The Department of Labor announced a proposed rule change last month that could help employers better understand their obligations towards workers they “jointly” employ.

The Fair Labor Standards Act requires covered employers to pay at least the federal minimum wage to nonexempt workers for all hours worked – plus overtime wages for anything beyond 40 hours. In some cases, more than one employer might be responsible for an employee’s pay. These “joint employers” could both be held liable for wage-and-hour violations.

Current regulations led to varying standards

Multiple organizations can be “joint employers” of a worker if they are both responsible for the employee’s wages. In the past, joint employers were defined as organizations “not completely disassociated” with each other when it came to an employee’s pay.

Some courts examined whether the employee was “economically dependent” on a given employer. Others focused on the relationship between two employers.

This imprecise definition confused staffing agencies, franchisors, and other entities facing potential liability under the FLSA.

U.S. Department of Labor proposes a four-factor test

On April 1, 2019, the DOL proposed a new test to clarify the joint employer standard. The test considers whether a potential joint employer “actually exercises the power” to:

  • Hire or fire the employee
  • Supervise and control the employee’s work schedule or aspects of their work
  • Determine the employee’s pay rate and method of payment
  • Maintain employment records

Interested employers and members of the public may submit comments on the proposed rule until June 25, 2019.

As FLSA rules develop, employers and employees alike can benefit from the advice of an attorney experienced in wage and hour disputes.