U.S. Department of Labor Releases Proposal to Redefine Joint Employer Test
April 5, 2019
The Wage and Hour Division of the United States Department of Labor has issued a proposed rule to delineate a new test for determining when businesses will be deemed “joint employers” under the Fair Labor Standards Act (FLSA), and subject to liability for the payment of minimum wage and overtime. The proposed rule rolls back the more expansive Obama-era standard and more closely resembles the traditional common law “selection and direction” standard.
The proposed rule sets forth a four-factor test to determine whether a business will be deemed a joint employer for the purpose of liability under the FLSA. These factors include: hiring and firing employees, setting and controlling work schedules, determining wage rates and method of payment, and maintaining employment records. Significantly, as to hiring and firing, an unexercised contractual right to hire and fire employees will have no bearing on whether a business will be deemed a joint employer, as long as it has not actually exercised control over hiring and firing decisions. However, the proposal does note that additional factors may be considered in determining status as a joint employer when a business exercises “significant control” over employees or otherwise acts “directly or indirectly in the interest of the employer” in relation to employees. A comment and review period will follow the release of this proposal, with the potential for additional revisions before it is finalized.
This Labor & Employment Update is intended to keep readers current on developments in the law, and is not intended to be legal advice. If you have any questions, please contact authors Michael D. Jones at 215.851.8461 or firstname.lastname@example.org, Brittany L. Stepp at 215.851.8512 or email@example.com, or any other attorney at Eckert Seamans with whom you have been working.
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