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The U.S. Department of Labor (“DOL”) proposed a new rule to establish a single standard for determining joint employer status. The rule would apply across multiple federal laws, including the Fair Labor Standards Act, the Family and Medical Leave Act, and the Migrant and Seasonal Agricultural Workers Protection Act. The goal is to replace inconsistent court interpretations with a universal standard.
The proposed rule distinguishes between horizontal and vertical joint employment.
Vertical joint employment arises where a worker is formally employed by one entity but is economically dependent on another entity that benefits from the work, such as in staffing arrangements. For purposes of vertical joint employment, the DOL proposed a four-factor test to assess whether a business exercises sufficient control over the worker to establish itself as a joint employer. The analysis considers whether the potential joint employer:
- Hires or fires the employee;
- Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
- Determines the employee’s rate and method of payment; and
- Maintains the employee’s employment records.
A strong showing across these factors may establish joint employer status.
Horizontal joint employment exists where:
- An employee works separate hours for two or more employers in the same workweek; and
- Those employers are sufficiently associated with respect to the employment of that employee
Unlike vertical joint employment, horizontal joint employment is not established by a fixed multi-factor test. Instead, it is based upon an evaluation of the relationship between the entities based on the totality of the circumstances. Courts and the DOL will look at factors such as common ownership, overlapping management, or coordinated operations in determining whether employers are sufficiently associated.
The DOL noted that business relationships unrelated to the employment of specific employees, such as sharing a vendor or operating under the same franchise brand, are not sufficient on their own to establish joint employer status.
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