DOL Signals Change to Joint Employer Rule

On February 23, 2021, the DOL sent a new proposed regulation on joint employment status under the Fair Labor Standards Act (FLSA) to the White House Office of Information and Regulatory Affairs (OIRA) for regulatory review. 

Background

In March 2020, the DOL issued a final rule regarding the determination of joint employer status under the FLSA. The rule defined a joint employer as any additional “person” (i.e., individual or entity) that is jointly and severally liable with the employer for the employee’s wages.

The DOL’s final rule established a four-factor balancing test for determining joint employer status when a potential joint employer benefits from work by another employer’s employee(s). The balancing test was taken from the Ninth Circuit’s 1983 ruling in Bonnette v. California Health & Welfare Agency, and assesses whether the potential joint 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.

On September 8, 2020, a New York federal district court struck down a significant portion of the DOL’s joint employer rule, making it more likely that certain employers would be considered joint employers and exposed to liability for employee wage and hour violations under the FLSA. 

What’s Next

The DOL’s new proposed regulation on joint employment status under the FLSA must be approved by ORIA before it is released, so its contents remain under wraps for now. However, it is expected that the Biden administration will reverse the DOL’s final rule on joint employment status under the FLSA issued under the Trump administration. Just what that will look like remains unclear for now; however, the HBL team will continue to monitor developments and provide future information to employers potentially affected by this change.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 678-439-6236.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.
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