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Labor and Employment Law Updates

US Department of Labor Announces Proposed Rule Limiting Joint-Employer Liability

This week, the Department of Labor (“DOL”) issued a proposed rule to alter the standard for determining joint-employer status under the Fair Labor Standards Act (“FLSA”).FN1 The DOL proposes a straightforward, four-factor test that would consider whether the potential joint employer actually exercises the power to:

  1. Hire or fire the employee;

  2. Supervise and control the employee's work schedules or conditions of employment;

  3. Determine the employee's rate and method of payment; and

  4. Maintain the employee's employment records.FN2  

The proposed standard, if adopted, would provide an employer-friendly approach to determining which company should be responsible for an employee’s wages when a claimant or government agency claims more than one company is jointly liable for wages due. Although the DOL has just proposed the rule, the development is good news for franchise and staffing businesses, which are especially prone to liability for the workplace actions of third parties.

Employers should keep in mind that the DOL’s proposed rule applies just to wage-and-hour matters under the FLSA. Different joint employer standards apply under state laws and enforcement of federal anti-discrimination laws and labor laws.FN3

Employers may provide comments on the DOL’s proposal for a 60-day period. Campbell Litigation will provide updates on the DOL’s proposed rule.

Footnotes:

FN1:  U.S. Department of Labor Issues Proposal for Joint Employer Regulation, U.S. Department of Labor (Apr. 1, 2019),  https://www.dol.gov/newsroom/releases/whd/whd20190401.

FN2:   Joint Employer Status under the Fair Labor Standards Act; Notice of proposed rulemaking and request for comments; 29 CFR Part 791 (Dep’t. of Labor Apr. 1. 2019), https://www.dol.gov/whd/flsa/jointemployment2019/joint-employment_NPRM.pdf.

FN3:Although the NLRB seeks a return to the “traditional test” requiring a company to actually exercise direct control over workers to be considered their joint employer for purposes of labor relations matters such as representation campaigns, collective bargaining, and unfair labor practice case, the NLRB’s standard has not been finalized and is in limbo. See Rocky Mountain Employer, Employer-Friendly Joint-Employer Rule Proposed by NLRB, Rocky Mountain Employer Blog (Sept. 27, 2018), https://www.rockymountainemployersblog.com/blog/2018/9/27/employer-friendly-joint-employer-rule-proposed-by-nlrb; See also Board Proposes Rule to Change its Joint-Employer Standard, National Labor Relations Board (Sept. 13, 2018), https://www.nlrb.gov/news-outreach/news-story/board-proposes-rule-change-its-joint-employer-standard.