On January 12, 2020, the Department of Labor (DOL) announced a final rule to revise—and narrow—the definition of “joint employer” under the Fair Labor Standards Act (FLSA). Whether or not a company is a joint employer is a question that contractors who use staffing agencies, franchise businesses, and firms that outsource services should be asking themselves. In recent years, a growing number of Americans have found themselves in these types of work arrangements. A contractor or franchisor who is determined to be a joint employer can end up on the hook for wages that were illegally denied by the staffing agency or franchisee. The DOL’s new rule simplifies the joint employer analysis, which may work to the benefit of companies that outsource labor or services.
The FLSA 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. To be liable for paying minimum wage or overtime, a person or entity must be an “employer” within the meaning of the FLSA. The DOL has always recognized that an employee can have two or more employers who are jointly and severally liable for that employee’s wages (i.e., joint employers). Joint employer status depends on whether multiple persons are “not completely disassociated” or “acting entirely independently of each other” with respect to the employee’s employment. 29 CFR 791.2(a). The regulation sets forth three situations where a joint employment relationship generally will be considered to exist:
- Where there is an arrangement between the employers to share the employee’s services;
- Where one employer is acting directly or indirectly in the interest of the other employer in relation to the employee; or
- Where the employers are not completely disassociated with respect to the employment of a particular employee and may be deemed to share control of the employee.
- Missing from the regulation is guidance for the most common joint employer scenario: where an employer suffers, permits, or otherwise employs an employee to work, and another person simultaneously benefits from that work. Instead, part 791 focuses on the relationship between the employers, which is not necessarily the relevant inquiry. Supreme Court and circuit court precedent teach that determining joint employer status requires a careful analysis of the degree of control exercised by the potential joint employer over the employee.
The new rule, which will take effect March 16, 2020, seeks to remedy this deficiency by proposing the following four-part test for determining whether a company is a joint employer: Whether the potential joint employer (1) hires or fires the employee; (2) supervises and controls the employee’s work schedule or conditions of employment; (3) determines the employee’s rate and method of payment; and (4) maintains the employee’s employment records.
This test creates a much narrower definition of a “joint employer,” and gives companies greater flexibility to set standards without necessarily being considered a joint employer responsible for overtime or minimum wage violations.
Employers should review their service agreements and subcontracts and consider whether any modifications to those agreements—or the ways in which they do business—are necessary in order to benefit from the DOL’s new rule.
As president of Hirschler and head of the firm's litigation section, Courtney knows how to lead people and projects to a successful outcome.
Leveraging deep experience in the construction industry, Courtney advises public and ...
Liz combines enthusiasm and diligence to help her clients resolve complex disputes. Whether the dispute is a construction claim, a breach of contract, or a business tort, Liz brings focus and determination to every case. Liz has ...
Jaime handles a variety of civil litigation matters, with a particular emphasis on cases arising out of real property disputes, including appeals of zoning and other land use decisions, appeals of tax assessments, and construction ...
Kelly’s practice focuses on construction law, commercial and product liability law, with an emphasis on dispute resolution—including mediation, arbitration, jury and bench trials in state and federal court. She routinely ...
Nate fully engages in each case and shoulders his clients’ needs. Communication, efficiency and careful judgment define his practice. In every case, he investigates competing claims to thoroughly understand their strengths ...
A professional engineer (P.E.) and an experienced lawyer, Webb began practicing at Hirschler Fleischer following four years of work as a consulting engineer. His multidisciplinary practice focuses on general business and ...
SubscribeSubscribe to Hirschler by Email
- Kelly Bundy Appointed to the Virginia Safety and Health Codes Board
- Jaime Wisegarver Outlines Labor Department Guidance on Travel Time Pay in Construction Executive
- New Defense to Joint Liability Available to Contractors
- What Employers Need to Know About Virginia’s New Overtime Wage Act
- OSHA Increases Amounts of Civil Penalties for 2021
- Have Force Majeure Defenses Based on COVID-19 Been Successful This Year?
- Kelly Bundy and Liz Burneson Publish Article on Joint Employer Status in Construction Executive
- Kelly Bundy Authors Article for ABA Construction Law Forum’s “Under Construction” Series
- Miller Act Notice More Than 90 Days Before A Subcontractor’s Final Day of Work Held Untimely
- Virginia Supreme Court Allows Sub-Sub Material Supplier To Recover Directly From General Contractor For Unpaid Material
- Occupational Safety and Health Act (OSHA)
- Department of Labor (DOL)
- COVID-19, Coronavirus Outbreak
- Dispute Resolution
- Little Miller Act
- Government Contracts
- Miller Act
- Workforce Development
- Mechanic's Liens
- Department of Professional and Occupational Regulation (DPOR)
- Fair Labor Standards Act
- Lien Waivers
- Force Majeure
- Joint Checks
- Unjust Enrichment
- Virginia Employment Commission (VEC)
- Virginia Workers' Compensation Commission
- Uniform Statewide Building Code
- Change Orders
- August 2021
- June 2021
- April 2021
- January 2021
- October 2020
- August 2020
- July 2020
- June 2020
- May 2020
- April 2020
- March 2020
- February 2020
- January 2020
- November 2019
- August 2019
- June 2019
- April 2019
- February 2019
- January 2019
- December 2018
- October 2018
- September 2018
- June 2018
- May 2018
- April 2018
- March 2018
- February 2018
- November 2017
- October 2017
- September 2017
- July 2017
- June 2017
- May 2017
- April 2017
- March 2017
- February 2017
- January 2017
- December 2016
- November 2016
- October 2016