U.S. DOL Clarifies Joint Employer Standard

By Lehr Middlebrooks Vreeland & Thompson, P.C.

February 7, 2020

The United States Department of Labor’s New Year’s gift to employers is its final joint employer rule, which becomes effective on March 16, 2020. Rather than focusing on the economic model of the relationship (franchisor – franchisee), DOL announced a four-part test to determine whether joint employment exists:

1. Do both employers have the right to hire and fire the employee?
2. Do both employers supervise and control the employee’s conditions of employment, work schedule, job assignment and training?
3. Do both employers determine the employee’s rate of pay, including discretionary and nondiscretionary bonuses?
4. Do both employers maintain the employee’s records, such as hours worked, I-9’s and other such information?

Not all four factors must be met in order for joint employment to exist. DOL stated that no one factor is dispositive in determining joint employer status, and the appropriate weight to give each factor will vary based on the circumstances.

DOL focused on the actual “control” that an employer has over an employee. The “right to control” does not create joint employment, according to DOL. “The reserved right to act can play some role in determining joint employment status, though there still must be some actual exercise of control.” DOL also mentioned several factors which are not dispositive one way or the other about joint employment:

1. Franchisor/franchisee relationship.
2. One company sells another company’s products under the producer’s brand name.
3. Policies intended as compliance or to promote a constructive work environment, such as safety policies, no discrimination/harassment/retaliation and ethics/morality.
4. Where one employer may provide business practices benefits to the other, such as sample applications, handbooks and the like.
5. Where one employer permits the other to operate on its premises.
6. Where one employer suggests to the other practices or processes which may improve its business, such as a franchisor to a franchisee.
7. A requirement that the work performed by one employer meets the quality standards determined by the other.

A business relationship that is more difficult to overcome with joint employment is the temporary service/customer relationship. The new DOL joint employer standard creates an opportunity to assess and prevent a joint employment outcome. Employers who use temporary services should have those contracts reviewed so that the guidance that DOL offers with its examples is incorporated into contract terms.