On January 12, 2020 the U.S. Department of Labor (“DOL”) released its long-awaited final rule updating its regulations regarding joint-employer status under the Fair Labor Standards Act (“FLSA”). The FLSA’s joint-employer regulations had not been substantively amended in over sixty years. This new rule becomes effective March 16, 2020.
The final rule gives employers greater guidance and clarity when determining if a joint-employer relationship exists. The DOL has now adopted a four-factor balancing test to evaluate whether the purported is a joint employer. This test assesses whether the employer:
- Hires or fires the employee;
- Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
- Determines the employee’s rate and method of payment; and
- Maintains the employee’s employment records.
It is important to note, that no single factor is dispositive in determining joint-employer status, but instead the factors are weighted based on the facts of each case. The final rule states that to be a joint employer under the FLSA, the other actor must actually exercise – directly or indirectly – one or more of the four factors.
The final rule includes a number of examples illustrating the application of the four-factor test, providing for practical guidance to employers who may have joint employment concerns based on their company structure and business relationships with other companies.
In addition to the DOL issuing its final rule on this topic, the National Labor Relations Board (“NLRB”) released a final rule on February 26, 2020 setting forth standards for joint-employer status under the National Labor Relations Act. The NLRB’s final rule will be effective April 27, 2020.
In light of these final rules, it is important for employers to seek counsel in any situation where joint employment is possible.
All employers need to make sure their payroll practices are compliant. Doing so will protect your business from costly lawsuits. If you would like help reviewing your employee classifications, or if you have any other employment law questions, you can contact us here.