On January 16, 2020, the Department of Labor’s (DoL) Wage and Hour Division will publish a final rule clarifying joint employer status under the Fair Labor Standards Act (FLSA), adopting a four-factor test to determine joint employer status. The rule simplifies and narrows the interpretation of a joint employer from the interpretation implemented by the Obama administration. This final rule will benefit companies establishing cooperative business arrangements as they seek assurances as to whether they will be responsible for ensuring employees are paid correctly.
When an employee performs work for an employer that also benefits another entity, DoL will use a four-part test to determine whether the two entities are joint employers. The test considers whether the entity has the power to:
- hire or fire an employee;
- supervise and control the employee’s work schedule or terms of employment;
- set rates or method of pay; and
- maintain employee records.
All factors in a particular case are considered in order to determine whether an entity is a joint employer. Additional factors may be considered if a potential joint employer exercises significant control over the terms and conditions of an employers work. The National Labor Relations Board and the Equal Employment Opportunity Commission are also considering revisions to their applicable joint employer standards.
This rule is a welcome adjustment in the interpretation of what constitutes joint employment after several years of a more complex test. Companies will now be able to more confidently mitigate risk of joint liability under the FLSA.