Are You a Joint Employer? That May Change Under the DOL’s Proposed New Test
As announced in an April 1, 2019, Notice of Proposed Rulemaking, the DOL has proposed to substantially revise the standard for determining joint-employer status conferring joint and several liability upon the primary employer and any other joint employers for all wages due to employees under the FLSA. Unlike the current regulations—under which two or more entirely independent entities may be found to jointly employ an employee who performs work in a workweek that simultaneously benefits both of them if they are “not completely disassociated” with respect to that individual’s employment—the proposed new rule would determine joint-employer status by a four-part test assessing whether the potential joint employer actually exercises the power to (1) hire or fire, (2) supervise and control work schedules or conditions of employment, (3) determine the rate and method of payment, and (4) maintain employment records. While additional factors may be considered, the proposed rule explains that an employee’s “economic dependence” on the employer would not be relevant under the new standard, nor would certain business models and practices and contractual agreements be pertinent.
The DOL’s proposal coincides with similar rulemaking activity by the National Labor Relations Board (“NLRB”) in September 2018. Under the NLRB’s proposal, two employers would be considered joint employers only when the putative joint employer possesses and exercises “substantial direct and immediate control over the essential terms and conditions of employment of another employer’s employees in a manner that is not limited and routine.” The period for comments on the NLRB’s proposed rule closed on January 28, 2019, and it is anticipated that the rule will be formally adopted later this year. The comment period in the DOL’s proposed rule is set to close on June 10, 2019. Hospitality owners/operators should stay tuned for further developments on both fronts, as joint-employer status is often a point of dispute when an employee lodges claims against one or more putative employers.