“Well done is better than well said”

-- Benjamin Franklin

 Back in January, 2020 Abrahams Wolf-Rodda published a blog noting that the Department of Labor (“DOL”) was on the cusp of issuing new joint employment regulations. See https://www.awrcounsel.com/blog/2020/1/13/dont-bogart-that-joint-dol-set-to-add-clarity-to-joint-employer-standards?rq=joint%20employer. But we never closed the loop on the next development – the final rule.  On March 16, 2020, DOL’s final rule on what a joint employer is under the Fair Labor Standard Act (“FLSA”), i.e., defining what it means for a worker to be employed by two or more employers at the same time, became effective.

The new DOL regulations update and revise the FLSA regulations and provide guidance on determining what joint employer status is under the FLSA. The FLSA requires covered employers to pay their workers at least the federal minimum wage for every hour they work and are given overtime for working over 40 in a workweek. The FLSA defines an employer as “any person acting directly or indirectly in the interest of an employer in relation to an employee[.]” in order to be liable for paying minimum wage or over time. An employee may have – in addition to their employer – one or more joint employers. A joint employer is an additional “person” who is jointly and severally liable with the employer for the worker’s wages.

Since the DOL takes into account different types of joint employers, they have different rules for each scenario. In one, regarding an employer who suffers, permits or employs the employee to work, while another individual simultaneously benefits from that work, the DOL introduced a four part balancing test to determine if the one who benefits is a “joint employer”. The final rule has a four-factor balancing test to determine if the joint employer is directly or indirectly controlling the employee. These four factors are if the party who benefits: (1) hires or fires the employee, (2) supervises and controls the employee’s work schedule, (3) determines payment; and (4) maintains the workers employment records.  See 29 CFR §791.2(a)(1). Of course, since this is a balancing test it is difficult to determine exactly which of these prongs are most important. But the idea is that having four factors that are always reviewed allows employers and employees to better plan for their respective roles. In any case, whatever the ambiguities of the new rule, it is far more explicit in its factors measuring benefit than the regulation it replaces.

In addition, the DOL issued different regulations for a second scenario; where one employer hires a worker for one set of hours in a week, and another employer hires the same worker for a separate set of hours in the same week. In this second scenario, if the employers are “sufficiently associated with respect to the employment of the employee” then they will be joint employers and have to aggregate the hours worked by the works for compliance with the act. 29 CFR § 791.2(e)(2). The final rule further states that the employers will be “sufficiently associated” if:

(1) there is an arrangement between them to share the employee’s services;

(2) one employer is acting directly or indirectly, in the interest of the other employer in relation to the employee; or

(3) they share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer.

This is more or less similar to the prior joint employment test. Such a determination depends on all of the facts and circumstances. Certain business relationships, for example, which have little to do with the employment of specific workers — such as sharing a vendor or being franchisees of the same franchisor - are alone insufficient to establish that two employers are sufficiently associated to be joint employers.

The final regulation can be found at 29 CFR § 791.2(e)(2)(i-iii).

Accordingly, effective on March 16, 2020, the Wage and Hour Division began applying a narrower standard to determine whether two or more businesses are jointly liable for minimum wage and overtime violations. Since this final rule is in effect, it is important for employers to review the new rule to determine their own status under the new rule. These rules can be complicated and consulting a labor attorney may be advisable if you are concerned about your own compliance with the FLSA.

For more information, please visit the federal register at https://www.federalregister.gov/documents/2020/01/16/2019-28343/joint-employer-status-under-the-fair-labor-standards-act.