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DOL's New Rule On Joint Employment Is Welcome News For Employers

For the first time in over 60 years, the United States Department of Labor (“DOL”) has substantially revised its regulations regarding the often-litigated “joint employer” issue under the Fair Labor Standards Act (“FLSA”).

This topic is significant for employers and employees alike, as businesses that are found to be joint employers can be held liable for FLSA violations by one another – such as a failure to pay overtime compensation.

On January 16, 2020, the DOL published a final rule regarding joint employment, to take effect 60 days from publication. The final rule introduces a four-factor balancing test for determining joint employer status where one employer benefits from work performed by an employee for another employer.

Although no one factor is determinative, the DOL’s new four-factor test assesses whether the benefitting 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; and

• Maintains the employee’s employment records.

As to a scenario in which an employee puts in hours for multiple employers in the same workweek, the DOL stated that joint employment can be established where the separately employers are “sufficiently associated with respect to the employment of the employee.”

The DOL’s new standard is generally considered to be good news for the business community, especially the franchising industry, as the new rule provides that a franchisor relationship, by itself, is insufficient to establish joint employment.

However, while the DOL’s interpretation will likely be given weight by courts considering FLSA claims, it does not carry the force of law. Ultimately, it will be up to the courts to determine the extent to which the DOL’s new joint-employer standard will govern.

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If you have questions about the DOL’s new joint-employer standard or any other wage-and-hour issues, please feel free to contact us.