U.S. Department of Labor and NLRB Issue New Rules on Joint Employment

Mar 5, 2020

by Adam Henningsen

The U.S. Department of Labor (DOL) recently announced a final rule to update its regulations interpreting joint employer status under the Fair Labor Standards Act (FLSA). Under the FLSA, an employee may have””in addition to his or her employer””one or more joint employers who are jointly and severally liable with the employer for the employee’s required minimum wage and overtime pay.

In the final rule, the DOL provides a four-factor test for determining FLSA joint employer status in situations where an employee performs work for one employer that simultaneously benefits another entity or individual. The four factors include whether the other individual or entity:

  • hires or fires the employee;
  • supervises and controls the employee’s work schedules or conditions of employment to a substantial degree;
  • determines the employee’s rate and method of payment; and
  • maintains the employee’s employment records.

All four factors need not necessarily be satisfied in order for an entity to be deemed a joint employer. Instead, the four factors represent a balancing test.   However, the final rule specifies that the potential joint employer’s maintenance of the employee’s employment records alone will not lead to a finding of joint employer status.

The final rule also identifies several factors that are not relevant to the determination of FLSA joint employer status.   For example, the use of the franchise model does not mean that a franchisor is more likely to be the joint employer of its franchisee’s employees.   Moreover, a potential joint employer’s contractual agreements with an employer requiring the employer to comply with its legal obligations or to meet certain standards to protect the health or safety of its employees or the public do not make FLSA joint employer status more or less likely. Examples of such contractual agreements include mandating that employers comply with their sexual harassment policies, requiring background checks, establishing workplace safety practices and protocols, or requiring that workers receive training regarding matters such as health, safety, or legal compliance.

The effective date of the final rule is March 16, 2020.   Prior to the issuance of the final rule, the DOL had not meaningfully revised this regulation in over 60  years. During that time, circuit courts across the country developed a variety of tests to determine FLSA joint employer status.   The DOL hopes that the final rule will reduce uncertainty over joint employer status and promote greater uniformity among court decisions.

Other federal agencies are also revising their rules regarding joint employment.   The National Labor Relations Board (NLRB) recently issued a new final rule governing joint-employer status under the National Labor Relations Act. Under the 2015 decision of Browning-Ferris Industries, the NLRB had permitted a company to be deemed a joint employer even if its control over the essential working conditions of another business’s employees was indirect, limited  or contractually reserved but never exercised.   The new final rule returns to the “direct and immediate control” standard applied prior to Browning-Ferris. Under the new final rule, an entity is a joint employer of a separate employer’s workers only if the two employers share or codetermine the employees’ essential terms or conditions of employment.

The U.S. Equal Employment Opportunity Commission (EEOC) has also indicated it will release guidance that defines joint-employer status under the various federal anti-discrimination laws, which should include Title VII, the Americans with Disabilities Act, and the Age Discrimination in Employment Act.

If you have questions about these rule changes and the implications for your business, or require an assessment of your status as a potential joint employer, please contact the employment attorneys at Tueth Keeney Cooper Mohan Jackstadt P.C.

Labor and Employment – Tueth, Keeney, Cooper, Mohan & Jackstadt, P.C. has successfully represented a number of businesses, large and small, throughout the Midwest in labor and employment matters. Our broad range of experience includes employment discrimination litigation, wage-hour investigations, affirmative action revision plans development, INS audits, and a variety of traditional labor matters.

Adam Henningsen practices primarily in the areas of education law, labor and employment law, and civil litigation. Adam regularly works with school districts and individual administrators on matters including labor and employment, contracting, student discipline, special education, and state and federal regulation compliance. He has successfully represented school districts, charter schools, and other employers in State and Federal Court, as well as administrative agencies including the Equal Employment Opportunity Commission, the Missouri Commission on Human Rights, the Missouri Administrative Hearing Commission, and the United States Department of Education Office for Civil Rights. Prior to joining the firm, Adam practiced school law at a firm in Kansas City, Missouri.

Adam comes from a long line of public school teachers and administrators. Prior to attending law school, Adam graduated with honors from the School of Education at Mizzou and taught social studies courses at the high school level.