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Labor Department Narrows Definition of Joint Employer

January 28, 2020
 
The U.S. Department of Labor (DOL) recently issued a final ruling that narrows the definition of a “joint employer” under the federal Fair Labor Standards Act (FLSA), overturning the Obama administration’s broader view of the arrangements.
 
The likely consequence is that fewer employers will face the risk of potential joint employment and the financial liability that may entail. The new regulation will take effect on March 16, 2020. 
 
It is been long established under the FLSA that an employee may have one or more joint employers - additional individuals or entities that are jointly and severally liable with the employer for the employee’s wages. The FLSA also requires any covered employers to pay their employees at least the federal minimum wage ($7.25 under federal law but $12.75 under Massachusetts law) for every hour worked and overtime (1.5 times an employee’s hourly rate) for every hour worked more than 40 in a workweek.
 
In issuing the latest version of the joint employer rule, the DOL presents a four-factor balancing test for determining FLSA joint-employer status in situations when an employee performs work for one employer that simultaneously benefits another entity or individual.
 
Not all four factors must be met to demonstrate joint employment. Each particular situation will be evaluated in light of the facts of the employment relationship.
 
The balancing test to determine whether the there is a potential joint employer consist of the following four factors:
  • Hires or fires the employee;
  • Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
  • Determines the employee’s rate and method of payment;
  • Maintains the employee’s employment records.
Employers who believe they may be subject to the joint employer rule should read the regulations regarding the four-factor balancing test. The regulations define some of the key terms (for example employment records) and offer examples of how the regulation may be interpreted in a given situation.
 
AIM members interested in learning more about this or other wage-and-hour issues may call the AIM Employer Hotline at 800-470-6277. 
 
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