On April 1, 2019, the U.S. Department of Labor’s (DOL) Wage-Hour Division (WHD) proposed a new rule governing employers in joint employer situations for purposes of enforcing the Fair Labor Standards Act, which governs wage and hour issues. Such situations can arise when an employer engages a staffing company to provide temporary employees or where a franchisor such as McDonald’s may employ the same employees at multiple locations.

The proposed rule focuses on whether a potential joint employer actually exercises, directly or indirectly, the power to:

• Hire or fire an employee;
• Supervise and control an employee’s work schedule or conditions of employment;
• Determine the employee’s rate and method of payment; and
• Maintain the employee’s personnel records.

The proposed rule also offers several examples of how the DOL would apply the analysis, of which here are two:

1. An office park company hires a janitorial service company to clean the building after-hours, pursuant to a contract, where the office park pays the janitorial service company a fixed fee but reserves the right to supervise the job performance of the janitors. The office park does not set the salaries or schedules of the janitors and does not in fact supervise their performance.

   Under the proposed rule, the office park is not a joint employer. The office park does not hire or fire the janitors or set their pay or schedules. Simply having the contractual right to control performance is not indicative of whether the office park is a joint employer if the right is not exercised.                                                      

2. A packaging company obtains workers from a staffing company on a daily basis.  The packaging company determines each worker’s hourly pay rate, supervises their work and analyzes expected customer demand to continuously adjust the number of workers it requests and the specific hours for each temporary employee.

   Under the proposed rule, the packaging company would be a joint employer because it exercises sufficient control over the temporary employees’ terms and conditions of employment.

While the proposed rule aims to provide clearer guidance to employers, as the examples show, it still requires careful analysis of each situation. Note that the proposed rule will not apply to other divisions of the DOL, such as the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, the Office of Federal Contract Compliance Programs, the National Labor Relations Board, and the Pension Benefit Guaranty Corporation, unless those other divisions go through their own rule-making process. Additionally, some federal courts may question whether the proposed rule would warrant judicial deference since it is more “employer-friendly” than what the WHD had previously adopted.

The DOL is taking comments on this proposed rule until June 10, 2019, which can be submitted either electronically through the Federal eRulemaking Portal at http://www.regulations.gov or via mail to the Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW, Washington, DC 20210. A comment should be submitted through only one of the methods and must include the agency name and Regulatory Information Number (RIN) 1235-AA26. All comments will become part of the public record.

The Taft Labor and Employment group is available to answer any questions you may have on joint employer or other employment law issues.