Joint Employer Status: Department of Labor Announces Final Rule

“You’re not the boss of me.”  If I had a penny for every time I heard that from one of my kids, I could afford to pay someone else to watch them while I hit nine holes!  However, the truth of the matter is that they are right to be a little confused.  After all, they have two parents intent on enforcing rules that may sometimes seem contradictory.  Unintentionally, the right hand doesn’t always talk to the left hand, and vice versa.  Then, what’s left over is a pair of kids looking at each other and knowing something doesn’t add up.  If you are an employer, this might be oddly reminiscent of your experience with joint employer status.

Image of a little boy crying on his father's lap.
Photo by Ilde Cook | SheHeWe Photography

If that’s what you were thinking, then you are justified in feeling that way.  In fact, parenting isn’t all that different from an employee who works for more than one unrelated business entity.  It can be confusing for the employee and employer alike to know where to turn in a joint-employer situation.  Lucky for us, the U.S. Department of Labor (DOL) recently announced its final rule on the topic.  So, here is what you need to know about the joint employer status, and the DOL’s final rule.

What is joint employment status?

Joint employment status refers to an employee who works for more than one unrelated business entity.  This means at least two business entities control and supervise the employee.  Now, the important thing is that in order to have joint employment status, the two entities have direct control over the employee, and are dually liable for the wellbeing of the employee, in terms of aspects related to the FLSA.   

Still, joint employer status is much more complex than only this, so let’s move on.

What is an example of joint employer status?

A good example of a joint-employer situation is the relationship between a staffing agency and a company that partners with a staffing agency to recruit workers.

In order to better envision this type of relationship, let’s look at a scenario. 

Maria is a hardworking mother of three.  Unfortunately, the printing company where she had worked for the past five years recently laid her off.  She is a skilled administrative assistant, and she didn’t want to lose time without an income, so she went to a nearby staffing agency.  The agency promised that, considering her skillset, it would be easy to place her in a position.  Furthermore, they felt confident that they could place her rather promptly.

So, after going through the proper screenings, interviews, and background checks, Maria was placed at a digital content creator, just minutes from her house.  The staffing agency told her they would be in touch daily to check in with her.  Maria’s new boss was eager to get her started, and engaged in showing her the ropes.  While Maria was happy to have a new job, she was unsure about whom she ultimately reported to.  Additionally, she wondered who would pay her, and where she would go if she had any questions about payroll and time off, among other things.

Why might this be confusing?

As you can see from Maria’s scenario, joint employment can be clear as mud.  On one hand, she has a staffing firm checking on her.  On the other hand, she has a boss who is very involved with her duties at her new job.  It would be hard to know where to turn when in doubt.

So, the reason why joint employment status can be confusing is that some employers haven’t been clear on the criteria that determines joint employer status.  In other words, in some cases employers have thought they are in a joint employer relationship, when in fact they are not, and vice versa.  Consequently, this really becomes a problem in situations where something goes awry with the employee, since it can be difficult to determine responsibility.  It can be a mess when both parties put their hands up and say, “It wasn’t me.” Nevertheless, if an employee wasn’t paid properly or either entity didn’t comply with certain labor laws, both entities could be jointly liable.

What is the joint employer final rule?

Now, the DOL, recognizing the agony that the joint employer status causes employers, decided to do something about the swirling confusion.  Even though they already had regulations in place, they felt they could do more.  In fact, after extensive discussion, they announced on January 12, 2020 that they had settled on a final rule on the topic.  The purpose of the final rule is to help guide employers when determining joint employer status.

Without further ado, here is an overview of the line items included in the new final rule.

In the new final rule, the DOL:

  • Clarifies the definition of joint employer status, where an employee performs work that dually benefits another individual or entity.
  • Conducts a four-facto balancing test to determine the relationship between the employer and employee.
  • Clarifies the question of an employee’s “economic dependence” with a supposed joint employer.
  • Highlights franchises and other special business models, indicating how they might be joint employers.
  • Illustrates joint-employer scenarios as examples for employers to use as guidance.

What is the four-facto balancing test?

So, your ears probably perked up when you heard “four-facto balancing test.” 

Four-Factor Balancing Test:

  1. Has authority to hire and fire employees.
  2. Controls employees’ work schedules, and has influence over an employee’s conditions of employment.
  3. Determines pay rate and payment method.
  4. Keeps employment records for that employee.

When does the joint employer final rule go into effect?

Now, as we know with all new legislation and amendments, there is going to be an effective date.  The DOL determined that the start date for the final rule is March 16, 2020.  So, while this date may be more than a month off, it’s going to be upon us in no time.  Remember, time flies when you’re having fun determining joint employer status!

How is joint employer status like parenting?

As you can see, joint employer status is very much like parenting because when all is said and done, both entities are responsible for doing right by the employee.  So, it’s imperative that you determine whether you are a joint employer. Fortunately, the DOL’s final rule has minimized the uncertainty.  Now, hopefully you will feel confident in your joint employer status.  Furthermore, instead of your employees thinking “You’re not the boss of me,” hopefully they are replying to you with, “Ok, boss!”

Black and white photo of a smiling family.
Photo by Ilde Cook | SheHeWe Photography

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This is not meant to provide legal counsel or advice. Every situation is different. Please contact an HR professional or employment attorney before taking any action.

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