On January 12, 2020, the Department of Labor (DOL) announced a final rule to revise and update its regulations by narrowing the definition of “joint employer” under the Fair Labor Standards Act (FLSA). This is the first update to the joint-employer rule in over 60 years. This final rule provides additional clarity
for businesses that have franchises and contractor relationships.
The DOL adopts a four-factor balancing test to determine whether businesses share liability for FSLA
concerns. When an employee performs work for its employer that simultaneously benefits another entity or individual, to determine potential joint employer status it is necessary to assess whether the other entity or individual:
– hires or fires the employee;
– supervises and controls the employee’s work schedule or conditions of employment to a
– determines the employee’s rate and method of payment; and
– maintains the employee’s employment records.
This final rule clarifies that actual control is necessary to establish joint employment and an employee’s mere “economic dependence” on a potential joint employer alone does not determine whether an entity or individual is a joint employer under the FSLA.
The final rule also sets forth several factors that do not make potential joint employer status more or less likely under the FLSA. Those include:
- 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, to the employer; 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.
This Final Rule is expected to become effective on March 16, 2020. This Final Rule will provide support for businesses subject to claims that they are jointly and severally liable for FSLA claims alleged by workers that are not their own employees. The hope is that these updates will assist businesses that may be hesitant to enter into beneficial business relationships or engage in worker-friendly business practices due to fear of being liable for the wages or FSLA claims of employees over whom they have insignificant control.
A good understanding of the new DOL guidance and applicable state wage and hour law can help further risk mitigation efforts. The final rule publishes on January 16, 2020 in the Federal Register. The unpublished rule can currently be found at: