On January 12, 2020, the Department of Labor, Wage and Hour Division (“DOL”) announced its revisions to the federal regulation interpreting joint employer status under the Fair Labor Standards Act (“FLSA” or “Act’). The new rule is set to take effect on March 16, 2020.
For decades, federal regulations have recognized two situations in which an employee may have two or more employers. In the first scenario, the employee works two jobs, each for different employers (i.e. a day job and a night job). Here, the employers are not associated with one another and may ignore the employee’s work performed in the other job.
In the second scenario, the employee has one job and two or more employers. In these cases, employment by one employer is “not completely disassociated” from the employment by the other employer. With this newly promulgated rule, the DOL tries to clarify when an employee has two or more employers for the same job.
The DOL adopted a four-factor test fashioned after Bonnette v. California, 704 F.2d 1465 (9th Cir. 1983). The test considers whether a potential joint employer may:
- Hire or fire the employee;
- Supervise and control to a substantial degree, the employee’s work schedule or employment conditions;
- Determine the employee’s rate and method of payment; and
- Maintain the employee’s records.
No single factor is dispositive, and the weight given each factor will vary depending on the circumstances. However, the maintenance of employee records alone will not sufficiently demonstrate employer status. Additionally an employer’s reservation of the right to control the worker’s schedule or conditions alone, will not establish employer status; the employer must actually exert control over the worker. Additional factors may be considered if they indicate whether the employer exercises control over the terms and conditions of the employee’s work.
To round things out, the DOL has specified several factors that are NOT relevant to joint employer status under the FLSA, including:
- Whether the organization operates under a certain business model, such as a franchise;
- Whether the organization adheres to certain business practices, such as allowing the operation of a store on one’s premises;
- Provision of handbooks or other forms;
- Offering association health or retirement plans;
- Whether the organization entered into contractual agreements, such as requiring a party to institute sexual harassment policies, or requiring quality control standards; and
- Whether the employee is economically dependent upon the potential joint employer.
The Final Rule is long. There are many changes and clarifications not detailed above. Moreover, the DOL is clear that this is the rule for the FLSA. A different rule might apply for the National Labor Relations Act or for liability under various federal employment statutes. The situation is as clear as mud.