On January 12, 2020, the U.S. Department of Labor published its Final Rule that would roll back the expansive interpretation of the joint employer test under the Fair Labor Standards Act promulgated four years ago by then-Wage and Hour Division Administrator David Weil.
Under the Obama Administration’s interpretation, the “economic realities” of a business’s relationship with a given worker determined if a secondary business is an employer of the worker. The Final Rule rejects the economic realities test and instead adopts a four-factor balancing test.
Under the new test, where a worker performs work for the employer that benefits another person or business, the second person or entity may potentially be a joint employer if it:
- 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
- Maintains the employee’s employment records
No single factor is dispositive in determining joint-employer status, and the appropriate weight to give each factor will vary depending on the circumstances. However, the satisfaction of the maintenance of employment records factor alone does not demonstrate joint-employer status.
Importantly under the new test, actual control is necessary to establish joint employment, as opposed to contractual language merely reserving the right to impose control.
The Final Rule is expected to go into effect on March 16, 2020.
For more information, please contact Jason Resnick at (949) 885-2253.