Who’s the boss? US DOL attempts to clarify the “joint employment” rule under the Fair Labor Standards Act

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The US Department of Labor (DOL) has issued proposed revisions to the definition of “joint employer” under the Fair Labor Standards Act (FLSA). The revisions are an attempt to clarify the joint employer relationship as codified at 29 C.F.R. § 791.2.

The “joint employment” rule allows for multiple employers to be responsible for paying hours worked by a shared employee under certain circumstances. Specifically, the rule provides that no joint employer relationship “exists if two or more employers for which one employee works” are “acting entirely independently” and are “completely disassociated” with respect to “the employment of a particular employee.” In contrast, a joint employer relationship will exist if an employee performs work (1) that simultaneously benefits multiple employers or (2) for multiple employers at different times during the workweek when the employers: (a) have some arrangement to share the employee’s services; (b) directly or indirectly act in the interest of the other; or (c) directly or indirectly “share control of the employee.” The result of a determination of “joint employer” status is that “all of the employee’s work for the all the joint employers during the workweek is considered as one employment for the purposes of the Act.”

The problem with this formulation, which has been the law for more than 60 years, is that inconsistent precedent has grown out of different applications of different standards in different jurisdictions. Indeed, courts in the Second Circuit have applied a 10-factor test (Zheng v. Liberty Apparel Co, 617 F.3d 182 (2d Cir. 2010), and the Fourth Circuit has used a 4-factor test (Bonnette v. California Health & Welfare Agency, 525 F. Supp. 128 (N.D. Cal. 1981)). Recently, the landscape became even more uncertain when, in August 2016, the National Labor Relations Board (NLRB) ruled that a California employer (Browning-Ferris Industries) and its temporary staffing agency were joint employers. In doing so, the NLRB focused on “indirect control” rather than “direct control.” However, in December 2017, the NLRB shifted gears again, overruling the “indirect control” approach. Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co., 365 NLRB No. 156 (2017). Further complicating matters, in February 2019, the Browning-Ferris approach was restored as precedent after the Hy-Brand ruling was vacated following the discovery of a board member’s conflict of interest.

To address the prevailing uncertainties, the DOL has now distinguished between the following two scenarios: (1) two employers employ the same worker for different hours during the same workweek; and (2) the employee is only employed by one business, but other employer(s) benefit from the work simultaneously. For the first scenario, the DOL proposes to apply a “not completely disassociated” test. For the second scenario, the DOL proposes to weigh four factors, including which of the employers: (a) hires or fires the employee; (b) supervises and controls the employee’s schedule and work conditions; (c) sets the employee’s rate and method of payment; and (d) keeps the employee’s employment records. The touchstones for balancing these factors would be: (a) no one factor would be dispositive; (b) “actual” exercise of control would be emphasized; (c) whether the employee is economically dependent on a particular employer would be irrelevant; and (d) an employer’s business model would be irrelevant.

The DOL’s proposed revisions remain open to public comment through June 10, 2019.

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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