DOL proposes four-factor test to determine joint employment status

Earlier this week, the U.S. Department of Labor (DOL) announced its latest proposed rule to amend its existing regulations regarding joint employer arrangements under the Fair Labor Standards Act (FLSA). Under the FLSA, companies found to be joint employers are jointly liable for all minimum wage and overtime violations.                          

To assist employers to determine whether they are in a joint employer arrangement, the DOL is proposing a four-factor balancing test. Specifically, the test asks whether the potential 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.

The proposed rule makes it clear that neither “economic dependence” nor an employer’s “ability, power, or reserved contractual right” to control the employee are relevant for determining joint employer status. The rule also provides examples to help explain how the new joint employer test would apply to various business scenarios.

Once the rule is published in the Federal Register, employers will have a 60-day public comment period. All affected employers concerned or dissatisfied with the proposed rule should consider submitting comments to the DOL, which can be done electronically here.