“This final rule furthers President Trump’s successful, government-wide effort to address regulations that hinder the American economy and to promote economic growth….”

-- Labor Secretary Eugene Scalia, https://www.washingtonpost.com/business/new-labor-dept-rule-clarifies-joint-employer-standard/2020/01/12/56b0be56-359a-11ea-a1ff-c48c1d59a4a1_story.html.

Under the Fair Labor Standards Act (“FLSA”), an employee or the government can bring a claim for wages or overtime against his “employer,” which is broadly defined as anyone who suffers or permits the employee to work. Thus, there is sometimes more than one pocket for the employees to collect back wages from. The result has been a proliferation of suits involving entities which are not the ostensible direct employer of the worker.

On January 12, 2020, the U.S. Department of Labor (“DOL”) released  a final rule under the FLSA that is intended to clarify “joint employer” standards. See https://www.dol.gov/sites/dolgov/files/WHD/publications/flsa-fr-joint-employer.pdf. The final rule makes clearer the standards to apply when a worker is said to be engaged by more than one employer, which is particularly an acute issue for business franchises such as fast-food chain restaurants as well as firms that outsource services, like cleaning and maintenance services.

The new rule will take effect on or about March 16, 2020 (i.e., 60 days after issuance) and will provide a four-part test to determine if a company is considered as a “joint employer” business. DOL is adopting this four-factor balancing test from the case of Bonnette v. California Health & Welfare Agency. These four factors include: (1 ) if the company can hire or fire the workers; (2) if it supervises its workers’ schedule; (3) if the company can set workers’ pay; and (4) if the company maintains the workers’ records. No single factor is dispositive in determining whether the company is joint employer, and there are also other circumstances that may weigh in.

In addition, DOL provides for consideration of other factors that may be relevant to the joint employer analysis, but only if there are signs the potential joint employer is exercising significant control over the terms and conditions of the employee’s work, or is acting directly or indirectly in the interest of the employer in relation to the employee.

DOL’s new standards also provide that, in examining the economic reality of the potential joint employer’s status under the new rules, the issue of whether an employee is economically dependent on the potential joint employer is not relevant. The Department says factors not relevant to the joint employer analysis include whether the employee: (1) is part of a specialty job (a job requiring special skills, initiative judgment or foresight); (2) has the opportunity for profit gains or loss based on their managerial skills; or (3) invests in equipment or materials required for the job.

The new rules may have an impact on the franchisees, prime and sub-contractors, and the so-called gig economy workers.  Whether the new rules truly “promote growth” or just perpetuate a cycle of economic exploitation and inequality, may depend on which lens which you are accustomed to viewing labor/management disputes.