The federal Department of Labor finalized regulations–to take effect in March 2020–loosening the test for joint employment. Employers that rely heavily on temporary and/or staffing agencies for workers and businesses that have franchisor-franchisee contracts will find some relief in the new test. Recall that the Obama administration in 2016 expanded joint employment liability through a guidance memo calling for greater scrutiny of joint employment relationships. The Trump DOL rescinded that guidance in 2017, reverting back to the policies of joint employer regulations in place since the late 1950s. These new rules give the 2017 rescission of the Obama guidance memo the force of law.
Under the new regulations, a four-factor balancing test is used to determine if two businesses are joint employers:
- whether the business can hire or fire employees;
- whether the business controls the employees’ schedules and conditions of employment to a “substantial” degree;
- whether the business sets the employees’ pay rates and the methods by which they are paid; and
- whether the business maintains the employees’ employment records.
If two businesses are determined to be joint employers, they share joint liability for wage violations, including the failure to pay overtime and minimum wage.
These regulations do not affect joint employer liability for OSHA, labor law, discrimination laws, or for tax purposes. The National Labor Relations Board (NLRB), which enforces labor laws, and Equal Employment Opportunity Commission (EEOC), which enforces discrimination laws, both plan to propose new joint employer tests and regulations.