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By: Janet Barringer
A new rule goes into effect March 16, 2020, per the Department of Labor (DOL), as to when a “joint employer” is equally liable under federal wage and hour laws. This new rule is an attempt to limit “joint employer” liability. The determination as to whether a scenario is one of joint employment turns on a new four-factor test.
The test asks DOES THE BUSINESS IN QUESTION:
According to the DOL, no single factor is dispositive in determining joint-employer status. Instead, the weight given to each of the four factors depends on the circumstances at hand. Most likely, Courts will decide the balancing test among these four factors, as the DOL has provided little guidance on how to do so.
Beware of Catch-all Provision
Employers should be aware there is an alternative “catch-all” provision in the DOL rule which states factors not specifically included in the four-part test may be considered in the determination of whether a joint employment relationship exists. However, this catch-all provision only applies if the potential joint employer exercises “significant control” over the terms and conditions of the employee’s work. The practical application of this catch-all provision remains to be seen, and will likely depend on Courts’ interpretation.
Employers Excluded under New Rule
The DOL helpfully included in its guidance several common business arrangements not factored into its analysis of a potential joint employment relationship. These include the following factors:
Safeguards for Employers to Take Before March 16, 2020
Before the new rule for joint employer goes into effect on March 16, 2020, businesses should take account of their procedures to confirm they are protected under the rule’s four-factor test. Employers should also consider working with their counsel to determine, and create, if necessary, business changes to maximize their ability in taking advantage of the new joint employment standard. The updated rule may provide more flexibility and certainty when it comes to employers’ wage and hour responsibilities.
If you have any questions or would like more information, please contact Janet Barringer in the National Labor & Employment Practice Section at [email protected].