A few weeks ago, we explained how the DOL clarified the regular overtime rate for the first time in 50 years. This month, the DOL issued its first significant update to the joint employer rule under the FLSA in more than 60 years.
On January 12, 2020 the DOL issued a Final Rule narrowing the definition of joint employer. The final rule provides updated guidance for determining joint employer status when an employee performs work for his or her employer that simultaneously benefits another individual or entity, including guidance on the identification of certain factors that are not relevant when determining joint employer status.
Significantly, the Final Rule adopts a four-factor balancing test to determine whether the potential joint employer is directly or indirectly controlling the employee. This new balancing test looks at whether 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
- maintains the employee’s employment records
The final rule also clarifies when additional factors may be relevant to a determination of FLSA joint employer status and identifies certain business models, contractual agreements with the employer, and business practices that do not make joint employer status more or less likely.
As we previously reported, this new rule aims to determine, as a matter of economic reality, whether a company actually exercises sufficient control over an employee to qualify as a joint employer. The new test, which appears to be less expansive, should limit the situations under which employers can be found to have sufficient control over an employee, and therefore be considered a joint employer under the FLSA.