U.S. Department of Labor Final Rule: Joint Employer

January 20, 2020
Joe Rotella, SHRM-SCP, SPHR, CPBA
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Joint Employer clarification

On Jan. 12, 2020, the U.S. Department of Labor (DOL) issued a press release announcing a Final Rule for Joint Employer under the Fair Labor Standards Act (FLSA). The final rule provides guidance for determining when individuals or entities are considered a “joint employer.” Published on January 16, 2020, the final rule will go into effect Mar. 16, 2020.

It contains two scenarios showing where an employee may have one or more joint employers. The first is the case when an employee’s work for one employer simultaneously benefits another employer. Here, the final rule uses a four-factor balancing test to determine joint employer status. In the second scenario, an employee works for one employer for a set number of hours in a workweek and a separate number of hours for a different employer during the same workweek.

The final rule also includes factual examples of how the joint-employer guidelines should be applied and a list of factors that are not relevant in determining the joint employer status under the FLSA.

Employer friendly

The new final rule is more employer friendly than the earlier Administration Interpretation (AI) of the FLSA language concerning the determination of a joint employer in the Obama administration. The recently released final rule narrows the definition by which an employer can be designated a “joint employer,” thus decreasing the likelihood of liability in joint employer wage and hours claims.

Negative responses

Not everyone is happy about the changes. In a public comment submitted online last June and addressed to the acting director of the Wage and Hour Division of DOL, Celine McNicholas and Heidi Shierholz of the Economic Policy Institute (EPI) made a case that the new rule will negatively impact wage earner protection.

The DOL received more comments related to changes in the determination of joint employer status, all with concerns of how the final rule would affect a wage earner’s ability to collect legal wages withheld from them. (Comments came from the AFL-CIO, National Employment Law Project, and Farmworker Justice to name a few.) The text of the final rule includes and addressed these comments.

Be alert

In a SHRM article (see “Sources” below), Marty Heller, attorney with Fisher Phillips in Atlanta suggests that business leaders look at the how their relationships with third-party entities are set up and determine if any could be considered joint-employer relationships. And if employers are making decisions for employees other than their own, they should seek counsel.

More changes could be coming. This final rule applies only under the FLSA, not the National Labor Relations Act or the Equal Opportunity Act. Therefore, as Heller says in the article, “Employers should keep up with the news, because there’s more to come.”

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