On May 14, 2019, the U.S. Department of Labor (DOL) extended the time period for submitting written comments on the Notice of Proposed Rulemaking (NPRM) entitled “Joint Employer Status Under the Fair Labor Standards Act.”
In early April, the DOL published the proposed rule in the Federal Register (84 FR 14043) to update and clarify the DOL’s interpretation of joint employer status under the Fair Labor Standards Act (FLSA). Public comments regarding the proposed rule were due on or before June 10, 2019. After receiving requests from law firms, unions, and advocacy organizations among others to extend the period for filing public comments, the DOL decided to extend the comment period to June 25, 2019.
The Significance of the Proposed Rule
Although the FLSA does not use the term “joint employer,” it contemplates situations where additional persons are jointly and severally liable with the employer for the employee’s wages due under the Act. The Department has not meaningfully revised its joint employer regulation since its promulgation in 1958. According to Secretary of Labor Alexander Acosta, “This proposal will reduce uncertainty over joint employer status and clarify for workers who is responsible for their employment protections.”
Keith Sonderling, Acting Administrator for the DOL’s Wage and Hour Division, also commented that, “The proposal explains the statutory basis for joint liability, helping to ensure that the Department’s joint employer guidance is fully consistent with the text of the FLSA. The proposed changes would provide courts with a clearer method for determining joint employer status, promote greater uniformity among court decisions, and reduce litigation.”
What is in the Proposed Rule?
In an effort to make the joint employer determination simpler and more consistent, the DOL proposes to adopt a four-factor balancing test, which would assess whether the potential joint employer actually exercises the power to:
- Hire or fire the employee;
- Supervise and control the employee’s work schedule or conditions of employment;
- Determine the employee’s rate and method of payment; and
- Maintain the employee’s employment records.
The DOL emphasized that these factors are highly probative of the ultimate inquiry in determining joint employer status—whether a potential joint employer, as a matter of economic reality, actually exercises sufficient control over an employee to qualify as a joint employer under the FLSA. Importantly only actions taken with respect to the employee’s terms and conditions of employment, rather than the theoretical ability to do so, are relevant to joint employer status under the proposed rule.
The proposed rule also explains that additional factors may be relevant to the joint employer analysis, if the factors indicate whether the potential joint employer is:
- Exercising significant control over the terms and conditions of the employee’s work; or
- Otherwise acting directly or indirectly in the interest of the acknowledged employer in relation to the employee.
In an effort to provide more clarity, the proposed rule describes factors that are NOT necessarily relevant to the joint employer inquiry or do not make joint employer status more or less likely under the FLSA. These include:
- Whether the employee is economically dependent on the potential joint employer;
- An entity or person’s business model (such as a franchise model);
- Certain business practices (such as participating in an association health or retirement plan); and
- Certain business agreements (such as requiring an employer in a business contract to institute sexual harassment policies).
Among other things, the proposed rule also includes a set of joint employment examples that the DOL believes will further assist in clarifying joint employer status.
What is Next?
After the comment period has expired, the DOL will determine whether to move forward with issuing a final rule. Given that the joint employer regulation has not been revised in more than 60 years, practitioners are hopeful that the Department will move forward with this initiative. In the meantime, employers with potential joint employment situations are encouraged to keep abreast of judicial opinions addressing this topic and reach out to local employment counsel with questions.
Alicia R. Duleba is an employment attorney and litigator who helps businesses comply with rules, regulations, and statutes impacting the employment relationship. Alicia has represented employers in a full range of employment law matters, including defending employee claims in state and federal court and representing clients before the Equal Employment Opportunity Commission, the Texas Workforce Commission – Civil Rights Division, the Occupational Safety and Health Administration, and the Department of Labor.
The opinions expressed are those of the author and do not necessarily reflect the views of the Firm, its clients, or any of its or their respective affiliates. This article is for informational purposes only and does not constitute legal advice.