Joint Employers Would Be Equally Responsible for Labor Law Compliance

On April 1, 2019, The U.S. Department of Labor (DOL) proposed a new ruling to change the current Fair Labor Standards Act (FLSA) joint employment regulations.

If the new ruling passes, businesses that employ the same worker simultaneously would be subject to a 4-Part Test to determine whether the companies are joint employers of the employee, and therefore, equally responsible and liable for compliance with federal labor laws.

The Fair Labor Standards Act (FLSA) and Joint Employment

The FLSA is a U.S. labor law that ensures the right to a minimum wage, overtime pay when employees work over 40 hours per week, and includes child labor provisions.

There has historically been ambiguity and legal debate over employees’ rights who are co-employed by more than one employer. This is particularly prevalent in franchise arrangements and staffing firm-hires who are seasonal or temporary workers.

Joint Employer Status Test

The DOL’s proposed criteria would determine joint employer status and clarify who is responsible for workers’ employment protections. This is based on whether the employer can:

• 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
• Maintain the employee’s employment records

Employers Affected by the Joint Employer Ruling

The proposed ruling aims to help firms with the same employee(s) clarify their labor responsibilities and diminish the likelihood of minimum wage and overtime pay violations.

In recent years, many franchisors have found themselves included in lawsuits that have been brought against their franchisees, especially in the fast-food industry, due to the vagueness of current joint employment terms and definitions. The U.S. Department of Labor has not meaningfully revised the interpretation of a joint employer since 1958.

Example Scenarios

The Department of Labor website lists examples to illustrate scenarios in which an employer would and would not be considered a joint employer of an employee. One such example is:

“A packaging company requests workers on a daily basis from a staffing agency. The packaging company determines each worker’s hourly rate of pay, supervises their work, and uses sophisticated analysis of expected customer demand to continuously adjust the number of workers it requests and the specific hours for each worker, sending workers home depending on workload. Is the packaging company a joint employer of the staffing agency’s employees?”

“Application: Under these facts, the packaging company is a joint employer of the staffing agency’s employees because it exercises sufficient control over their terms and conditions of employment by setting their rate of pay, supervising their work, and controlling their work schedules.”

What the Ruling Attempts to Do

Labor attorneys are interpreting the proposed revision as an effort by U.S. labor officials to raise the bar for joint employment status, reduce litigation, and promote consistency among court rulings in wage-law violation cases.

Employers who may be affected by the joint employer status proposed ruling are encouraged to review the proposed revisions, and submit comments by June 10, 2019, when the public comment period ends.

Our Recommendation

MyHRC recommends that employers carefully consider how the new DOJ ruling might affect their businesses. However, refrain from taking any immediate action regarding the proposed ruling.

We will continue to provide new information as it becomes available. MyHRC provides our clients with the information they need to remain compliant with state and federal labor laws. If your business needs these services, contact us for a free consultation.

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Chris Cooley is co-founder of MyHRConcierge and SMB Benefits Advisors. MyHRConcierge specializes in helping small to mid-sized businesses throughout the U.S. Chris can be reached at (855) 538-6947, ext. 108 or at ccooley@myhrconcierge.com.