On January 16, 2020, the Department of Labor (“DOL”) issued its final regulations addressing joint employer status under the Fair Labor Standards Act (“FLSA”). The regulations will become effective on March 16, 2020.
Joint employers may both be found liable for violations of the FLSA committed by one of them. The regulations discuss two situations where joint employment may be found. First, in relationships (like temporary staffing) where one employer employs the individual but another employer simultaneously benefits from the work, the second employer is a joint employer only if it actually exercises control over the employee. To make this determination, the DOL will examine whether the second employer (whether directly or indirectly) performs any of the following activities: (1) hiring or firing the employee; (2) substantially supervising and controlling the employee’s work schedule or other conditions of employment; (3) determining the employee’s rate and method for payment of wages or other remuneration; or (4) maintaining the employee’s employment records, such as payroll records, schedules, discipline, and determination of rate and pay. No single factor is dispositive, and each must be examined with respect to the circumstances of a particular case. Acts that incidentally affect the employee do not establish a joint employer relationship.
Simply having a reservation of a right of control, as set forth in a contract between the parties, is not sufficient to show joint employment. Nor is the second employer’s potential power to act without some actual exercise of control.
Indirect control will occur when the second employer gives mandatory directions about the employee to the first employer. A direct employer’s voluntary decision to acquiesce to a request by the second employer does not establish indirect control.
The economic dependence of the employee on the second employer is not relevant to determining whether a joint employment relationship exists. Therefore, factors that should not be considered include: (1) whether the employee is in a job that requires special skills; (2) whether the employee has the opportunity for profit or loss; (3) whether the employee invests in equipment, material, or assistants to complete the work; and (4) whether the employee performs the service for others.
The regulations specify that operating as a franchisor, entering a brand and supply agreement, or using a similar business model does not, by itself, create a joint employer relationship or make one more likely. Neither having contract provisions requiring that the parties comply with specific legal obligations or meet standards for health or safety reasons, nor monitoring such requirements, makes a joint employment relationship more likely.
Similarly, the fact that the second employer provides sample handbooks or forms to the first employer or allows the first employer to operate a business on its premises does not make a joint employment relationship more likely. Nor does the offer of an association health or retirement plan by one employer to the other, or participation of one employer in an association health or retirement plan with the other employer make a joint employment relationship more likely.
The second situation in which joint employer status may be found is where one employer employs a worker for a scheduled number of hours each week and a second employer employs the same worker for a separate number of hours in the same work week. In this situation, employers will be considered joint employers and will need to add together all hours worked for overtime purposes if they are sufficiently associated. Employers will generally be sufficiently associated if: (1) they have an arrangement to share the employee’s services; (2) one employer is acting directly or indirectly in the interest of the other employer with respect to the employee; or (3) the employers share control of the employee, either directly or indirectly, which may be found when one employer controls, is controlled by, or is under common control with the other employer. Sharing a vendor or being franchisees of the same franchisor are not sufficient, standing alone, to show a joint employer relationship.
Joint employers are jointly and severally liable for compliance with the FLSA, including overtime and all other provisions. That means that one joint employer will be held responsible for violations made by any other joint employers in the relationship.
What Does This Mean For You? You should check any relationships that your organization may have to determine whether it may be a joint employer under the FLSA. Joint employer status is most likely to be found in some temporary staffing arrangements or where several companies act under the same umbrella company. If your company is a joint employer, you should ensure that any agreements you have with the other company or companies comprising the joint employer relationship have indemnity clauses so that your company is indemnified for any violations by other companies. For companies operating under the same umbrella, it is important to understand that overtime must be based on aggregate hours, rather than on the specific hours at each employer.
If you have questions about this or any other employment law issues, please contact S. Whitney Rahman at firstname.lastname@example.org or (717) 509-7237, Grace C. Nguyen Bond at email@example.com or (717) 509-7226, or Jill M. Laskowitz at firstname.lastname@example.org or (717) 509-7261.
**This update is provided for informational purposes only and
should not be construed as legal advice or as creating an
attorney-client relationship where one does not already exist.**