DOL releases final joint employer rule

The DOL has issued a final rule regarding the Joint Employer doctrine.

Analysis of a joint employer issues under the Fair Labor Standards Act (FLSA), the DOL rule says, should start — and will generally end — with the following non-exclusive four factors (quoting the summary in the DOL’s Fact Sheet regarding its new rule):

  • 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.

The rule emphasizes that no one factor will be controlling and specifically states that the fourth (maintaining employment records) alone will never be sufficient to establish joint employer status. This is a particularly important principle for companies — like franchisors for example — that mandate the use of a software platform hosted by the principle company to encompass a variety of operational needs that include scheduling and HRIS.

The rule eliminates the prior “economic dependence” test that has proven so controversial. Likewise the rule specifies that the worker’s ability to recognize an independent profit or loss is not to be considered. The rule states that, under its application, franchisors, among others, will generally no longer be considered joint employers.  Indeed the rule states that the following are not to be considered indicators of joint employer status (again quoting the DOL’s own summary at its Fact Sheet, above):

  • operating as a franchisor or entering into a brand and supply agreement, or using a similar business model;

  • the potential joint employer’s contractual agreements with the 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;

  • the potential joint employer’s contractual agreements with the employer requiring quality control standards to ensure the consistent quality of the work product, brand, or business reputation; and

  • the potential joint employer’s practice of providing the employer with a sample employee handbook, or other forms, allowing the employer to operate a business on its premises (including “store within a store” arrangements), offering an association health plan or association retirement plan to the employer or participating in such a plan with the employer, jointly participating in an apprenticeship program with the employer, or any other similar business practice.

Additional information, including a FAQ, is available on the DOL’s web page regarding its new rule.

Source: DOL final rule, “Joint Employer Status Under the Fair Labor Standards Act,” 85 Fed.Reg. 164 et seq. (1/16/20).

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