The Department of Labor (DOL) has proposed a new rule to determine whether an employer is a joint employer or not. The proposal simplifies the current standard, introducing a four-part test to determine an employer’s status. According to the newly proposed rule, an employer qualifies as a joint employer if it:
- Can hire or fire employees;
- Controls employee schedules;
- Determines employees’ pay and how they are paid; and
- Maintains the employees’ employment records.
All factors must be completed to decide an employer’s status. Under the Fair Labor Standards Act (FLSA), if two employers exercise joint responsibility for a group of workers, minimum wage compensations and overtime obligations are shared by both parties. In 2016, the Obama Administration DOL issued guidance that dramatically increased a club’s liability for joint employment; however, in 2017, the Trump Administration’s DOL rescinded that guidance.
The current DOL noted the proposed rule may consider additional factors to determine an employer’s status such as if a potential joint employer is “exercising significant control” over employees’ work or “otherwise acting directly or indirectly in the interest of the employer in relation to the employee.”
In a statement by Labor Secretary Alexander Acosta, the new proposed rule would reduce litigation under FLSA and provide clarity to businesses and courts.
The proposal is currently on a 60-day public comment period.