Joint Employment

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On April 1, 2019, DOL published a third proposal rule over two weeks, this one dealing with joint employment.  The Fair Labor Standards Act (FLSA) allows joint employer situations where an employer and a joint employer are jointly responsible for the employee's wages.  This is a major issue for companies that could be potentially liable for wage and hour violations of contractually related companies, such as staffing companies and companies in franchise relationships.

In 2017, the DOL withdrew the previous administration's sub-regulatory guidance regarding joint employer status that did not go through the rulemaking process that includes public notice and comment.  That previous Obama-era guidance memo said that joint employment should be applied "as broad as possible" under the FLSA. 

Now the DOL proposes a four-factor test that would consider whether the potential joint employer actually exercises the power to:

  • Hire or fire the employee;
  • Supervise and control the employee's work schedules or conditions of employment;
  • Determine the employee's rate and method of payment; and
  • Maintain the employee's employment records.

The proposal also includes a set of joint employment examples for comment that would further assist in clarifying joint employer status.  There are numerous examples, but only one illustrative example is listed below.  Examples also include factors that the DOL would consider irrelevant, including notably that "economic dependence" on the potential joint employer does not determine the potential joint employer's liability.

Example: An office park company hires a janitorial services company to clean the office park building after-hours.  According to a contractual agreement with the office park and the janitorial company, the office park agrees to pay the janitorial company a fixed fee for these services and reserves the right to supervise the janitorial employees in their performance of those cleaning services.  However, office park personnel do not set the janitorial employees' pay rates or individual schedules and do not in fact supervise the workers' performance of their work in any way.  Is the office park a joint employer of the janitorial employees?

Application: Under these facts, the office park is not a joint employer of the janitorial employees because it does not hire or fire the employees, determine their rate or method of payment, or exercise control over their conditions of employment.  The office park's reserved contractual right to control the employee's conditions of employment does not demonstrate that it is a joint employer.

The proposed rule would also clarify factors that are not relevant to the joint employer analysis, most notably explaining that "economic dependence" on the potential joint employer does not determine the potential joint employer's liability.  Other irrelevant factors include, but are not limited to, whether the employee is in a specialty job or a job otherwise requiring special skill, initiative, judgment, or foresight; has the opportunity for profit or loss based on managerial skill; and invests in equipment or materials required for work or the employment of helpers - factors often used to determine whether a worker is an employee or an independent contractor.

The NLRB recently published a separate proposed rule to restrict joint employer liability.  The Board generally would require a company to exercise direct control over workers to be considered their joint employer.  The NLRB during the Obama Administration took an expansive view, indicating that a company's ability to indirectly control workers even if that authority wasn't used, may be enough to establish joint employment.

Comments on the joint employment rule are due June 10, 2019.

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