  • hires or fires the employee;
  • supervises and controls the employee's schedule and work conditions;
  • sets the employee's rate and method of payment; and
  • keeps the employee's employment records.

When balancing these factors, the DOL will:

  • ensure that no one factor is dispositive;
  • emphasise the actual exercise of control;
  • not consider whether the employee is economically dependent on a particular employer; and
  • not consider the employer's business model.

The DOL's proposed revisions remain open to public comment through 10 June 2019.

For further information on this topic please contact Richard I Scharlat at Dentons by telephone (+1 212 768 6700) or email (richard.scharlat@dentons.com). The Dentons website can be accessed at www.dentons.com.

Endnotes

(1) Zheng v Liberty Apparel Co, 617 F3d 182 (2d Cir 2010).

(2) Bonnette v California Health & Welfare Agency, 525 F Supp 128 (ND Cal 1981).

(3) Hy-Brand Industrial Contractors, Ltd and Brandt Construction Co, 365 NLRB 156 (2017).

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.