No Fooling: DOL Proposes New Rule to Determine Joint-Employer Status

As a rule of thumb, skepticism is in order for any news blasted out on April Fool’s Day. For that reason, you could easily believe that the U.S. Department of Labor (DOL) was joining in the tomfoolery this year when it issued a new Notice of Proposed Rulemaking on April 1, 2019, to address joint employment under the Fair Labor Standards Act (FLSA), but, that wasn’t the case.

Through its April 1, 2019 notice, the DOL seeks to revise regulations on joint employment issues. A joint employer is any additional individual or entity who is equally liable with the employer for the employee’s wages, including minimum wages and overtime. Presently, the regulations state that multiple persons or companies can be joint employers if they are “not completely disassociated” with respect to the employment of an employee. The phrase “not completely disassociated” is not clearly explained in the regulations, which has led to thorny issues when dealing with the employees of subcontractors, franchisees, and similar relationships.

To address such issues, the DOL proposes a four-factor analysis that considers whether the employer actually exercises the power to:

• Hire and fire an employee;
• supervise and control an employee’s work schedules or conditions of employment;
• determine the employee’s rate and method of payment; and
• maintain the employee’s employment records.

The DOL indicates that there are other factors that should and should not be considered. It also clarifies certain business models and practices or contractual language that does not make a joint employer status more or less likely. A Fact Sheet issued with this proposed rule does a fair job of summarizing the other factors. For example, the DOL indicates that just because a company reserves the right in a contract to exercise control over another company’s workers does not—by itself—make a company more or less likely to be considered a joint employer. Rather, a company must actually exercise the contractual control to become a joint employer. Likewise, the DOL notes that just because a company can require another contracting party to institute anti-harassment policies, workplace safety measures, or wage floors does not make it more or less likely the two companies are joint employers.

The April 1, 2019 notice began the notice-and-comment process. The DOL will accept comments from interested parties for 60 days. The public will be able to provide electronic comments at www.regulations.gov (after searching for RIN no. 1235-AA26) or via mail addressed to:

Division of Regulations, Legislation, and Interpretation
Wage and Hour Division
U.S. Department of Labor, Room S-3502
200 Constitution Avenue, N.W.
Washington, D.C. 20210

(identifying in the written comment (1) the Wage and Hour Division, United States Department of Labor; and (2) RIN no. 1235-AA26).