In a move that many employer groups had lobbied for, the United States Department of Labor (“DOL”) issued a new final rule in January 2020 (effective March 16, 2020) limiting the definition of joint employer under the Fair Labor Standards Act (“FLSA”). This new rule thereby provides clarity to all businesses, including those involved in franchising and who use contracting companies.
The new rule focuses on four factors:
• The Hiring & Firing of Employees
• The Supervision & Control of Employees’ Work Schedules or Conditions of Employment to a Substantial Degree
• The Determination of Employees’ Rate of Pay and Method of Payment
• The Maintenance of Employment Records
Crucially, it is the exercise of the above rights, rather than just the authority to do so, that controls, making it far less likely for joint employment to exist. A previous factor that joint employment existed where an employee was “economically dependent” on a given company no longer applies. The DOL specifically stated that this change was meant to encourage franchisors and contracting companies to provide guidance, training, form policies, facilities, apprenticeship programs and even association health or retirement plans without worrying about being deemed a joint employer.
Employers are advised to consult with experienced employment counsel in looking at their company relationships for possible joint employment. Also, this rule applies for now on FLSA wage and hour issues, not to state law or other federal statutes (although the National Labor Relations Board and the Equal Employment Opportunity Commission are expected to issue similar rules shortly).
As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.