New Guidance for Joint Employers: The Department of Labor’s Final Rule Under the FLSA

3 minute read | February.17.2020

On January 12, 2020, the Department of Labor announced a final rule to revise and update its regulations to assist in determining joint employer status under the Fair Labor Standards Act (FLSA). Notably, the final rule recognizes two potential scenarios where an employee may have one or more joint employers.

Scenario 1: Staffing Agencies

The first scenario is illustrated by the relationship between a company and a staffing agency. Under this scenario, the staffing agency is the employer in the traditional sense (one who suffers, permits, or otherwise employs the employee to work), but the company at which that employee is assigned simultaneously benefits from the work of the employee. Under the final rule, the DOL will apply a four-factor balancing test to determine whether the company using the employee provided by the staffing agency is directly or indirectly controlling that employee such that it would be a joint employer of the staffing agency’s employee. If so, the company would be jointly liable for payment of wages to the employee. The four factors to be used by the DOL are whether the company:

  • 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.

No single factor is dispositive, and whether a company is considered by the DOL to be a joint employer will depend on the facts of each case.

Under this scenario, the final rule also identifies factors that the DOL considers not relevant to the determination of FLSA joint employer status. For example, the final rule specifies that whether the employee is economically dependent on the potential joint employer, including factors traditionally used to establish whether a particular worker is an independent contractor (e.g., the worker’s opportunity for profit or loss, their investment in equipment and materials, etc.), are not relevant in determining joint employer liability. Other factors that do not make joint employer status more or less likely under the FLSA include:

  • The potential joint employer’s contractual agreements with the employer requiring the employer to comply with its legal obligations under the FLSA or other laws, instituting sexual harassment policies, requiring background checks, or requiring workers to receive training regarding health, safety, or legal compliance;

  • The potential joint employer’s contractual agreements with the employer requiring quality control standards to ensure the consistent quality of the work product, brand, or business reputation; and

  • The potential joint employer’s practice of providing the employer with a sample employee handbook, or other forms, allowing the employer to operate a business on its premises (including “store within a store” arrangements), offering an association health plan or association retirement plan to the employer or participating in such a plan with the employer, jointly participating in an apprenticeship program with the employer, or any other similar business practice.

Scenario 2: Sharing Employee Services

In the second scenario, 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, but the jobs and the hours worked for each employer are separate.

The final rule did not make any substantive changes to the standard for determining joint employer liability in this scenario. Here, the employers will be 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.

What's Next?

The final rule will go into effect on March 16, 2020. The full text of the final rule can be found here.