In January, the U.S. Department of Labor released a final rule to aid employers in determining whether they may be “joint employers.” The rule took effect on March 16, 2020. Prior to its release, DOL’s previous regulation on the topic had not been updated for over 60 years.
Joint employer status is particularly important relative to ascertaining an employer’s responsibilities under the FLSA, which are generally triggered by the employer‑employee relationship. There are two scenarios under which an employer may be considered a joint employer. The first scenario occurs where an employee performs work for an employer, which also benefits another individual or entity (i.e. the potential joint employer). The second scenario occurs when two employers share an employee during different, separate hours and/or days of a workweek.
In the first scenario, DOL’s new guidance makes it clear that a balancing test is used to determine whether the potential joint employer benefiting from the employee’s work actually controls the employee, whether directly or indirectly. The balancing test weighs whether the potential joint employer (1) hires or fires the employee, (2) supervises and controls the employee’s work schedule or conditions of employment to a substantial degree, (3) determines the employee’s rate and method of payment, and (4) maintains the employee’s employment records. Whether the individual/entity is a joint employer depends on all the facts in a particular case, and DOL has communicated that maintaining employment records, by itself, is not sufficient to acquire joint employer status.
Other factors may also be considered to the extent they demonstrate the potential joint employer exercised significant control over the terms and conditions of the employee’s work. DOL identified the following factors as not relevant to a determination of joint employer status:
- Whether the employee is economically dependent on a potential joint employer;
- Contractual agreements between the employer and potential joint employer requiring compliance with legal obligations or other standards; and
- The potential joint employer’s practice of providing an employer with a sample employee handbook or other similar forms
The final rule made no changes in the second scenario. As always, such employers are not joint employers as long as they act independently of one another and are disassociated relative to the employment of the employee. Employers are generally sufficiently associated to trigger joint employer status if there is an arrangement between them to share the employee’s services, one employer acts in the interest of the other employer in relation to the employee, or if one employer controls, is controlled by, or is under common control with the other employer.