On March 16, 2020, the Department of Labor’s final rule updating regulations on joint employer status under the Fair Labor Standards Act (FLSA) will go into effect. The final rule provides new guidance for determining joint employer status when an employee performs work for an employer that simultaneously benefits another entity or person.

The FLSA requires covered “employers” to pay their employees at least the federal minimum wage and overtime for every hour worked over 40 in a workweek. To be liable for paying minimum wage or overtime, an entity must be an employer, and under the FLSA, an employee may have one or more joint employers. A joint employer is any additional “person” (i.e., an individual or entity) who is jointly and severally liable with the employer for the employee’s wages.

The new rule specifies that when an employee performs work for the employer that simultaneously benefits another person, that person will be considered a joint employer when that person is acting directly or indirectly in the interest of the employer in relation to the employee.  The rule also provides a four-factor balancing test to determine when a person is acting directly or indirectly in the interest of an employer in relation to the employee. These factors include whether the potential joint employer: 

  • 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; and
  • maintains the employee’s employment records.

Whether a person is a joint employer will depend on the facts in a particular case.  In addition, the rule clarifies that an employee’s “economic dependence” on a potential joint employer does not determine whether it is a joint employer under the FLSA. It further specifies that an employer’s franchisor, brand and supply, or similar business model and certain contractual agreements or business practices do not make joint employer status under the FLSA more or less likely. The rule also provides examples of how the Department’s joint employer guidance should be applied in various circumstances.