News: Joint Employer Status in the Fair Labor Standards Act

News: Joint Employer Status in the Fair Labor Standards Act

The United States Department of Labor is at it again. On April 1, of all days (no, it’s not a joke), the Department of Labor issued a proposed rulemaking on joint employer status under the Fair Labor Standards Act

First things first, what is a joint employer? 

A joint employer is any company that is hiring a temporary worker. The employer is the temp agency, and the joint employer is the person or entity that is hiring the temporary employee. 

Joint employer status generally comes up in the context of temporary agencies. Most commonly, a temp worker is hired to come in for a few weeks to help with a particular project or deal with a big need spike, or even somebody who hires through a placement agency on a trial basis. There are other situations, but these are some of the most common. 

The U.S. has had a long-standing rule regarding joint employers going back to 1958 and it has not been changed until the Obama Administration. There was some information that came out through the National Labor Relations Board and some administrative proceedings under the Obama administration that provided for what the current Department of Labor charitably refers to as sub-regulation guidance. Basically the Department of Labor, the National Labor Relations Board, and a few other government agencies were taking actions that re-interpreted the joint employer rule to mean something a little different. The “re-interpretation threw a large monkey wrench into employers’ understanding of the law. It has been since 1958, more than sixty years, that the joint employer rules were reviewed and updated. The Department of Labor has finally undertaken a formal review of the joint-employer rule by making a proposed rulemaking, which is the process in which the regulations are created. 

The joint employer proposed rule is going to look at a fairly simple four-factor test which would consider whether the potential joint employer actually exercises some power over the employee, and is therefore liable for labor law requirements, such as wage and hour violations. 

The four-factor test considers the following: 

  1. whether the potential joint employer has the power to hire or fire the employee, which goes beyond bringing them into the company on a temporary basis
  2. whether the joint employer has the right to supervise or control the employee’s work schedule or conditions of employment,
  3. whether or not the joint employer can determine the employee’s rate and method of payment, and
  4. Whether the employer maintains the employee’s employment records

The joint employer probably can hire and fire the employee, at least from working with the joint employer. Joint Employers certainly get to supervise and control the employee’s work schedule and immediate conditions of employment. But, a joint employer might not get to determine what rate of pay and method of payment is. Often, in a temporary agency the joint employer pays the temp agency, who then takes their cut and pays the employee. Usually, the temp agency is responsible for the employee’s records.

There is a lot that goes into this, and the proposed rule actually has a lot of pretty good examples that they share with the public. If you are an employer who refers to temp agencies regularly, this is a rule you have to pay attention to. Also, folks who may need to pay attention to this are franchise owners, though that is a little less clear.

Here is the Department of Labor’s Notice.  

So, if you are somebody that hires temporary employees, this is a rule that you need to take a look at. If you’d like further information, just give us a call. We would be happy to chat about the proposed rule and what the current regulations look like. 

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