DEEP DIVE! New 4 Factor Test for Joint Employment

What this episode covers

Proposed joint employer rule includes 4-factor test: hiring and firing, supervision and control, payment, and recordkeeping Noting it has not meaningfully revised its joint employer regulation since 1958, the Labor Department has announced via press release a proposed rule to revise and clarify the responsibilities of employers and joint employers. The FLSA allows joint employer situations where an employer and a joint employer are jointly responsible for the employee’s wages. DOL proposes a four-factor test to consider whether the potential joint employer actually exercises the power to: Hire or fire the employee; Supervise and control the employee’s work schedules or conditions of employment; Determine the employee’s rate and method of payment; and Maintain the employee’s employment records. The proposal would ensure employers and joint employers clearly understand their responsibilities to pay at least the federal minimum wage for all hours worked and overtime for all hours worked over 40 in a workweek, the agency said. Reduce uncertainty. “This proposal will reduce uncertainty over joint employer status and clarify for workers who is responsible for their employment protections,” said Secretary of Labor Alexander Acosta. “Providing public notice and comment is the best way to move forward with another significant deregulatory proposal.” In June 2017, the DOL withdrew the previous administration’s sub-regulatory guidance regarding joint employer status, which did not go through the rulemaking process that includes public notice and comment. DOL examples for comment. The proposal also includes a set of joint employment examples for comment that would further assist in clarifying joint employer status, notably in the franchise industry. DOL’s examples include: (1) Example (nationwide restaurant franchise): An individual works 30 hours per week as a cook at one restaurant establishment, and 15 hours per week as a cook at a different restaurant establishment affiliated with the same nationwide franchise. These establishments are locally owned and managed by different franchisees that do not coordinate in any way with respect to the employee. Are they joint employers of the cook? Application: Under these facts, the restaurant establishments are not joint employers of the cook because they are not associated in any meaningful way with respect to the cook’s employment. The similarity of the cook’s work at each restaurant, and the fact that both restaurants are part of the same nationwide franchise, are not relevant to the joint employer analysis, because those facts have no bearing on the question whether the restaurants are acting directly or indirectly in each other’s interest in relation to the cook. (2) Example (same owner, multiple restaurants): An individual works 30 hours per week as a cook at one restaurant establishment, and 15 hours per week as a cook at a different restaurant establishment owned by the same person. Each week, the restaurants coordinate and set the cook’s schedule of hours at each location, and the cook works interchangeably at both restaurants. The restaurants decided together to pay the cook the same hourly rate. Are they joint employers of the cook? Application: Under these facts, the restaurant establishments are joint employers of the cook because they share common ownership, coordinate the cook’s schedule of hours at the restaurants, and jointly decide the cook’s terms and conditions of employment, such as the pay rate. Because the restaurants are sufficiently associated with...