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Department of Labor Narrows Joint Employer Definition

The federal Department of Labor (DOL) released its long-awaited final rule to revise and update its regulations interpreting joint employer status under the Fair Labor Standards Act (FLSA), which governs responsibility for payment of minimum wages and overtime.

This rule rolls back the Obama administration’s much broader definition of joint employer and replaces it with a four-factor test that looks to who maintains the power to hire and fire, to supervise schedules and conditions of employment, to set pay, and to keep employment records.

The DOL rule goes into effect March 16, 2020. The National Labor Relations Board (NLRB) and Equal Employment Opportunity Commission (EEOC) are both expected to enact similar joint employer rules later this year.

Once all of these new rules go into effect, individuals who work for franchisees or as contract workers will have fewer options to pursue claims if they are the victim of discrimination, retaliation, unfair labor practices, are improperly denied minimum wages or overtime, and so forth. Instead of being able to target deep-pocketed franchisors or users of contract labor, these individuals will be limited to pursuing their claims against the much smaller franchisees or agencies. A likely major consequence of these rules will be to markedly reduce the number of large employment class action suits against franchisee-related business or those reliant on large amounts of contractor labor.

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