On January 12, 2020, the U.S. Department of Labor (DOL) announced a new four-factor balancing test to determine whether two or more organizations should be considered “joint employers” under the Fair Labor Standards Act (FLSA). The final rule establishing the new test becomes effective March 16, 2020.
In the final rule, the Department provides a four-factor balancing test for determining FLSA joint employer status in situations where an employee performs work for one employer that simultaneously benefits another entity or individual. The balancing test examines whether the potential joint employer:
- 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.
The final rule also clarifies when additional factors may be relevant to a determination of FLSA joint employer status and identifies certain business models, contractual agreements with the employer and business practices that do not make joint employer status more or less likely.
These revisions will add certainty regarding what business practices may result in joint employer status and promote greater uniformity among court decisions by providing a clearer interpretation of FLSA joint employer status. These benefits will in turn improve employers’ ability to remain in compliance with the FLSA and help reduce litigation costs.
Additional Information for Employers
On Tuesday, February 25, 2020, at 1:00 p.m. Eastern Time, the Wage and Hour Division will offer a public webinar to provide compliance assistance on the final rule. Throughout the webinar, participants will have the opportunity to submit questions. Wage and Hour Division hosts will answer as many of those questions as possible following the presentation.
Click this link to register for a webinar on the Joint Employer Final Rule