Archive
Department of Labor Proposes New Interpretation of Joint Employer Status Under The Fair Labor Standards Act
By: Amanda Thibodeau
On April 9, 2019, the United States Department of Labor (“DOL”) published a notice of proposed rulemaking (the “NPRM”) to amend its existing regulations regarding so-called “joint employer” status under the federal Fair Labor Standards Act (the “FLSA” or the “Act”).
The FLSA requires covered “employers” to pay nonexempt employees at least the federal minimum wage for all hours worked and overtime for all hours worked over 40 hours in a workweek. The Act also contemplates scenarios in which other “persons,” in addition to the nominal employer, may be jointly liable for wages due to an employee under the Act. This concept is generally known as joint employer wage liability (although the term “joint employer” is not specifically used in the language of the FLSA). Joint employer status under the FLSA implicates questions such as:
- Is a franchiser liable for the wage obligations of its franchisees?
- Is an institutional investor liable for the wage obligations of its portfolio businesses?
- Is a parent corporation liable for the wage obligations of its subsidiaries?
In 1958, the DOL issued regulations interpreting joint employer status under the Act. Those regulations instructed that multiple persons or entities may be jointly liable for wage obligations due to an employee if they are “not completely disassociated with” respect to the employment of an employee. This open-ended standard, which remains the current DOL benchmark on the subject, has been the subject to debate for nearly sixty years.
The DOL indicates that the purpose of the NPRM is to make the determination of joint employer status under the FLSA “simpler and more consistent.”
A New Test For Joint Liability Status
The NPRM proposes a four-factored test to determine when a person or entity shares wage liability for an employee with the nominal employer. The four factors are whether the person or business entity:
- hires or fires the employee;
- supervises and controls the employee’s work schedule or conditions of employment;
- determines the employee’s rate and method of payment; and
- maintains the employee’s employment records.
The NPRM clarifies that that “the potential joint employer must actually exercise . . . one or more of these indicia of control to be jointly liable under the Act.” (Emphasis supplied). The reserved, but unexercised, contractual right to act in relation to an employee “is not relevant for determining joint employer status.” In addition, the NPRM provides a set of examples that illustrate the limits of the four-factor test:
- The potential joint employer’s business model—for example, operating as a franchisor—does not make joint employer status more or less likely under the Act.
- The potential joint employer’s contractual agreements with the employer requiring the employer to, for example, set a wage floor, institute sexual harassment policies, establish workplace safety practices, require morality clauses, adopt similar generalized business practices, or otherwise comply with the law, do not make joint employer status more or less likely under the Act.
- The potential joint employer’s practice of providing a sample employee handbook, or other forms, to the employer; allowing the employer to operate a business on its premises (including “store within a store” arrangements); offering an association health plan or association retirement plan to the employer or participating in such a plan with the employer; jointly participating in an apprenticeship program with the employer; or any other similar business practice, does not make joint employer status more or less likely under the Act.
What’s Next?
It should be noted that NPRM is a proposal. The DOL is now soliciting comments from interested parties with respect to the NPRM, and will begin the process of developing a final rule on the subject. Whether the DOL ultimately adopts the rules proposed in the NPRM is unclear. What is clear is that the DOL is focused on clarifying standards with respect to this contentious area of employment law. Morse will continue to monitor, and report on this subject.
***
Morse’s Employment Law Group regularly advises clients with respect to compliance with the Fair Labor Standards Act and its developments.
For more information, please contact Amanda Thibodeau or Matthew Mitchell.
Time Spent In Security Screenings Does Not Have To Be Compensated – The U.S. Supreme Court’s Decision in Integrity Staffing v. Busk
The question of when an employee’s compensable work for the day begins and ends is one which can be more complicated than it seems at first glance. Does an employee who checks email before driving to work have to be compensated for that time? Will an employer have to pay an employee for the time it takes to park in a remote lot and take a shuttle bus to work? The U.S. Supreme Court weighed in on this subject in its recent decision in Integrity Staffing Solutions, Inc. v. Busk, No. 13-433 (December 9, 2014), where it ruled unanimously that employees did not have to be paid for the time they spent waiting to undergo and then undergoing security screenings before leaving the workplace each day. In this class action case, the employees were hourly workers who worked in two different warehouses. Their duties involved retrieving products from shelves and packaging the products for delivery to Amazon customers, and at the end of the day, were required to undergo a security screening which included removing their wallets, keys and belts, and going through a metal detector. The employees complained that they were forced to spend up to twenty-five minutes a day in this screening process, and argued that under the Fair Labor Standards Act (“FLSA”) they should be compensated for this time.
Please see this month’s Employment Law Alert for further details.
Feel free to contact any member of our Employment Law Group with any questions.
Employment Law Clip: FLSA Classifications – Salaried Does Not Necessarily Mean Exempt From Overtime
A common misconception is that paying a salary to an employee makes the employee exempt from the overtime requirements of the Fair Labor Standards Act (FLSA). In reality, many salaried employees do not qualify for any exemption from overtime obligations, and relying solely upon whether employees are paid a salary in classifying them as exempt or nonexempt will almost certainly result in misclassifications. In this video Massachusetts Employment Lawyer Maura E. Malone discusses the process of determining whether your employees are exempt or non-exempt and the risks of failing to properly classify them.
Want more information? Try some of our other resources on this topic:
- Wage & Hour Tip: Salaried Does Not Necessarily Mean Exempt From Overtime
- Caution: Administrative Assistants Only Rarely Are Exempt From Overtime Pay
- What Does Paid “On A Salary Basis” Mean?
- New Treble Damages Requirement Makes Compliance
with Wage/Hour Laws Even More Critical - Wage & Hour Tip: Certain Bonuses Must Be Included
When Calculating Overtime Pay
Please feel free to contact any member of our Employment Law Group with any questions on Massachusetts wage payment laws.
MBBP’s Employment Law Clip Series provides quick, easy-to-digest snapshots of common Employment issues, as well as practical information on how to avoid complicated, expensive and time-consuming pitfalls. Stay tuned for the next topic on Restrictive Employment Agreements.
New Proposed Federal Legislation Targets Independent Contractor Misclassification
By: Bob Shea
Government efforts to combat the independent contractor misclassification continue as a new U.S. Senate bill was recently introduced by Sen. Bob Casey of Pennsylvania. The “Payroll Fraud Prevention Act” would amend the federal Fair Labor Standards Act to require employers to “accurately classify” workers as either employees or non-employees, and to provide each worker with a written notice informing the worker “of the classification of such individual … as an employee or a non-employee.” The Act also would require the notice to include a statement directing the worker to a U.S. Department of Labor website providing further information about employee rights.
Under the Act, if an employer failed to provide the required notice to a worker the individual would be presumed to be an employee, as opposed to an independent contractor. The Act also would contain anti-retaliation protections for workers and would amend the Social Security Act to provide for audits of employers who are believed to be misclassifying workers for purposes of avoiding unemployment taxes or benefits.
Please contact our Employment Law Group if you have questions regarding this topic.
Massachusetts Employment Law Blog 