U.S. Department of Labor Issues Notice of Proposed Rulemaking for Joint Employment

April 12, 2019 - Lisa R. Claxton

On April 1, 2019, the U.S. Department of Labor released a Notice of Proposed Rulemaking (NPRM) on joint employment under the Fair Labor Standards Act (FLSA).

The Department is proposing to revise and clarify the responsibilities of employers and joint employers to employees in joint employer arrangements. Under the FLSA, an employee may have—in addition to his or her employer—one or more joint employers. A joint employer is any additional entity who is jointly and severally liable with the employer for the employee’s wages. The NPRM on joint employment proposes to revise the regulations at 29 C.F.R. Part 791, which defines when two entities are considered joint employers of the same employee. The last meaningful revision to this regulation was in 1958.

Part 791 currently addresses two joint employer scenarios. In the scenario where an employee works one set of hours in the workweek for his or her employer, and that work simultaneously benefits another entity, the Department proposes in the NPRM a four-factor test for determining joint employment under the FLSA and explains that the Department will 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 proposed rule explains that additional factors may be used to determine joint employer status, but only if they are indicative of 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 proposed regulation also clarifies that an employee’s “economic dependence” on the potential joint employer does not determine the potential joint employer’s liability under the FLSA. The proposed regulation sets forth examples of “economic dependence” factors that are not relevant to the joint employer analysis—including, but 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.

The proposed rule also includes a set of scenarios where the Department would or would not determine a joint employer status exists which is intended to further help to clarify joint employer status.

Once the proposed rule is officially published in the Federal Register, members of the public can file comments at www.regulations.gov in the rulemaking docket by searching for 1235-AA26. It is anticipated that public comments most likely will be due in early June – 60 days after official publication in the Federal Register.

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