The U.S. Department of Labor (DOL) on April 1 released a Notice of Proposed Rulemaking (NPRM) to address the issue of joint employment under the Fair Labor Standards Act (FLSA). Under the proposal, the DOL would provide a four-factor test to determine whether a joint employment relationship exists.
According to the proposal, the test “would consider whether the potential joint employer actually exercises the power to:
•hire or fire the employee;
•supervise and control the employee’s work schedules or conditions of employment;
•determine the employee’s rate and method of payment; and
•maintain the employee’s employment records.”
As this blog has written in the past, the broader issue of joint employment has become one of the most contentious issues in the area of labor and employment law in recent years, most notably due to the National Labor Relations Board’s (NLRB) errant 2015 Browning-Ferris decision, which upended decades of precedent to expand joint employer liability under the National Labor Relations Act. The current NLRB majority already has published an NPRM to address the expansive standard that case established.
The problem being solved with DOL’s proposed rule, however, is different from the NLRB’s. With the FLSA, there are too many definitions of joint employment due to multiple judicial decisions interpreting the term. This creates a patchwork effect for employers working in multiple jurisdictions and thus a real liability exposure problem. Shortly after getting in office as the Administrator for Wage and Hour in 2014, David Weil released an Administrator’s Interpretation (AI) announcing an “economic realities” test for determining joint employment that would have greatly expanded which employers would be considered joint employers under the FLSA, and thus liable for another employer’s wage and hour violations. Because it was only an AI, and not a regulation, the Trump administration was able to withdraw it very quickly in June 2017.
The current proposal seeks to put into place a clearer national standard for determining joint employment that will help employers to know whether they could face liability for alleged violations. As a DOL fact sheet explains, “the proposed changes are designed to reduce uncertainty over joint employer status and clarify for workers who is responsible for their employment protections, promote greater uniformity among court decisions, reduce litigation, and encourage innovation in the economy.” The fact sheet also lays out the major features of the proposal for the curious reader.
While DOL’s NPRM certainly comes as welcome news, it does bear mentioning that during the last Congress the House of Representatives passed bipartisan legislation, the Save Local Business Act, to amend the National Labor Relations Act and the FLSA, which would have established definitively that two or more employers must have direct and immediate control over employees to be considered joint employers under either law. The current Congress would bring much-needed clarity and stability to all parties were it to pass the same legislation.