When someone performs parallel work for two different companies, are both companies responsible for complying with federal labor laws?
The answer can have serious implications in a variety of scenarios, including when an employee is owed overtime pay and whether an additional company is obligated to pay it. It also determines whether an additional company is responsible for any assessed penalties if they violate federal labor law by having a young employee perform dangerous labor.
That’s why the United States Department of Labor is taking steps to provide greater clarity. This week, we published a proposed rule — the Joint Employer Status Under the Fair Labor Standards Act, Family and Medical Leave Act, and Migrant and Seasonal Agricultural Worker Protection Act — designed to clear up confusion and demystify joint employment for both employers and employees.
Published in the U.S. Federal Register on April 22, our proposed rule seeks to eliminate confusion and uncertainty surrounding when joint employment applies and to clarify the scope of joint employment in the regulatory space. It also aims to improve labor law compliance by defining established roles for employers and employees. Furthermore, the proposal would simplify the department’s enforcement efforts, reduce burdensome litigation, and promote greater uniformity in court analyses.
Joint employment occurs when two or more employers share legal responsibility for the same employee and is especially common in industries like staffing, franchising, construction, and farming. When an employee is subject to joint employment, all employers involved are jointly liable for ensuring the employee receives the correct wages and benefits, including overtime.
To provide greater clarity, the proposed rule includes distinct standards for different joint employment situations. The most important of these is “vertical” joint employment in which one company employs a worker whose labor may also benefit another company. This leads to a dilemma: should the other company be considered an additional employer?
To address this situation, the department is proposing a modified version of the “Bonnette” test — something that would help employers and the department’s investigators determine whether joint employment applies.
Under the proposed standard, joint employment would be determined by assessing whether the potential joint employer: hires or fires the employee; supervises and controls the employee’s work schedule or employment conditions to a substantial degree; determines the employee’s rate and method of payment; and maintains the employee’s employment records.
These factors are the closest we have to a common denominator applied by courts when determining joint employment under the Fair Labor Standards Act. By synthesizing these criteria, the department aims to encourage greater consistency and uniformity for stakeholders — including employees themselves.
In addition to the test, we’ve introduced guidance that parties generally should not consider certain criteria that are confusing, irrelevant, or even contradictory. Some courts, for example, have considered extraneous factors that should only matter in understanding whether a worker is an employee or independent contractor — an entirely separate issue. The proposal also provides that certain common business models and practices, such as providing a sample employee handbook or requiring anti-harassment training, don’t by themselves make joint employer status more likely.
By providing clear and uniform standards through this proposed rule, the Department of Labor anticipates less time and money will be spent trying to determine whether joint employment applies. We’re also confident it will help employers avoid labor law violations.
Releasing this proposal is just the first step in the rule-making process. In the weeks to come, I invite all parties to provide public comments to the department during the 60-day comment period — open until June 22 at regulations.gov. With your support — and under President Trump’s strong leadership — the Department of Labor will continue to put American workers first each and every day.
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