After several months of reviewing comments regarding a proposed update to joint employer regulations, the US Department of Labor (DOL), Wage and Hour Division issued its Final Rule: Joint Employer Part 791 on January 12, 2020. This development should be welcome news to Georgia employers. Many have struggled to identify an employee’s status in situations where multiple businesses may share responsibility for wage and hour issues under the US Fair Labor Standards Act (FLSA). Even human resources advocates pushing for an update asserted that the previous regulatory structure regarding joint employment was unclear and challenging in its application.
Though the Final Rule does provide some clarity, there are still many complex issues involved with joint employer relationships. It’s important to discuss your circumstances with a Georgia wage and hour attorney to ensure compliance, but an overview may be informative.
Summary of Legal Issues Regarding Joint Employment: The FLSA is a federal law that requires employers to comply with various regulations regarding minimum wage, overtime pay, recordkeeping, and youth employment standards. Instead of creating its own regulatory system, the Georgia Department of Labor follows FLSA regulations. In the context of joint employment, businesses faced challenges and confusion over which one would take responsibility for compliance with FLSA and rules established under the law. In response to these concerns, the DOL first adopted a definition regarding joint employment more than six decades ago.
With the passage of time came the development of very different business models as compared to the 1960s – especially with the increase of franchise arrangements and contractor entities. These structures raised questions on whether a franchisor was a joint employer for the workers hired by the franchisee. There was also considerable confusion on how companies should treat the employees of general and subcontractors.
For years, companies of all sizes and employment organizations had urged the DOL to update its rules on joint employment. On April 1, 2019, the DOL released a Notice of Proposed Rule Making and opened the matter up to comments. The process culminated on January 12, 2020, with adoption of the Final Rule, which brings the DOL definition of joint employment more current with modern business models.
Proposed Four-Part Test for Joint Employment: Under the new regulation, which becomes effective on March 16, 2020, the DOL clarified that businesses may be joint employers when an employee performs work that simultaneously benefits both. The Final Rule establishes a four-part test on the matter, so a company may be considered a joint employer where it has the power to:
- Hire and fire an employee;
- Supervise, monitor, and control the worker’s schedule or conditions of employment;
- Determine wages and how they’re paid; and,
- Maintain the employee’s employment records.
From these factors, you can see that it’s likely your company will NOT be considered a joint employer if you generally stay out of the daily employment and management decisions of the worker. However, if your business does meet these four factors, you’re likely to be defined as a joint employer – which means your company must comply with FLSA requirements regarding wages and hours.
Specific Factors that Do NOT Affect Joint Employment: The DOL’s Final Rule also goes on to describe situations that don’t point to joint employment, further clarifying the issue for companies. The following factors – considered on their own – do not impact the joint-employer analysis:
- Operating as a franchisor-franchisee company;
- A franchisor providing a sample employee manual to a franchisee;
- Allowing a business to operate a site on another company’s grounds, such as a restaurant functioning as a cafeteria;
- One company participating in an apprenticeship program offered by another business;
- Offering a health insurance, benefits, or retirement plan to another employer;
- Participating in a health insurance, benefits, or retirement plan with a separate company; and,
- Requiring a business partner to set minimum wages and employment policies regarding workplace safety, sexual harassment prevention, employment discrimination, and related issues.
Consult with a Georgia Employment Law Attorney for Clarification on Joint Employment
This summary of the DOL’s Final Rule on joint employment is helpful, but it’s wise to trust a knowledgeable wage and hour lawyer with its application to your business. As with other rules involving employment law, there can be serious consequences for noncompliance. To learn more about how our attorneys can help, please contact the Vaughn Law Firm to set up a no-cost consultation at our Decatur, GA office. Our team serves clients throughout DeKalb County, Fulton County, and Cobb County in a wide array of employment law matters, and we’re happy to offer advice on your situation.