On April 23, the U.S. Department of Labor’s (DOL) Wage and Hour Division issued a proposed rule seeking to establish a unified “Joint Employer” test under the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). 

The proposed rule sets forth two standards of joint employment: vertical joint employment and horizontal joint employment. In either scenario, a determination that two or more entities are joint employers means that they are jointly and severally liable for compliance with the FLSA, i.e., responsible for complying with overtime provisions and ensuring minimum wage is paid for all hours worked by the employee in the workweek. 

The proposed rule is also incorporated by reference into the FMLA and MSPA for purposes of determining compliance with those acts. For purposes of the FMLA, all employees who are jointly employed must be counted in determining employer coverage and employee eligibility. However, only the primary employer is ultimately responsible under the FMLA for providing required notices, leave, and health benefits.

Defining the Joint Employment Scenarios

A vertical joint employment scenario involves an employee typically working one set of hours for two or more employers who simultaneously benefit from the employee’s work. The proposed rule sets out four factors for consideration, each of which depends on whether the employer:

1. Hires or fires the employee
2. Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree
3. Determines the employee’s rate and method of payment, and
4. Maintains the employee’s employment records

The DOL has clarified in the proposed rule that each of the four factors may be relevant, but a unanimous finding on all four in either direction would establish as a “substantial likelihood” under the proposed rule regarding joint employment status. The proposed rule also permits the consideration of additional factors when relevant, such as whether the employee is economically dependent on the potential joint employer for work or has a continuous, repeated relationship with a person that benefits from the individual’s work. However, these additional factors will carry less weight.

The proposed rule also specifically excludes from the vertical analysis certain general business models and practices, such as providing a sample handbook or other forms to another employer; contractual agreements related to health, safety, or legal compliance (such as anti-harassment policies, background checks and workplace safety protocols); joint participation in an apprenticeship program; brand and supply agreements; and implementing quality control standards. Additionally, factors that are primarily prohibitive of a worker’s status as employee or independent contractor (skill/judgment required, opportunity for profit/loss, and whether equipment or materials are required) will have no relevance. 

Alternatively, the horizontal joint employment scenario involves an employee working separate hours for two or more employers in the same workweek when those employers are sufficiently associated with each other and the employment of the employee. The test for “sufficiently associated” employers includes the following three factors:

1. There is an arrangement between them to share the employee’s services
2. One employer is acting directly or indirectly in the interest of the other employer in relation to the employee, or
3. They share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer

Unlike the vertical analysis, the proposed rule does not specifically exclude from consideration certain relationships and business models, contractual agreements between parties, or the provision of handbooks and forms. Instead, the proposed rule states only that these facts do not make joint employer status more or less likely. 

Next Steps

The public will have 60 days to comment on the proposed rule. After the comment period closes, the DOL may revise the rule based on public input before issuing a final version. Employers should be aware, however, that even after finalization, the regulations serve as interpretive guidance for the Wage and Hour Division’s enforcement activities and do not carry the force of binding judicial precedent.

Federal circuit courts have historically applied varying standards to joint employment questions — most notably the “economic realities” test, which examines the totality of the working relationship, and narrower common-law agency tests that focus more heavily on the right to control the manner and means of work. The proposed rule’s multi-factor framework appears to draw from the economic realities tradition, but it remains to be seen whether courts will defer to the DOL’s formulation (if adopted) or continue charting their own course.

If you have questions about the proposed rule or need assistance submitting comments to the DOL, please contact the author.