The federal Department of Labor issued a final rule on Jan. 12, 2020, updating what it means to be a joint employer.
The National Restaurant Association staff members on Jan. 13 said this final rule is a win for members and “brings uniformity and needed certainty.” (Click here to watch a video detailing the challenges joint-employer caused for restaurants prior to the final rule.)
According to the department:
“The Department of Labor announced a final rule to revise and update its regulations interpreting joint employer status under the Fair Labor Standards Act (FLSA). The final rule provides updated guidance for determining joint employer status when an employee performs work for his or her employer that simultaneously benefits another individual or entity, including guidance on the identification of certain factors that are not relevant when determining joint employer status. The effective date of the final rule is March 16, 2020.
In the final rule, the department:
- 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;
- 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;
- Clarifies that an employee’s ‘economic dependence’ on a potential joint employer does not determine whether it is a joint employer under the FLSA;
- 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; and
- provides several examples applying the department’s guidance for determining FLSA joint employer status in a variety of different factual situations.”
The new four-factor balancing test includes:
- 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.