DOL PROPOSES FOUR-FACTOR JOINT EMPLOYER TEST
The definition of who is a joint employer and what control do they have to exercise (or don’t) has been a topic of discussion for the last several years. The Department of Labor (DOL) has become the latest federal agency to jump into the fray.
The DOL has proposed a rule that would update the over 60 year old definition of joint employer under the Fair Labor Standards Act (FLSA). As proposed, the rule would align the FLSA’s definition of joint employer with that of the National Labor Relations Board’s (NLRB) proposed rule.
Under the proposed rule, the DOL would look to four factors to determine whether a business is a joint employer (and equally liable for wage and hour violations). If the proposed rule is adopted as written, fewer businesses would be deemed joint employers compared to the current state of the rule.
Under the proposed rule, if an employer employs someone to work and another entity simultaneously benefits from that work, the other entity would only be considered a joint employer for purposes of the FLSA if that other entity is acting directly or indirectly “in the interest of the employer” in relation to the employee. The DOL would assess whether the potential joint employer:
- Hires or fires an employee
- Supervises and controls an employee’s work schedule or conditions of employment
- Determines an employee’s rate and method of payment
- Maintains the employee’s employment records
The DOL also laid out factors that, if the proposed rule was adopted, would not be under consideration in determining whether an entity was a joint employer.
- Right to Control – An employer’s ability or contractual right to control the terms and conditions of employment would not be a consideration. Only specific actions taken by the entity regarding the terms and conditions of employment would be considered.
- Economic Dependence – An employee’s dependence on the potential joint employer would not be a consideration.
- Business Models, Practices, and Arrangements – An entity’s business model (i.e. franchise relationship), business practices, and certain business agreements (i.e. requiring implementing a sexual harassment policy) are not factors in whether an entity is a joint employer or not.
What is next? The DOL will accept comments for 60 days followed by the usual administrative process to finalize any federal regulations (i.e. public hearings, formal responses, etc.). Employers that wish to comment on the proposal may do so by visiting www.regulations.gov.
In the interim, employers should look at their current business relationships to determine how they would be affected by this rule’s implementation and what adjustments, if any, need to be made.
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