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What is the Department of Labor’s Final Rule on Joint Employer Status?

In an effort to avoid liability issues, the U.S. Department of Labor (“DOL”) recently updated its joint labor employment status under the Fair Labor Standards Act (“FLSA”). The DOL published its Final Rule in the Federal Register on January 16, 2020, and it was expected to be effective on March 6th. Prior to the ruling, the tests used by the circuit courts to determine joint employer status were inconsistent and confusing, and they often resulted in increased litigation costs for employers. The Final Rule is considered a positive development for employees and the business community.

Highlights of the Final Rule

The FLSA states that an employee of one company may be considered a joint employee of a second company, depending on how much control the employer of the second business has over the employee’s work. As a result, the joint employer may be held jointly liable for minimum wage or overtime payments to non-exempt workers. The Final Rule uses a four-factor balancing test to determine joint employer status in situations in which another employer benefits from an employee’s work. To determine whether a second company is a joint employer, the DOL will consider the following factors:

  • The employer hires or fires the employee
  • The employer is responsible for supervising and controlling the employee’s work schedule or conditions of employment to a substantial degree
  • The employer determines the rate and method of payment
  • The employer is responsible for maintaining the worker’s employment records

The Final Rule states that joint employer status will not be based on one single factor, and the weight given to one of these factors will depend on the specific scenario. In addition, the extent to which an employee depends on a potential joint employer financially will not determine joint employer status unless other factors are involved as well. According to the DOL, the following are factors that are not relevant to determine FLSA joint employer status:

  • The potential joint employer is operating as a franchisor or using a similar business model;
  • The potential joint employer is in compliance with all legal, health, and safety obligations;
  • The potential joint employer’s contractual agreements with the employer require quality control standards to ensure consistent quality of the work, brand, or business reputation; or
  • The potential joint employer provides the employer with an employee handbook, allowing the employer to operate a “store within a store” arrangement, offering an association health plan or retirement plan, jointly participating in an apprenticeship program, or other similar business practices.

Philadelphia Employment Lawyers at Sidkoff, Pincus & Green P.C. Assist Clients with Employment Status Issues

The Philadelphia employment lawyers at Sidkoff, Pincus & Green P.C. have a proven track record of litigating all areas of employment law. Our skilled legal team has a thorough understanding of the Final Rule and the impact it has on joint employer status. To schedule an initial consultation with one of our highly experienced employment lawyers, do not hesitate to call us at 215-574-0600 or contact us online. Located in Philadelphia, we serve clients throughout Pennsylvania and New Jersey.