DOL Final Rule on Joint Employers: What You Need to Know
Professional employment organizations (PEOs) like QBS implement a co-employment business model where an established business may pass off its administrative responsibilities to a PEO so it may focus on revenue-generating tasks for growing the business. As defined by the Department of Labor, joint employment or co-employment is “when two or more organizations share the control and supervision of one or more employees.” (USDOL)
On January 12, 2020, the DOL established a four-factor balancing test to distinguish a joint-employer status under the Fair Labor Standards Act.
The final rule will become effective March 16, 2020.
Here is the breakdown of the new four-factor test:
1. Hires or fires employee(s)
2. Supervises and controls employee’s employment scheduled and/or conditions
3. Determines rate and method of payment
4. Maintains employment records
Additional factors may be considered in a review of joint-employer status. For example, the final rule clarifies that an employee’s economic reliance on an employer does not determine whether the employer is in fact a joint employer as defined by the FLSA (National Law Review). It also states that an employer’s brand, supply, or similar business model and contractual agreements or business practices influence joint-employer status.
The DOL has the authority to enforce compliance against one or all joint employers. Be sure to review the DOL Fact Sheet that provides in-depth explanations regarding FLSA, DOL, and other authoritative entities’ oversight of compliance on such joint-employer status.
To avoid compliance violations, employers should:
* Thoroughly review the final rule
* Determine if in a joint employer relationship
* Identify and address and compliance issues
Some FAQs are answered below.
Question: Why was the Joint Employer Rule revised?
Answer: It has been 60+ years since it was last revised and as time has progressed, courts have established a wide array of tests to define joint-employer status, which as a result has created confusion and augmented compliance and litigation expenses.
Question: Do all four factors need to be met to be defined as a joint employer by FLSA?
Answer: There is no straightforward answer as it is evaluated case-by-case. The final rule states that an employer’s maintenance of an employee’s employment records only will not solidify a joint employer status.
For more information, please review these FAQs.
If you are not sure if you are in compliance or would like to learn more about joint-employer status, please reach out to QBS. As a PEO, we are thoroughly experienced and equipped to answer questions regarding joint employer relationships. Contact QBS today to determine if you are working within compliance.