U.S. Department of Labor Issues Final Rule on the Definition of "Joint Employer"

The U.S. Department of Labor (DOL) issued a final rule on the definition of "joint employer" under the Fair Labor Standards Act (FLSA), which will take effect on March 16, 2020. Under the FLSA, an employee of one company may be the joint employee of a second, independent company, depending on the nature and extent of control over the employee's work exerted by the second business.

This is the first significant update in more than 60 years to the joint-employer rule and provides clarity in determining whether businesses share liability for federal FLSA wage and hour violations (for example, payment of minimum wage, or payment of overtime to non-exempt employees.)

According to the DOL's website, the final rule:

  • specifies that when an employee performs work for the employer that simultaneously benefits another person, that person will be considered a joint employer when that person is acting directly or indirectly in the interest of the employer in relation to the employee;
  • provides a four-factor balancing test to determine when a person is acting directly or indirectly in the interest of an employer in relation to the employee;
  • clarifies that an employee's "economic dependence" on a potential joint employer does not determine whether it is a joint employer under the FLSA;
  • 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; and
  • provides several examples applying the Department's guidance for determining FLSA joint employer status in a variety of different factual situations.

The final rule can be found in the Federal Register.

Additional Information:

For questions regarding this rule and if it impacts your business contact a member of Barrett McNagny's Labor and Employment group.

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