The Department of Labor Rescinds Previous Administration’s Joint Employer Rule: What Employers Need to Know
August 24, 2021
On July 29, 2021, the Department of Labor (“DOL”) issued its final rule rescinding the Trump-era joint employer rule, “Joint Employer Status under the Fair Labor Standards Act,” which took effect in March 2020. The previous joint employer rule implemented a standard inconsistent with the statutory language of the Fair Labor Standards Act (“FLSA”) and Congressional intent. By rescinding the previous rule, the DOL advances an employee-friendly joint employer rule which will ensure more workers receive minimum wage and overtime protections of the FLSA. The final rule will become effective on September 28, 2021.
In recent weeks, we have been advising our clients on issues related to the utilization of third parties, staffing companies, and/or professional employer organizations (“PEOs”) to manage, staff, or accentuate their workforce. Certainly these supplemental workforce arrangements are fairly customary and are not necessarily problematic; however, it is important for our clients to be aware of the legal concept of “joint employment.” Joint employment occurs when two or more entities are so intertwined in managing a group of workers, that each entity may be deemed the employer for legal purposes.
You should be aware that the arms-length nature of the relationship between your entity and workers that are not technically your employees may not necessarily create a layer of protection or separation from legal liability associated with those workers. For example, it may be possible for a worker supplied by a staffing agency (and is technically employed by that staffing agency) to sue your organization for discrimination or OSHA violations. In addition, you should be aware many employment-related laws are triggered by a certain number of employees and the joint employer concept will add these additional workers to your totals (i.e., Title VII of the Civil Rights Act (15 employees), Americans with Disabilities Act (15 employees), Age Discrimination in Employment Act (20 employees), Family and Medical Leave Act (50 employees), etc.).
Below are some questions to help you determine whether you may be in a joint employment relationship with another entity:
- Do you utilize a staffing company or third party to identify, interview, or hire employees and/or contractors?
- Are your employees and/or contractors compensated (in whole or in part) by a third party for work performed at your place of business or operations?
- Do you rely on another company, entity or PEO, to provide training, manage human resources, payroll or benefits, for your employees and/or contractors?
- Does another company or organization exercise control over the day-to-day work of your employees and/or contractors (i.e.: set schedules, assign work projects, issue disciplinary actions, maintain personnel records, etc.)?
If the answer is “yes” to any of the above questions, then you may be engaged in a joint employment relationship with another entity. We are happy to speak with you to help you navigate the potential risks, liabilities, and questions regarding joint employment. Contact us today!