On April 1, the U.S. Department of Labor proposed a new regulation for determining a company’s joint employer status under the Fair Labor Standards Act. When two companies are deemed joint employers, they share responsibility for the workers’ wages, which include the payment of minimum wages and overtime. Under the new rule, the Labor Department would analyze the following four factors in evaluating whether a company jointly employs workers:
- Whether the company hires or fires the employees
- Whether the company supervises and controls the employees’ work schedule or conditions of employment
- Whether the company determines the employees’ rate and method of pay; and
- Whether the company maintains the employees’ employment records.
The Labor Department proposed the new rule to determine, as a matter of economic realty, whether a company actually exercises sufficient control over an employee to qualify as a joint employer. In the Labor Department’s estimation, a business model (e.g., franchise or staffing) does not alone indicate joint employer status under the FLSA. Rather, the company must exercise sufficient control over the employee.
If implemented, this new regulation will limit companies’ shared wage and hour liability and follows the trend established by other agencies within the Trump administration. As we previously
reported, in September 2018 the National Labor Relations Board proposed to limit the circumstances under which a company would be considered a joint employer under the National Labor Relations Act.
For now, the waiting game begins. Before the rule can go into effect, the Labor Department must publish it in the Federal Register for public comment. As we have done
consistently, Frantz Ward attorneys will monitor developments on this proposed rule and other joint employer liability developments.