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DOL Proposes New Standard for Assessing Joint Employer Liability

April 30, 2019

Earlier this month, the DOL announced a proposed rule that would update existing joint employment regulations under the Fair Labor Standards Act (“FLSA”).  Currently, under the FLSA, any business operators who utilize another business’s employees – for example, by hiring temps – may be held jointly and severally liable for all wages due to the employee unless they are “completely disassociated” from the employee’s employment.  However, this broad standard – which had not been meaningfully updated in over 60 years – has been left open to differing interpretations by courts, leading to confusion among employers as to when joint employer status actually applies.  This lack of clarity can prove costly for businesses, as they may unwittingly be dragged into expensive wage and hour disputes with workers who they never intended to “employ.”  Moreover, this could redefine the “joint employer” relationship, expanding potential liability for these business owners under Title VII, the NLRA and other applicable statutes, as well.

The DOL’s proposed rule would replace the existing standard with a clear four-factor balancing test which would focus on the degree of control a prospective joint employer exerts over a worker.  Specifically, the proposed rule would assess whether the prospective joint employer:

  • Hires or fires the employee;
  • Supervises and controls the employee’s work;
  • Determines the employee’s rate/method of pay; and
  • Maintains the employee’s employment records.

Furthermore, under the proposed rule, a prospective joint employer must not only have the power to control a worker in this manner but must have actually exercised its control.  As a result, this proposed rule not only provides clarity on the joint employer standard with respect to wage and hour laws, but it also narrows the circumstances where joint employer status applies. 

Moving forward, the proposed rule is still subject to a 60-day public comment period, after which it may be subject to further changes before the DOL publishes a “final” rule.  Stay tuned for further developments as this process continues.

CONTACT

Gregory D. Grant

Meredith “Merry” Campbell

Joy C. Einstein

Richard D. Norwood

MORE INFORMATION

The contents of this Alert are for informational purposes only and do not constitute legal advice. If you have any questions about this Alert, please contact the Shulman Rogers attorney with whom you regularly work or a member of the Shulman Rogers Employment and Labor Law Group.