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US Department of Labor Issues Final Rule on Joint Employment

On January 12, 2020, the United States Department of Labor ("USDOL") Wage and Hour Division announced a final rule regarding joint employment under the Fair Labor Standards Act ("FLSA"), to be published on January 16 of this year, and effective 60 days after publication. 

The stated purpose of this final rule is to "promote certainty for employers and employees, reduce litigation, promote greater uniformity among court decisions, and encourage innovation in the economy." 

Since the FLSA's enactment, the USDOL has recognized that an employee can have two or more employers who are jointly and severally liable for unpaid wages due to an employee.  Under the Obama administration, attempts were made to broaden what defines joint employment.  It was suggested at the time that employers were getting a free pass by using separate entity formations and contracts (among other strategies) to get around employer liability. 

At the same time, the business community argued that for joint employment to be established between two or more entities and/or people, some level of control over the employee(s) in question needed to be exercised by the entity/person claimed to be a joint employer.

With the USDOL Wage and Hour Division's final rule on joint employment, we at long last have guidance on this issue.  The good news for employers is that the final rule is friendly to the business community and its point of view.  For example, the USDOL describes several key aspects of the final rule:

  • The final rule states that "when an employee performs work for the employer that simultaneously benefits another person, that person will be considered a joint employer when that person is acting directly or indirectly in the interest of the employer in relation to the employee."

  • It also "provides a four-factor balancing test to determine when a person is acting directly or indirectly in the interest of any employer in relation to the employee." No one factor being determinative, the four-factor balancing test derived from Bonnette v. California Health & Welfare Agency assesses whether the other person: "(1) hires or fires the employee; (2) supervises and controls the employee's work schedule or conditions of employment to a substantial degree; (3) determines the employee's rate and method of payment; and (4) maintains the employee's employment records."

  • The final rule, "clarifies that an employee's 'economic dependence' on a potential joint employer does not determine whether it is a joint employer under the FLSA."

  • It "specifies that an employer's franchisor, brand, and supply, or similar business model and certain contractual agreements or business practices do not make joint employer status under the FLSA more or less likely."

  • The final rule also "provides several examples applying [USDOL Wage and Hour Division] guidance for determining FLSA joint employer status in a variety of different factual situations."

The USDOL states that application of the four-factor test should determine joint employer status in most cases, but we would urge you to seek counsel in the event that a finding of joint employment is possible. A copy of the yet-to-be published final rule can be found here.

© 2021 Ward and Smith, P.A.. All Rights Reserved.National Law Review, Volume X, Number 15
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About this Author

Emily Massey attorney WardandSmith
attorney

Emily's practice focuses on a wide range of labor and employment law issues.

EDUCATION

  • J.D., magna cum laude, Campbell Law School, 2017. Editor in Chief, Campbell Law Review. Teaching Scholar, Legal Research & Writing. Member, Campbell Law Moot
    Court Team. Quarterfinalist, 2015 Richard A. Lord Intramural Moot Court Competition. Quarterfinalist, 2015 Kilpatrick Townsend 1L Mock Trial Competition. 2017 National Association of Women Lawyers Award.
  • B.A., ...
919-277-9168
Attorney

Will leads the firm's Workplace Safety and Health practice.  His practice experience encompasses various areas of employment and workplace-related counseling and civil litigation in both the federal and state courts at the trial and appellate levels.  Will also regularly represents employers and employees before the United States Department of Labor (USDOL), the Equal Employment Opportunity Commission (EEOC), the Occupational Safety and Health Administration (OSHA), the Mine Safety and Health Administration (MSHA), the North Carolina Department of Labor (NCDOL), the North Carolina...

910.794.4813
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