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Federal - Joint Employer Final Rule

On January 12, 2020, the U.S. Department of Labor announced its final rule revising joint employer status under the Fair Labor Standards Act (FLSA) and adoption of a four-factor balancing test to determine joint employer status when another person benefits from an employee’s work. A joint employer situation occurs when an employee has two or more employers who are jointly and severally (separately) liable for wages due to the employee under the FLSA.

Under the following four-factor balancing test, to be jointly liable the potential joint employer must actually exercise — directly or indirectly — one or more of the following control factors:

  1. Hire or fire the employee;
  2. Supervise and control the employee’s work schedule or conditions of employment to a substantial degree;
  3. Determine the employee’s rate and method of payment; and
  4. Maintain the employee’s employment records. (However, satisfaction of the maintenance of employment records factor alone does not demonstrate joint employer status.)

No single factor alone may determine whether an entity is a joint employer. Instead, the appropriate weight is given to each factor and varies depending on the circumstances.

The final rule also:

  • Clarifies that an employee’s economic dependence on a potential joint employer does not determine whether it is a joint employer under the FLSA;
  • Provides additional guidance on how to apply the four-factor test. For example, the other person’s ability, power, or reserved right (ability) to act in relation to the employee may be relevant for determining joint employer status, but such ability alone does not demonstrate joint employer status without some actual exercise of control (to be a joint employer the other person must actually exercise — directly or indirectly — one or more of the four control factors); and
  • Specifies that an employer’s franchisor, brand and supply, or similar business model and certain contractual agreements or business practices do not make joint employer status under the FLSA more or less likely.

The final rule publishes in the Federal Register on January 16, 2020 and is effective March 16, 2020.

Read more about the final rule