January 13, 2020

Last night, the Department of Labor (DOL) took the unusual step of issuing a Sunday night press release and posting a final rule on its website concerning joint employment under the Fair Labor Standards Act (FLSA).  Issuance of this final rule has been expected since the Office of Information and Regulatory Affairs cleared the review of it on December 20, 2019.  The final rule is expected to be published in the Federal Register this Thursday, January 16 and will take effect 60 days thereafter.

This final rule is the culmination of an effort to reverse Obama-era changes to how joint employer status is defined and enforced under the FLSA that began with DOL’s rescission in June 2017 of Wage and Hour Administrator Interpretation (AI) 2016-1.  AI 2016-1 sought to address what the Obama DOL viewed as a “fissured workplace” by interpreting joint employment under the FLSA standard pursuant the Salinas precedents that applied a “not completely dissociated standard” that interpreted the FLSA broadly in favor of workers.  Under this standard, an employer did not have to exercise actual control over the workers.  It was enough if they had authority certain types of authority over the worker but had not exercised them.  This standard also considered the extent to which a worker was economically dependent on the potential joint employer.

The just-released final rule eliminates reliance on the Salinas “not completely dissociated standard” and replaces it with the Bonette interpretation that relies on a four-factor test that is much more favorable to employers. Under Bonette, two entities must “actually exercise, directly or indirectly” one of the following powers over the worker: (1) to hire or fire; (2) supervise and control work schedule or conditions of employment; (3) determine rate and method pay; or (4) maintain the worker’s employment records. Note, however, the final rule makes clear that “satisfaction of the maintenance of employment records factor alone does not demonstrate joint employer status.” The final rule also provides that “whether the employee is economically dependent on the potential joint employer is not relevant for determining the potential joint employer’s liability under the [FLSA].” This DOL final rule on joint employment comes as the NLRB and EEOC are also taking steps to tighten their standards for finding joint employment under the laws they enforce.

You can find more information about the final rule on a resource page DOL released yesterday here.

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