Legal Alert

DOL Issues Final Rule on Joint Employer Test

January 14, 2020

The Department of Labor (DOL) issued a final rule last weekend that codifies a majority of the changes it proposed to the joint employer test in April 2019. These changes will take effect on March 16, 2020.

As discussed in our prior alert in April, the DOL has moved to a four-part test for evaluating joint employment. The test focuses on whether the alleged joint employer:

  • hires or fires the employee;
  • supervises and controls the employee’s work schedule or conditions of employment;
  • determines the employee’s rate and method of payment; and
  • maintains the employee’s employment records.

Additional factors may be relevant in determining whether another person is a joint employer, but only if they can show the potential joint employer is exercising significant control over the terms and conditions of the employee’s work.

The rule also notes that whether an employee is economically dependent on the potential joint employer is not a relevant consideration. Additionally, it says an employer’s business model, and certain contractual agreements or business practices, do not make a finding of joint employer status under the FLSA more or less likely.

Finally, the final rule offers several examples and a list of frequently asked questions to assist employers in applying this new balancing test to their businesses.

If, after application of this test, two entities are found to be joint employers under the FLSA, they will share responsibility for employee wages, including the duty to pay minimum wages and overtime, and legal liability for any wage violations.

Ballard Spahr’s Labor and Employment Group routinely assists employers in ensuring compliance with state, federal, and local statutes and regulations, and can assist employers with structuring their business relationships to avoid joint employer liability under the FLSA.

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