[Author: Woods & Aitken, LLP, 03.2020 | Keywords: HR, Employee Policies]
On January 12, 2020, the U.S. Department of Labor (DOL) announced a final rule updating its regulations governing joint-employer status under the Fair Labor Standards Act (FLSA). The final rule is to take effect on March 16, 2020.
JOINT AND SEVERAL LIABILITY
The final rule clarifies when individuals or entities are joint employers under the FLSA. Under the FLSA, an employee may have – in addition to his or her employer – one or more joint employers who are jointly and severally liable for the employee’s required federal minimum wage and overtime pay.
NEW FOUR-FACTOR TEST
DOL issued this final rule, which has not been revised for over 60 years, due to the courts developing a variety of tests to determine FLSA joint-employer status. The new four‑factor balancing test is designed to reduce the uncertainty for employers and workers and decrease compliance and litigation costs.
The four factors include whether the other individual or entity:
- Hires or fires the employee
- Supervises and controls the employee’s work schedules 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 identifies certain contractual arrangements and business practices that do not make FLSA joint-employer status either more or less likely. DOL gave examples of contractual arrangements mandating employers to comply with their obligations under the FLSA or other similar laws; instituting sexual harassment policies; requiring background checks; establishing workplace safety practices and protocols; or requiring that workers receive training regarding matters such as health, safety or legal compliance.
The final rule did not make any substantive changes to the standard for determining joint-employer liability in the situation when one employer employs an employee for one set of hours in a workweek and another employer employs the same employee for a separate set of hours in the same workweek. According to the DOL, if the employers are acting independently of each other and are disassociated with respect to the employment of the employee, each employer may disregard all work performed by the employee for the other employer when determining its liability under the FLSA.
However, the DOL points out that if the employers are sufficiently associated with respect to the employment of the employee, they are joint employers and must aggregate the hours worked for each for purposes of determining if they are in compliance. The employers will generally be considered sufficiently associated if there is an arrangement between them to share the employee’s services; the employer is acting directly or indirectly in the interest of the other employer in relation to the employee; or they share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer.
INEDA members can expect the DOL’s new joint employer rule to be challenged in the courts, as parties challenge the DOL rule which seeks to roll back the aggressive enforcement policies of the Obama administration.
Editor’s Note: This article is not intended to provide legal advice to our readers. Rather, this article is intended to alert our readers to new and developing issues and to provide some commonsense answers to complex legal questions. Readers are urged to consult their own legal counsel or the author of this article if the reader wishes to obtain a specific legal opinion regarding how these legal standards may apply to their particular circumstances. The author of this article, Jerry L. Pigsley, can be contacted at 402.437.8500, firstname.lastname@example.org or at Woods Aitken LLP, 301 S. 13th Street, Suite 500, Lincoln, NE 68508-2578.
Source: Woods & Aitken, LLP