The Biden Administration’s United States Department of Labor announced a final rule to rescind the joint employer rule set forth by the Trump administration in March 2020. The Trump Administration’s joint employer rule made it less likely that two employers would be found to be joint employers. For example, the Trump Administration’s joint employer rule said that an entity must actually exercise control over key aspects of the employment relationship instead of just having the right to control those aspects. This rule will make it more likely that two employers will be found to be joint employers and if more employers are found to be joint employers, they may each be subject to a claim for misclassification of a worker as an independent contractor.
WASHINGTON, DC – The U.S. Department of Labor today announced a final rule to rescind an earlier rule, “Joint Employer Status under the Fair Labor Standards Act,” that took effect in March 2020. By rescinding that rule, the department will ensure more workers receive minimum wage and overtime protections of the Fair Labor Standards Act.
The rescinded rule included a description of joint employment contrary to statutory language and Congressional intent. The rule also failed to take into account the department’s prior joint employment guidance. The U.S. District Court for the Southern District of New York vacated most of the rule in 2020.
Under the FLSA, an employee can have more than one employer for the work they perform. Joint employment applies when – for the purposes of minimum wage and overtime requirements – the department considers two separate companies to be a worker’s employer for the same work. For example, a joint employer relationship could occur where a hotel contracts with a staffing agency to provide cleaning staff, which the hotel directly controls. If the agency and the hotel are joint employers, they are both responsible for worker protections.
“Joint employment is part of our longstanding federal labor laws,” said Wage and Hour Division Acting Administrator Jessica Looman. “The U.S. Department of Labor’s Wage and Hour Division will continue to follow the law and judicial precedent when evaluating joint employer relationships to enforce worker protections.”
The final rule becomes effective Sept. 28, 2021.
The FLSA requires covered employers to pay employees at least the federal minimum wage for every hour they work and overtime compensation at not less than one-and-one-half times their regular rate of pay for every hour they work over 40 in a workweek. A strong joint employer standard is critical because FLSA responsibilities and liability for worker protections do not apply to a business that does not meet the definition of employer.
For more information about the FLSA or other laws it enforces, visit the Wage and Hour Division, or call toll-free 1-866-4US-WAGE.
The Trump Administration joint employer rule was:
PART 791 – JOINT EMPLOYER STATUS UNDER THE FAIR LABOR STANDARDS ACTSource:
85 FR 2858, Jan. 16, 2020, unless otherwise noted.§ 791.1 Introductory statement.This part contains the Department of Labor’s general interpretations of the text governing joint employer status under the Fair Labor Standards Act. See 29 U.S.C. 201-19. The Administrator of the Wage and Hour Division will use these interpretations to guide the performance of his or her duties under the Act, and intends the interpretations to be used by employers, employees, and courts to understand employers’ obligations and employees’ rights under the Act. To the extent that prior administrative rulings, interpretations, practices, or enforcement policies relating to joint employer status under the Act are inconsistent or in conflict with the interpretations stated in this part, they are hereby rescinded. These interpretations stated in this part may be relied upon in accordance with section 10 of the Portal-to-Portal Act, 29 U.S.C. 251-262, notwithstanding that after any such act or omission in the course of such reliance, any such interpretation in revised part 791 “is modified or rescinded or is determined by judicial authority to be invalid or of no legal effect.” 29 U.S.C. 259.§ 791.2 Determining Joint Employer Status under the FLSA.There are two joint employer scenarios under the FLSA.
(1) In the first joint employer scenario, the employee has an employer who suffers, permits, or otherwise employs the employee to work, see 29 U.S.C. 203(e)(1), (g), but another person simultaneously benefits from that work. The other person is the employee’s joint employer only if that person is acting directly or indirectly in the interest of the employer in relation to the employee. See 29 U.S.C. 203(d). In this situation, the following four factors are relevant to the determination. Those four factors are whether the other person:
(i) Hires or fires the employee;
(ii) Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
(iii) Determines the employee’s rate and method of payment; and
(iv) Maintains the employee’s employment records.
(2) As used in this section, “employment records” means records, such as payroll records, that reflect, relate to, or otherwise record information pertaining to the hiring or firing, supervision and control of the work schedules or conditions of employment, or determining the rate and method of payment of the employee. Except to the extent they reflect, relate to, or otherwise record that information, records maintained by the potential joint employer related to the employer’s compliance with the contractual agreements identified in paragraphs (d)(3) and (4) of this section do not make joint employer status more or less likely under the Act and are not considered employment records under this section. Satisfaction of the maintenance of employment records factor alone will not lead to a finding of joint employer status.
(i) The potential joint employer must actually exercise – directly or indirectly – one or more of these indicia of control to be jointly liable under the Act. See 29 U.S.C. 203(d). The potential joint employer’s ability, power, or reserved right to act in relation to the employee may be relevant for determining joint employer status, but such ability, power, or right alone does not demonstrate joint employer status without some actual exercise of control. Standard contractual language reserving a right to act, for example, is alone insufficient for demonstrating joint employer status. No single factor is dispositive in determining joint employer status under the Act. Whether a person is a joint employer under the Act will depend on how all the facts in a particular case relate to these factors, and the appropriate weight to give each factor will vary depending on the circumstances of how that factor does or does not suggest control in the particular case.
(ii) Indirect control is exercised by the potential joint employer through mandatory directions to another employer that directly controls the employee. But the direct employer’s voluntary decision to grant the potential joint employer’s request, recommendation, or suggestion does not constitute indirect control that can demonstrate joint employer status. Acts that incidentally impact the employee also do not indicate joint employer status.
(b) Additional factors may be relevant for determining joint employer status in this scenario, but only if they are indicia of whether the potential joint employer exercises significant control over the terms and conditions of the employee’s work.
(c) Whether the employee is economically dependent on the potential joint employer is not relevant for determining the potential joint employer’s liability under the Act. Accordingly, to determine joint employer status, no factors should be used to assess economic dependence. Examples of factors that are not relevant because they assess economic dependence include, but are not limited to:
(1) Whether the employee is in a specialty job or a job that otherwise requires special skill, initiative, judgment, or foresight;
(2) Whether the employee has the opportunity for profit or loss based on his or her managerial skill;
(3) Whether the employee invests in equipment or materials required for work or the employment of helpers; and
(4) The number of contractual relationships, other than with the employer, that the potential joint employer has entered into to receive similar services.
(1) A joint employer may be an individual, partnership, association, corporation, business trust, legal representative, public agency, or any organized group of persons, excluding any labor organization (other than when acting as an employer) or anyone acting in the capacity of officer or agent of such a labor organization. See 29 U.S.C. 203(a), (d).
(2) Operating as a franchisor or entering into a brand and supply agreement, or using a similar business model does not make joint employer status more likely under the Act.
(3) The potential joint employer’s contractual agreements with the employer requiring the employer to comply with specific legal obligations or to meet certain standards to protect the health or safety of its employees or the public do not make joint employer status more or less likely under the Act. Similarly, the monitoring and enforcement of such contractual agreements against the employer does not make joint employer status more or less likely under the Act. Such contractual agreements include, but are not limited to, mandating that employers comply with their obligations under the FLSA or other similar laws; or institute sexual harassment policies; requiring background checks; or requiring employers to establish workplace safety practices and protocols or to provide workers training regarding matters such as health, safety, or legal compliance. Requiring the inclusion of such standards, policies, or procedures in an employee handbook does not make joint employer status more or less likely under the Act.
(4) The potential joint employer’s contractual agreements with the employer requiring quality control standards to ensure the consistent quality of the work product, brand, or business reputation do not make joint employer status more or less likely under the Act. Similarly, the monitoring and enforcement of such agreements against the employer does not make joint employer status more or less likely under the Act. Such contractual agreements include, but are not limited to, specifying the size or scope of the work project, requiring the employer to meet quantity and quality standards and deadlines, requiring morality clauses, or requiring the use of standardized products, services, or advertising to maintain brand standards.
(5) The potential joint employer’s practice of providing the employer 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.
(1) In the second joint employer scenario, one employer employs a worker for one set of hours in a workweek, and another employer employs the same worker for a separate set of hours in the same workweek. The jobs and the hours worked for each employer are separate, but if the employers are joint employers, both employers are jointly and severally liable for all of the hours the employee worked for them in the workweek.
(2) In this second scenario, if the employers are acting independently of each other and are disassociated with respect to the employment of the employee, each employer may disregard all work performed by the employee for the other employer in determining its own responsibilities under the Act. However, if the employers are sufficiently associated with respect to the employment of the employee, they are joint employers and must aggregate the hours worked for each for purposes of determining compliance with the Act. The employers will generally be sufficiently associated if:
(i) There is an arrangement between them to share the employee’s services;
(ii) One employer is acting directly or indirectly in the interest of the other employer in relation to the employee; or
(iii) They share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer. Such a determination depends on all of the facts and circumstances. Certain business relationships, for example, which have little to do with the employment of specific workers – such as sharing a vendor or being franchisees of the same franchisor – are alone insufficient to establish that two employers are sufficiently associated to be joint employers.
(f) For each workweek that a person is a joint employer of an employee, that joint employer is jointly and severally liable with the employer and any other joint employers for compliance with all of the applicable provisions of the Act, including the overtime provisions, for all of the hours worked by the employee in that workweek. In discharging this joint obligation in a particular workweek, the employer and joint employers may take credit toward minimum wage and overtime requirements for all payments made to the employee by the employer and any joint employers.
(g) The following illustrative examples demonstrate the application of the principles described in paragraphs (a) through (f) of this section under the facts presented and are limited to substantially similar factual situations:
(i) Example. 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?
(ii) Application. 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.
(i) Example. 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 owned by the same person. Each week, the restaurants coordinate and set the cook’s schedule of hours at each location, and the cook works interchangeably at both restaurants. The restaurants decided together to pay the cook the same hourly rate. Are they joint employers of the cook?
(ii) Application. Under these facts, the restaurant establishments are joint employers of the cook because they share common ownership, coordinate the cook’s schedule of hours at the restaurants, and jointly decide the cook’s terms and conditions of employment, such as the pay rate. Because the restaurants are sufficiently associated with respect to the cook’s employment, they must aggregate the cook’s hours worked across the two restaurants for purposes of complying with the Act.
(i) Example. An office park company hires a janitorial services company to clean the office park building after-hours. According to a contractual agreement between the office park and the janitorial company, the office park agrees to pay the janitorial company a fixed fee for these services and reserves the right to supervise the janitorial employees in their performance of those cleaning services. However, office park personnel do not set the janitorial employees’ pay rates or individual schedules and do not in fact supervise the workers’ performance of their work in any way. Is the office park a joint employer of the janitorial employees?
(ii) Application. Under these facts, the office park is not a joint employer of the janitorial employees because it does not hire or fire the employees, determine their rate or method of payment, or exercise control over their conditions of employment. The office park’s reserved contractual right to control the employee’s conditions of employment is not enough to establish that it is a joint employer.
(i) Example. A restaurant contracts with a cleaning company to provide cleaning services. The contract does not give the restaurant authority to hire or fire the cleaning company’s employees or to supervise their work on the restaurant’s premises. A restaurant official provides general instructions to the team leader from the cleaning company regarding the tasks that need to be completed each workday, monitors the performance of the company’s work, and keeps records tracking the cleaning company’s completed assignments. The team leader from the cleaning company provides detailed supervision. At the restaurant’s request, the cleaning company decides to terminate an individual worker for failure to follow the restaurant’s instructions regarding customer safety. Is the restaurant a joint employer of the cleaning company’s employees?
(ii) Application. Under these facts, the restaurant is not a joint employer of the cleaning company’s employees because the restaurant does not exercise significant direct or indirect control over the terms and conditions of their employment. The restaurant’s daily instructions and monitoring of the cleaning work is limited and does not demonstrate that the restaurant is a joint employer. Records of the cleaning team’s work are not employment records under paragraph (a)(1)(iv) of this section, and therefore, are not relevant in determining joint employer status. While the restaurant requested the termination of a cleaning company employee for not following safety instructions, the decision to terminate was made voluntarily by the cleaning company and therefore is not indicative of indirect control.
(i) Example. A restaurant contracts with a cleaning company to provide cleaning services. The contract does not give the restaurant authority to hire or fire the cleaning company’s employees or to supervise their work on the restaurant’s premises. However, in practice a restaurant official oversees the work of employees of the cleaning company by assigning them specific tasks throughout each day, providing them with hands-on instructions, and keeping records tracking the work hours of each employee. On several occasions, the restaurant requested that the cleaning company hire or terminate individual workers, and the cleaning company agreed without question each time. Is the restaurant a joint employer of the cleaning company’s employees?
(ii) Application. Under these facts, the restaurant is a joint employer of the cleaning company’s employees because the restaurant exercises sufficient control, both direct and indirect, over the terms and conditions of their employment. The restaurant directly supervises the cleaning company’s employees’ work on a regular basis and keeps employment records. And the cleaning company’s repeated and unquestioned acquiescence to the restaurant’s hiring and firing requests indicates that the restaurant exercised indirect control over the cleaning company’s hiring and firing decisions.
(i) Example. A packaging company requests workers on a daily basis from a staffing agency. Although the staffing agency determines each worker’s hourly rate of pay, the packaging company closely supervises their work, providing hands-on instruction on a regular and routine basis. The packaging company also uses sophisticated analysis of expected customer demand to continuously adjust the number of workers it requests and the specific hours for each worker, sending workers home depending on workload. Is the packaging company a joint employer of the staffing agency’s employees?
(ii) Application. Under these facts, the packaging company is a joint employer of the staffing agency’s employees because it exercises sufficient control over their terms and conditions of employment by closely supervising their work and controlling their work schedules.
(i) Example. A packaging company has unfilled shifts and requests a staffing agency to identify and assign workers to fill those shifts. Like other clients, the packaging company pays the staffing agency a fixed fee to obtain each worker for an 8-hour shift. The staffing agency determines the hourly rate of pay for each worker, restricts all of its workers from performing more than five shifts in a week, and retains complete discretion over which workers to assign to fill a particular shift. Workers perform their shifts for the packaging company at the company’s warehouse under limited supervision from the packaging company to ensure that minimal quantity, quality, and workplace safety standards are satisfied, and under more strict supervision from a staffing agency supervisor who is on site at the packaging company. Is the packaging company a joint employer?
(ii) Application. Under these facts, the packaging company is not a joint employer of the staffing agency’s employees because the staffing agency exclusively determines the pay and work schedule for each employee. Although the packaging company exercises some control over the workers by exercising limited supervision over their work, such supervision, especially considering the staffing agency’s supervision, is alone insufficient to establish that the packaging company is a joint employer without additional facts to support such a conclusion.
(i) Example. An Association, whose membership is subject to certain criteria such as geography or type of business, provides optional group health coverage and an optional pension plan to its members to offer to their employees. Employer B and Employer C both meet the Association’s specified criteria, become members, and provide the Association’s optional group health coverage and pension plan to their respective employees. The employees of both B and C choose to opt in to the health and pension plans. Does the participation of B and C in the Association’s health and pension plans make the Association a joint employer of B’s and C’s employees, or B and C joint employers of each other’s employees?
(ii) Application. Under these facts, the Association is not a joint employer of B’s or C’s employees, and B and C are not joint employers of each other’s employees. Participation in the Association’s optional plans does not involve any control by the Association, direct or indirect, over B’s or C’s employees. And while B and C independently offer the same plans to their respective employees, there is no indication that B and C are coordinating, directly or indirectly, to control the other’s employees. B and C are therefore not acting directly or indirectly in the interest of the other in relation to any employee.
(i) Example. Entity A, a large national company, contracts with multiple other businesses in its supply chain. Entity A does not hire, fire, or supervise the employees of its suppliers, and the supply agreements do not grant Entity A the authority to do so. Entity A also does not maintain any employment records of suppliers’ employees. As a precondition of doing business with A, all contracting businesses must agree to comply with a code of conduct, which includes a minimum hourly wage higher than the federal minimum wage, as well as a promise to comply with all applicable federal, state, and local laws. Employer B contracts with A and signs the code of conduct. Does A qualify as a joint employer of B’s employees?
(ii) Application. Under these facts, A is not a joint employer of B’s employees. Entity A is not acting directly or indirectly in the interest of B in relation to B’s employees – hiring, firing, maintaining records, or supervising or controlling work schedules or conditions of employment. Nor is A exercising significant control over Employer B’s rate or method of pay – although A requires B to maintain a wage floor, B retains control over how and how much to pay its employees, and the example does not indicate that the wage floor is accompanied by any other indicia of control. Finally, because there is no indication that A’s requirement that B commit to comply with all applicable federal, state, and local law exerts any direct or indirect control over B’s employees, this requirement has no bearing on the joint employer analysis.
(i) Example. Franchisor A is a global organization representing a hospitality brand with several thousand hotels under franchise agreements. Franchisee B owns one of these hotels and is a licensee of A’s brand, which gives Franchisee B access to certain proprietary software for business operation or payroll processing. In addition, A provides B with a sample employment application, a sample employee handbook, and other forms and documents for use in operating the franchise, such as sample operational plans, business plans, and marketing materials. The licensing agreement is an industry-standard document explaining that B is solely responsible for all day-to-day operations, including hiring and firing of employees, setting the rate and method of pay, maintaining records, and supervising and controlling conditions of employment. Is A a joint employer of B’s employees?
(ii) Application. Under these facts, A is not a joint employer of B’s employees. A does not exercise direct or indirect control over B’s employees. Providing optional samples, forms, and documents that relate to staffing and employment does not amount to direct or indirect control over B’s employees that would establish joint liability.
(i) Example. A retail company owns and operates a large store. The retail company contracts with a cell phone repair company, allowing the repair company to run its business operations inside the building in an open space near one of the building entrances. As part of the arrangement, the retail company requires the repair company to establish a policy of wearing specific shirts and to provide shirts to its employees that look substantially similar to the shirts worn by employees of the retail company. Additionally, the contract requires the repair company to institute a code of conduct for its employees stating that the employees must act professionally in their interactions with all customers on the premises. Is the retail company a joint employer of the repair company’s employees?
(ii) Application. Under these facts, the retail company is not a joint employer of the cell phone repair company’s employees. The retail company’s requirement that the repair company provide specific shirts to its employees and establish a policy that its employees to wear those shirts does not, on its own, demonstrate substantial control over the repair company’s employees’ terms and conditions of employment. Moreover, requiring the repair company to institute a code of conduct or allowing the repair company to operate on its premises does not make joint employer status more or less likely under the Act. There is no indication that the retail company hires or fires the repair company’s employees, controls any other terms and conditions of their employment, determines their rate and method of payment, or maintains their employment records.
§ 791.3 Severability.If any provision of this part is held to be invalid or unenforceable by its terms, or as applied to any person or circumstance, or stayed pending further agency action, the provision shall be construed so as to continue to give the maximum effect to the provision permitted by law, unless such holding shall be one of utter invalidity or unenforceability, in which event the provision shall be severable from part 791 and shall not affect the remainder thereof.