On April 1, 2019, the Department of Labor (DOL) announced a proposed rule to narrow the definition of a “joint employer” under the Fair Labor Standards Act (FLSA). Because joint employers are jointly and severally liable for wage and hour claims brought under the FLSA, the change could have a significant impact on wage and hour litigation as we know it, offering franchisers and businesses that hire workers through staffing firms a shield from liability for some minimum wage and overtime pay violations.
Part 791 of Title 29 of the Code of Federal Regulations contains the DOL’s official interpretation of joint employer status. Under the proposed regulation, it would be significantly revised for the first time in over 60 years. A four-factor test would be used to analyze whether a potential joint employer relationship exists. Those are, whether the potential joint employer exercises the power to:
- Hire or fire an employee
- Supervise and control an employee’s work schedules or employment conditions
- Determine an employee’s rate and method of pay
- Maintain a worker’s employment records
Significantly, the proposed rule removes the threat of businesses being deemed joint employers based on the mere possibility that they could exercise control over a worker’s employment conditions. As such, merely having a contractual right under a staffing-agency or franchise agreement to exercise control over employment conditions would not amount to the level of control necessary to establish a joint employment relationship.
Expect the unexpected
Once the proposed rule is published in the Federal Register, the notice-and-comment process will begin. The DOL will accept comments from interested parties for 60 days. After that, public hearings on the proposed rule will commence and the DOL will draft formal responses to substantive comments.
In the meantime, expect the unexpected. Workers’ rights advocates who believe the rule goes too far will likely challenge it in court before final publication (if we even get to that point). We will be keeping close tabs and will report on future developments.