On January 16, 2020, the U.S. Department of Labor (“DOL”) issued its final rule regarding joint employment under the Fair Labor Standards Act (“FLSA”). The new rule will go into effect on March 16, 2020 and creates a four-factor balancing test for determining joint employer status. The question of joint employer status can become an issue when a company contracts to use the services of another company’s employees, such as a staffing agency, or when a company is a franchisor whose franchisees have employees. The four factors the DOL will examine are:
Does the potential joint employer:
- Have the ability to hire or fire the employee;
- Supervise and control the employee’s work schedule or conditions of employment to a substantial degree;
- Determine the employee’s rate and method of payment; and
- Maintain the employee’s employment records.
No single factor is determinative and the weight given to each factor will vary depending on the facts in each situation. However, the rule does make clear that merely maintaining employment records will not, in the absence of other factors, establish joint employer status. The final rule also makes it clear that the potential joint employer must actively exercise one or more of the four control factors. The ability to control these factors, if not actually exercised, is not enough to establish a joint employer relationship.
The final rule also indicates that the use of a franchise model does not make it more or less likely that a corporate franchisor will be considered a joint employer of its franchisees’ employees. Finally, the fact that a business requires a subcontractor, personnel provider, or franchisee to maintain policies that encourage legal compliance, such as requiring a personnel provider to maintain workplace safety or harassment policies, does not make joint employer status more likely, so long as the primary employer, not the contracting employer, is responsible for enforcing those policies.
The final rule replaces an aggressive and expansive standard used by the prior administration, so this change is a win for the business community. While Iowa employers should continue to be cautious and use best practices when using contracted personnel, the new rule reduces one area of risk associated with a franchise model or the use of staffing agency personnel.
In other DOL news, the agency continues issuing opinion letters at a rapid pace. We are only a month into 2020 and the DOL has already issued letters addressing: (1) the calculation of overtime pay for a non-discretionary lump sum bonus paid at the end of a multi-week training period; (2) if per-project payments satisfy the salary basis test for the administrative, executive and professional exemptions and (3) if a combined general health district must count employees of the County where the district is located for purposes of determining FMLA eligibility. Stay tuned for more as we get further into 2020!
Sara Sidwell recently joined Shuttleworth & Ingersoll, P.L.C. after spending six years as in-house employment counsel for a large financial services company and a multi-national furniture manufacturer and retailer. Sara advises and represents clients in all aspects of employment law, including discrimination and harassment, disability management, workforce reductions or restructuring, employment contracts, wage and hour compliance, background checks and FCRA compliance, performance management, noncompetition claims, commission agreements and claims, safety issues, workers’ compensation, and whistleblower claims. As a former in-house attorney for two large, multi-state corporations, Sara has significant counseling experience associated with all aspects of the employment relationship, from hire through termination, as well as conducting complex workplace investigations and providing manager and employee training. Sara handles charges before federal and state administrative agencies as well as all aspects of employment litigation, from the initial investigation through trial.