U.S. Department of Labor Unveils New Joint Employer Rule

Date: February 06, 2020

In January, the U.S Department of Labor (DOL) announced its new “joint employer” rule, which narrows the definition of joint employer under the Fair Labor Standards Act (FLSA) and the federal wage and hour law. The new rule provides much-needed clarity for small businesses.

The new rule takes effect on March 16 and will limit the situations under which employers, such as a contractor and a subcontractor, can be considered to jointly employ a group of workers under the FLSA, which makes both parties responsible for wage and hour violations such as unpaid overtime.

This is the first significant update to the joint-employer rule in more than 60 years – a win for small businesses.

The rule includes a four-factor balancing test to determine whether businesses share liability for FLSA wage and hour violations. To determine whether a second company is a joint employer of a worker, DOL will examine whether the presumed joint employer 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.

In a statement, Karen Harned, Executive Director of the NFIB Small Business Legal said, “Small and independent businesses need a standard for determining joint-employer status that is easier to understand, simpler, and less expensive to administer. Citing NFIB, the Department of Labor noted the concerns and needs of small business owners, such as the fact that ‘small and independent businesses cannot afford the lawyers, accountants, and clerks that larger companies use to decipher complex regulations and implement costly business systems necessary to comply with the regulations.’”

NFIB filed comments in support of DOL’s proposal to simplify the test for determining joint-employer status. NFIB argued that a less flexible and broader joint-employer standard would discourage large businesses, concerned with additional wage and hour liability, from hiring small companies.

On Tuesday, March 3, 2020, at 1:00 p.m. ET, DOL will offer a public webinar to provide compliance assistance on the final rule. Register for DOL Webinar on the Joint Employer Final Rule.

Employers with questions can also contact the NFIB Small Business Legal Center at 800-NFIB-NOW. Employers can also download a copy of the NFIB Guide to Wage and Hour Law, which provides additional information on FLSA rules including DOL’s new overtime rule.

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