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Joint employer rule provides clarity but may be overturned by courts


The proposed joint employer regulation announced by the U.S. Department of Labor last week will give employers needed clarity and guidance if promulgated, say experts.

But they also warn the rule would provide only interpretative guidance to the Fair Labor Standards Act and could be overruled by courts. It could also differ from the interpretations put forth by other federal agencies and would not nullify regulations promulgated by individual states that have different standards for who should be considered a joint employer.

The DOL said its proposal “would ensure employers and joint employer employers clearly understand their responsibilities to pay at least the federal minimum age for all hours worked and overtime for all hours worked over 40 in a workweek,” according to a statement issued last week.

It said the department is proposing a clear, four-factor test “based on well-established precedent” that would 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.

Secretary of Labor Alexander Acosta said in a statement the proposal “will reduce uncertainty over joint employer status and clarify for workers who is responsible for their employment protections.”

The public has 60 days from April 1 to comment on the proposal.

Employers have been left without any clear guidelines under DOL regulations as to who is considered a joint employer since controversial guidance issued by the Obama administration in 2015 that expanded the definition of employees was withdrawn by the Trump administration in 2017. 

“It’s a solid proposal that balances the interests between employers and workers and goes back to what the law has been for many years, even in California,” said Tammy D. McCutchen, a principal with Littler Mendelson P.C. in Washington.

The proposal provides some clarity and “is far better than the prior position the DOL took where everyone would be potentially a joint employer,” said Jonathan A. Segal, a principal with Duane Morris LLP in Philadelphia.

“If I’m a franchisor, I’m pretty happy with this,” said Eric B. Meyer, a partner with FisherBroyles LLP in Philadelphia. Franchisors did not mean to be on the hook for their franchisee’s employment practices, Mr. Meyer said.

The standards enunciated in the proposal are based on a 1983 case by the 9th U.S. Circuit Court of Appeals in San Francisco, Bonnette v. California Health & Welfare Agency, Ms. McCutchen said. “It’s a test the Obama administration had abandoned” without any rule-making, she said.

James J. Plunkett, senior government relations counsel with Ogletree, Deakins, Smoak Nash & Stewart P.C. in Washington, said he believes because the proposal reflects the Bonnette decision, with which many are already familiar, and which other circuits have applied in their own decisions, there is a “good potential” the final DOL regulation will be close to what was proposed.

Brendan Sweeney, of counsel with Jackson Lewis LLP in Melville, New York, said, however, “It’s a positive development for employers, but they all need to understand it doesn’t have the force of law because it’s an interpretive regulation.” A court “could decide it’s not a valid interpretation of the Fair Labor Standards Act.”

Some courts have analyzed the issue of who is a joint employer under a different test and may continue to do so, “and they’re not bound to follow the DOL’s interpretation,” Mr. Sweeney said.

He added, however, “I would say the DOL’s interpretation Is, one, a very valid interpretation of the statute, and, two, it’s one, if adopted, would give a lot more certainty to businesses” and clear rules.

“It’s important to keep in mind this is only one government agency,” Mr. Segal said, adding that other federal agencies such as the U.S. Equal Employment Opportunity Commission could have different interpretations and some states “would have a more robust definition of joint employer,” he said.

“This is a good starting point for employers, but it should not be the stopping point in the analysis,” Mr. Segal said.

Experts also point to parallel action by the National Labor Relations Board, which in September proposed a joint employer ruling that was promulgated by the Obama administration. While the DOL issues rules under the FLSA, the NLRB issues its rules under the National Labor Relations Act.

Mr. Plunkett said, “The bottom line for employers is both of these proposals are proposing more streamlined and bright-lined tests” for employers.

Meanwhile, in other activity, the DOL’s long-awaited overtime proposal, which was issued in March, was apparently conceived to ensure as smooth an enactment process as possible, experts say. 




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