On July 29, 2021, the U.S. Department of Labor (DOL) rescinded its final rule entitled “Joint Employment Status Under the Fair Labor Standards Act;” known to most as the Joint Employer Rule. The recission takes effect September 28, 2021.
First issued in January 2020, the Joint Employer Rule was the DOL’s attempt to provide guidance on the issue of joint employment. Combining prior DOL guidance with a newly adopted four-factor test, the DOL attempted to delineate the standards that should be applied to determine whether an entity qualifies as a joint employer. Immediate challenges were raised concerning the DOL’s impermissibly narrow interpretation of the FLSA and its departure from prior interpretations. The rule’s sixteen-month journey through the federal court system witnessed the DOL appealing and subsequently rescinding one and finally both facets of its joint employer rule.
Under the Biden Administration’s pro-Labor stance, employers will need to remain alert to the possibility of joint employment obligations. Without clear guidance, employers should continue to evaluate possible joint employment scenarios under pre-rule guidelines.
For California and Arizona employers, joint employer analysis – at least in the short-term – will likely rely on a Ninth Circuit test set out in the case Bonnette v. California Health & Welfare Agency.[i] In Bonnette, the court found the four factors: “whether the alleged employer (1) had the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records,” to be a useful framework for analyzing joint employer relationships.
However, the general view of the Court was that while useful, these factors are not “etched in stone” and will not necessarily be blindly applied. This view was further expressed in court rulings interpreting joint employer relationships under the Migrant Seasonal Agricultural Worker Protection Act (MSPA), where the court considered not only the four Bonnette factors, but eight additional factors. Whether using the Bonnette factors or additional factors, it is safe to say cases in the Ninth Circuit will be determined on “the circumstances of the whole activity.” (i.e., a totality of the circumstances).
Employers seeking assistance in analyzing potential joint employer status should contact Western Growers.
[i] The DOL Joint Employer Rule factors and analysis are based on the Ninth Circuit test as set forth in Bonnette.