The U.S. Department of Labor Issues Final Rule to Update FLSA’s Joint Employer Regulations After 60 Years.
On Monday, the Department of Labor announced a new “joint employer” rule that will go into effect March 16th. The new rule updates the regulations interpreting joint employer status under the Fair Labor Standards Act (FLSA), which requires covered employers to pay their employees at least the federal minimum wage for every hour worked and overtime for every hour worked over 40 in a workweek.
What Is the FLSA?
Under the FLSA, an employee may have, in addition to his or her employer, one or more joint employers-additional individuals or entities that are jointly and severally liable with the employer for the employee’s wages.
“The changes in this final rule break down barriers that keep companies from constructively overseeing, guiding and helping their business partners,” said Wage and Hour Division Administrator Cheryl Stanton. “For small business owners, and the employees working in those businesses, the relationship and the guidance coming from franchisors and other contracting companies can greatly improve the workplace and help them create jobs.”
What FLSA Regulations Were Updated?
The final rule contains a four-factor “balancing test”. The test is meant to help determine FLSA joint employer status when an employee performs work for one employer that simultaneously benefits another person. The test considers whether the joint employer:
- Hires or fires of an 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
“The Department’s final rule provides additional guidance on how to apply this test. For example, to be a joint employer under the Act, the other person must actually exercise — directly or indirectly — one or more of the four control factors,” the Labor Department said in the rule.
How Does The FLSA Affect My Business?
Businesses, such as hotels, senior living centers, restaurants, franchisers and more, can use the updated regulation to clarify when additional factors may be relevant to determine FLSA joint employer status. The DOL also includes examples designed to help further clarify when joint employer status exists when hiring part-time and contract-only employees.
These revisions will add certainty regarding what business practices may result in joint employer status and promotes greater uniformity among court decisions by providing a clearer interpretation of FLSA joint employer status, according to the DOL. The DOL’s ruling ultimately provides franchise owners with a clear and straightforward joint employer standard.
How Can I Learn More?
The rule is expected to be published in the Federal Register on January 16th. More information about the final rule is available here.