Labor Department Seeks to Narrow Definition of Joint Employer

Proposed rule aims to clarify labor law responsibilities when two firms employ the same worker.

April 02, 2019

WASHINGTON, D.C. —The U.S. Department of Labor announced a proposed rule to “revise and clarify the responsibilities of employers and joint employers to employees in joint employer arrangements” when a worker has two employers.

The Trump Administration proposal seeks to ensure that employers and joint employers understand their responsibilities to pay at least the federal minimum wage for all hours worked and overtime for all hours worked over 40 in a workweek.

A proposed four-factor test would be used to determine if a second company is a joint employer. The test would ask whether the potential joint employer exercises the power to:

  • hire or fire the employee;
  • supervise and control the employee’s work schedules or conditions of employment;
  • determine the employee’s rate and method of payment; and
  • maintain the employee’s employment records 

It’s unlikely that a company would be considered a joint employer if it doesn’t engage in most or all of these activities, the New York Times reports.

“NACS welcomes the four-factor test proposed by the Department of Labor today,” said Jon Taets,
NACS director of government relations. “The proposal appears to provide needed certainty to convenience retailers regarding potential labor-related liabilities with both franchise and supplier arrangements.”

The department provided examples to help clarify joint employer status. In one, an individual works 30 hours per week as a cook at one restaurant establishment, and 15 hours per week as a cook at a different restaurant establishment affiliated with the same nationwide franchise. These establishments are locally owned and managed by different franchisees that do not coordinate in any way with respect to the employee. Are they joint employers of the cook?

The department said, under these facts, the restaurant establishments are not joint employers of the cook because they are not associated in any meaningful way with respect to the cook’s employment. The similarity of the cook’s work at each restaurant, and the fact that both restaurants are part of the same nationwide franchise, are not relevant to the joint employer analysis, because those facts have no bearing on the question whether the restaurants are acting directly or indirectly in each other’s interest in relation to the cook.