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United States Department of Labor: Updated Final Rule on Joint Employer Status under the Fair Labor Standards Act

What is the Fair Labor Standards Act?

The Fair Labor Standards Act (“FLSA”) is a federal law that establishes minimum wage and overtime requirements that affect private and public employers alike. Under the FLSA, an employer must pay non-exempt employees at least the federal minimum wage for every hour worked and overtime for every hour worked in excess of forty (40) in a given workweek. To subject an entity to liability for paying minimum wage or overtime, an employee must demonstrate the entity and/or individual that failed to pay in accordance with the FLSA is an “employer” within the meaning of the FLSA.

FLSA “Employer” Definition

Under the FLSA, an employer is defined as “any person acting directly or indirectly in the interest of an employer in relation to an employee.” However, in addition to an employer, an employee may have one or more joint employers. The U.S. Department of Labor (“DOL”) in its Fact Sheet entitled “Final Rule on Joint Employer Status under the Fair Labor Standards Act,” defined “joint employer” as any additional ‘“person” (i.e., an individual or entity) who is jointly and severally liable with the employer for the employee’s wages.”

One “Joint Employer” Scenario and the Relevant and Irrelevant Factors

In the Fact Sheet, the DOL notes several example scenarios that were provided in the updated Final Rule regarding joint employer status under the FLSA. One scenario involves an employee performing work for the employer that simultaneously benefits another individual and/or entity. The DOL’s Final Rule adopted a four (4) factor balancing test under this scenario for determining whether the potential joint employer directly or indirectly controls the employee. This test assesses whether the potential joint employer: (i) hires or fires the employee; (ii) supervises and controls the employee’s work schedule or conditions of employment to a substantial degree; (iii) determines the employee’s rate and method of pay; and (iv) maintains the employee’s employment records.

Whether an individual and/or entity is a joint employer depends upon the individual facts of a case and the weight given to each factor in those particular circumstances. However, a key factor is whether a potential joint employer exercises significant control over the terms and conditions of the employee’s work. In addition to notating several relevant factors, the DOL also noted a number of irrelevant factors in the joint employer determination. These factors include but are not limited to the following:
 

  • Whether the employee is dependent on the potential joint employer;
  • Operating as a franchisor or entering into a brand and supply agreement, or using a similar business model;
  • The potential joint employer’s contractual agreements with the employer requiring the employer to comply with its legal obligations or to meet certain standards to protect the health or safety of its employees or the public;
  • The potential joint employer’s contractual agreements with the employer requiring quality control standards to ensure the consistent quality of the work product, brand, or business reputation; and
  • The potential joint employer’s practice of providing the employer with a sample employee handbook, or other forms, allowing the employer to operate a business on its premises (including “store within a store” arrangements), offering an association health plan or association retirement plan to the employer or participating in such a plan with the employer, jointly participating in an apprenticeship program with the employer, or any other similar business practice.

If you feel your rights under the Fair Labor Standards Act have been violated, or if you have any other questions regarding your employment rights, please contact the experienced Birmingham employment law attorneys at Wrady Michel & King. You can contact us either online or by calling us at (205) 319-9724. We are here to serve you.