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Regulatory/Judicial News - Joint Employer Definition Clarified by DOL Proposed Rule

Wed, April 10, 2019 3:17 PM | Anonymous member (Administrator)

The Dept. of Labor’s Wage & Hour Division issued an notice of rulemaking regarding the agency's “joint employer” status as defined by the Fair Labor Standards Act. The proposed changes are designed to promote certainty for employers and employees, reduce litigation, promote greater uniformity among court decisions, and encourage innovation in the economy.  [See, 84 FR 14043 (04/09/2019); Doc’t. No. 2019-06500. For details on the proposed rule go to: https://www.federalregister.gov/documents/2019/04/09/2019-06500/joint-employer-status-under-the-fair-labor-standards-act].  The issue of joint employees or employer responsibility does come-up on project work sites; therefore, if your firm is interested in the matter – submittals must include the Regulatory Information No. (RIN) 1235-AA26.  Electronic Comments sent through the eRuling Portal at: http://www.regulations.gov.  Comments on the proposed rule are due June 10, 2019.

Background

Although the FLSA does not use the term “joint employer,” the Act contemplates situations where additional personsare jointly and severally liable with the employer for the employee's wages due under the Act. 

Over 60 years ago, in 1958, the Department promulgated a regulation, codified at part 791 of Title 29, Code of Federal Regulations (CFR), interpreting joint employer status under the Act.  The Department has not meaningfully revised this regulation since its promulgation. Under part 791, multiple persons can be joint employers of an employee if they are “not completely disassociated” with respect to the employment of the employee.  However, Part 791 does not adequately explain what it means to be “not completely disassociated” in one of the joint employer scenarios—where the employer suffers, permits, or otherwise employs the employee to work one set of hours in a workweek, and that work simultaneously benefits another person. In that scenario, the employer and the other person are almost never “completely disassociated,” and the real question is not whether they are associated but whether the other person's actions in relation to the employee merit joint and several liability under the Act.

To make the determination simpler and more consistent, the Department proposes to adopt a four-factor balancing test derived (with one modification) from Bonnette v. California Health & Welfare Agency.  A plurality of circuit courts use or incorporate Bonnette' s factors in their joint-employer test. The Department's proposed test would assess whether the potential joint employer:

  • Hires or fires the employee;
  • Supervises and controls the employee's work schedule or conditions of employment;
  • Determines the employee's rate and method of payment; and
  • Maintains the employee's employment records.

DOL believes: these factors are consistent with section 3(d) of the FLSA, which defines an “employer” to “include[ ] any person acting directly or indirectly in the interest of an employer in relation to an employee,” 29 U.S.C. 203(d), and with Supreme Court precedent. They are clear and easy to understand. They can be used across a wide variety of contexts. And they are highly probative of the ultimate inquiry in determining joint employer status: Whether a potential joint employer, as a matter of economic reality, actually exercises sufficient control over an employee to qualify as a joint employer under the Act.

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