On January 13th 2020, the Department of Labor issued its Final Rule on joint employer status under the Fair Labor Standards Act (FLSA). The Final Rule provides clarity on joint employment - when two or more companies share responsibility over a group of employees. In the final rule, the department provides a four-factor balancing test for determining FLSA joint employer status in situations where an employee performs work for one employer that simultaneously benefits another entity or individual.
This test asks if the potential joint employer:
- hires or fires the employee;
- supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
- determines the employee’s rate and method of payment; and
- maintains the employee’s employment records.
This rule has not been meaningfully updated in over 60 years. House Democrats are attempting to move the regulations in the opposite direction in the Protecting the Right to Organize (PRO) Act. HARDI recently signed a letter through the Coalition for a Democratic Workforce opposing this legislation.
“This final rule furthers President Trump’s successful, government-wide effort to address regulations that hinder the American economy and to promote economic growth,” said Secretary of Labor Eugene Scalia. “By giving greater clarity to businesses who want to work together, we promote an entrepreneurial culture that has driven American prosperity for decades.”
These revisions will add certainty regarding what business practices may result in joint employer status. This rule promotes greater uniformity among court decisions by providing a clearer interpretation of FLSA joint employer status. These benefits will in turn improve employers’ ability to remain in compliance with the FLSA and will help reduce litigation costs.
“The changes in this final rule break down barriers that keep companies from constructively overseeing, guiding and helping their business partners,” said Wage and Hour Division Administrator Cheryl Stanton. “For small business owners, and the employees working in those businesses, the relationship and the guidance coming from franchisors and other contracting companies can greatly improve the workplace and help them create jobs.”
The final rule will be effective 60 days after its date of publication.
You can find additional information on the final rule here and here.
We will continue to keep you updated as further changes occur. If you would like to learn more about how you can get involved, contact Alex Ayers.
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