DOL Issues Update on Joint Employment under the FLSA

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For the first time in 60 years, the U.S. Department of Labor updated the Fair Labor Standard Act’s (FLSA) joint employer regulations. (29 C.F.R. §§ 791.1 to 791.3.)

The new regulations, effective March 16, 2020, identify three situations where a joint employment relationship likely exists:

  • The primary and secondary employers have an arrangement to share the employees’ services or interchange employees.
  • One employer acts directly or indirectly in the interest of the other employer in relation to the employees at issue.
  • The employers are not completely disassociated regarding the employment of particular employees and share control of the employees because one employer controls, is controlled by, or is under common control with the other employer.

The Final Rule applies a four-factor test to make this determination, and considers whether the potential joint employer:

  • 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 (though this factor alone is not sufficient to constitute joint employment).

None of these four factors is controlling, and the weight given to each factor varies depending on the circumstances.

The intent of these updates is to provide more certainty to employers in assessing risks of joint employment liability. If two entities are joint employers under the FLSA, the employee’s hours worked for each of the joint employers are aggregated and considered part of one employment. This aggregation affects the calculation of the number of hours worked in a week, the employee’s regular rate of pay, and the amount of overtime due to the employee. All joint employers are jointly and severally liable for FLSA compliance. Additionally, each joint employer can take credit towards the minimum wage and overtime requirements for payments made to an employee by every other joint employer.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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