FLSA Update: Department of Labor Revises Joint Employment Regulations under the Fair Labor Standards Act

The Fair Labor Standards Act’s regulations are changing again. These changes involve joint employment under the FLSA, which is important because joint employers are individually and jointly responsible for FLSA compliance and legally liable for violations. According to the Department of Labor, the revised regulations will reduce uncertainty over joint employer status and reduce litigation.

Assume Susan, a non-exempt employee, worked 35 hours for Acme and 35 hours for Globex in a single workweek. If Acme and Globex are deemed joint employers, each would be individually and jointly responsible for the 30 hours of overtime compensation that Susan is due. Otherwise, Susan could sue Acme, Globex or both for violating the FLSA.

The revised regulations continue to recognize two potential scenarios in which an employee may have joint employers. The first involves an employee who performs work for Employer A that simultaneously benefits another individual or entity (Employer B). The DOL adopted a four-factor balancing test to determine whether Employer B exercises sufficient direct or indirect controls over the employee to qualify as a joint employer. The four factors are whether Employer B:

  • 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.

Employer B must actually exercise direct or indirect control over the employee. Indirect control is exercised if Employer B gives mandatory directions to Employer A that directly controls the employee. The appropriate weight to give each factor will vary depending on the circumstances. Additional factors may need to be considered in some cases, but some factors are not relevant, such as whether a potential joint employer is franchisor or whether there is a contract between potential joint employers.

No substantive changes were made for determining joint employment status in the second scenario, which involves employees who work one set of hours for one employer and a separate set of hours for another. If the employers are acting independently with respect to an employee’s employment, they are not joint employers. If they are sufficiently associated with respect to an employee’s employment, they are joint employers and must aggregate all hours worked to determine FLSA compliance.

The revised regulations, which are effective March 16, 2020, include examples for determining joint employment in various factual circumstances. Employers should pay attention to circumstances that may create a joint employment relationship and should consult their attorney to avoid costly FLSA violations. Employers should also consider Employment Practices Liability Insurance to protect against various employment-related claims.

The Human Equation prepares all risk management and insurance content with the professional guidance of Setnor Byer Insurance & Risk.

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