United States: DOL Proposes New Definition Of Joint Employer, Seeks To Clear Up A Confusing Label

Last Updated: April 17 2019
Article by Todd Lebowitz

Sometimes it's obvious what something is, and you don't need a label. Other times it's not so obvious, and you do need a label. Then there's the rare instance when it's obvious what something is, but someone feels compelled to supply a label anyway. That third scenario is what I saw when I went to my daughter's volleyball tournament last weekend and snapped this photo of a cabinet in the lobby. The label is small, but if you look closely, you'll see that it helpfully declares the item to be a "cabinet." It further announces, in red handwriting, that the item has been "sold," thereby allaying my concerns that my daughter was spending her Saturday playing volleyball in a den of cabinet thieves.

The second scenario – label needed – is the focus of this Alert. And the territory is familiar ground ‒ joint employment.

It's rarely obvious what that phrase means, and companies that use workers supplied by other companies have been seeking clarity for some time now. Ignoring Ronald Reagan's famous quip about the nine most terrifying words in the English language, the Department of Labor (DOL) announced on Monday that it's here to help.

Aiming to provide that much-needed clarity, the Wage and Hour Division of the DOL has proposed a new regulation that would redefine "joint employment" under the Fair Labor Standards Act (FLSA). Since 1958, the FLSA regulations have unhelpfully suggested that two companies may be joint employers if they are "not completely disassociated" from each other. In recent years, that excessively broad language has been used by some courts to label companies "joint employers" under circumstances where the DOL no longer believes the tag is warranted.

The proposed new regulation would replace the "not completely disassociated" guidance with a four-part balancing test, assessing whether a potential joint employer:

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

The reserved right to do these things would not be relevant to a company's status as a joint employer. To be a joint employer, it must actually do them. (Remember, unlike other federal laws, the FLSA does not use a Right to Control Test.)

The DOL would permit other factors to be considered in the joint employment analysis too, but only if they tend to show whether the potential joint employer is:

  • Exercising significant control over the terms and conditions of the employee's work; or
  • Otherwise acting directly or indirectly in the interest of the employer in relation to the employee.

The joint employment test would not look to whether the worker is economically dependent on the putative joint employer. Economic dependence is still relevant to whether a worker is an employee of the primary employer but, under the proposed new regulation, it would no longer be relevant to the joint employment analysis.

The new rule would also clarify that certain business models are not lightning rods for joint employment. For example, franchising would not increase the likelihood of a joint employment finding.

The new rule would clarify that certain business practices are also not suggestive of joint employment. For example, none of these activities would make a finding of joint employment more likely:

  • Providing a sample employee handbook to a franchisee;
  • Participating in or sponsoring an association health or retirement plan;
  • Allowing an employer to operate a facility on one's premises; or
  • Jointly participating with an employer in an apprenticeship program.

The new rule would provide that certain types of business agreements are not indicative of joint employment. For example, requiring an employer to institute workplace safety measures, wage floors, sexual harassment policies, morality clauses, or requirements to comply with the law or promote other desired business practices would not be evidence in favor of joint employment.

The new regulation would promote clarity and would seek to eliminate the sometimes contradictory tests that different federal courts use when trying to answer the same question ‒ who is a joint employer under the FLSA? The answer should no longer be, "That depends on where you live."

The proposed new regulation will now proceed down the path labeled, Notice of Proposed Rulemaking. In the next few days, the Notice will be published in the Federal Register. That publication will begin a 60-day public comment period. Anyone can submit comments. Really, I mean anyone. Comments about the proposed rule may be submitted electronically at www.regulations.gov, in the rulemaking docket RIN 1235-AA26.

Notice of Proposed Rulemaking is a potentially bumpy path, with cobblestones and potholes along the way. Based on the comments, the DOL could decide to modify the proposed rule or rewrite it or scrap it entirely. But hopefully, if things turn out right for the business community, at the end of that road there is a tall beige cabinet with a label on it that says "cabinet," and inside that cabinet is a newly minted regulation that says "joint employer" and, for the first time in decades, everyone will know what that means.

Sometimes it's obvious what something is, and you don't need a label. Other times it's not so obvious, and you do need a label. Then there's the rare instance when it's obvious what something is, but someone feels compelled to supply a label anyway. That third scenario is what I saw when I went to my daughter's volleyball tournament last weekend and snapped this photo of a cabinet in the lobby. The label is small, but if you look closely, you'll see that it helpfully declares the item to be a "cabinet." It further announces, in red handwriting, that the item has been "sold," thereby allaying my concerns that my daughter was spending her Saturday playing volleyball in a den of cabinet thieves.

The second scenario – label needed – is the focus of this Alert. And the territory is familiar ground ‒ joint employment.

It's rarely obvious what that phrase means, and companies that use workers supplied by other companies have been seeking clarity for some time now. Ignoring Ronald Reagan's famous quip about the nine most terrifying words in the English language, the Department of Labor (DOL) announced on Monday that it's here to help.

Aiming to provide that much-needed clarity, the Wage and Hour Division of the DOL has proposed a new regulation that would redefine "joint employment" under the Fair Labor Standards Act (FLSA). Since 1958, the FLSA regulations have unhelpfully suggested that two companies may be joint employers if they are "not completely disassociated" from each other. In recent years, that excessively broad language has been used by some courts to label companies "joint employers" under circumstances where the DOL no longer believes the tag is warranted.

The proposed new regulation would replace the "not completely disassociated" guidance with a four-part balancing test, assessing whether a potential joint employer:

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

The reserved right to do these things would not be relevant to a company's status as a joint employer. To be a joint employer, it must actually do them. (Remember, unlike other federal laws, the FLSA does not use a Right to Control Test.)

The DOL would permit other factors to be considered in the joint employment analysis too, but only if they tend to show whether the potential joint employer is:

  • Exercising significant control over the terms and conditions of the employee's work; or
  • Otherwise acting directly or indirectly in the interest of the employer in relation to the employee.

The joint employment test would not look to whether the worker is economically dependent on the putative joint employer. Economic dependence is still relevant to whether a worker is an employee of the primary employer but, under the proposed new regulation, it would no longer be relevant to the joint employment analysis.

The new rule would also clarify that certain business models are not lightning rods for joint employment. For example, franchising would not increase the likelihood of a joint employment finding.

The new rule would clarify that certain business practices are also not suggestive of joint employment. For example, none of these activities would make a finding of joint employment more likely:

  • Providing a sample employee handbook to a franchisee;
  • Participating in or sponsoring an association health or retirement plan;
  • Allowing an employer to operate a facility on one's premises; or
  • Jointly participating with an employer in an apprenticeship program.

The new rule would provide that certain types of business agreements are not indicative of joint employment. For example, requiring an employer to institute workplace safety measures, wage floors, sexual harassment policies, morality clauses, or requirements to comply with the law or promote other desired business practices would not be evidence in favor of joint employment.

The new regulation would promote clarity and would seek to eliminate the sometimes contradictory tests that different federal courts use when trying to answer the same question ‒ who is a joint employer under the FLSA? The answer should no longer be, "That depends on where you live."

The proposed new regulation will now proceed down the path labeled, Notice of Proposed Rulemaking. In the next few days, the Notice will be published in the Federal Register. That publication will begin a 60-day public comment period. Anyone can submit comments. Really, I mean anyone. Comments about the proposed rule may be submitted electronically at www.regulations.gov, in the rulemaking docket RIN 1235-AA26.

Notice of Proposed Rulemaking is a potentially bumpy path, with cobblestones and potholes along the way. Based on the comments, the DOL could decide to modify the proposed rule or rewrite it or scrap it entirely. But hopefully, if things turn out right for the business community, at the end of that road there is a tall beige cabinet with a label on it that says "cabinet," and inside that cabinet is a newly minted regulation that says "joint employer" and, for the first time in decades, everyone will know what that means.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions