This week, the Department of Labor (DOL) released a notice of proposed rulemaking in an effort to simplify the often-complicated issue of what a joint-employer is and, more importantly, when your business is at risk of being found to be one. The DOL’s stated goals were to “promote certainty for employers and employees, reduce litigation, and encourage innovation in the economy.”

The DOL proposed a four-part balancing test dealing specifically with the scenario where “an employee works one set of hours in the workweek for his or her employer, and that work simultaneously benefits another person.” This scenario speaks closely to the relationship where staffing agencies provide workers to their end clients.

The four factors from the DOL’s proposed test would evaluate whether the potential joint employer:

  • 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
  • maintains the employee’s employment records

This proposed test would replace the current standard established by the Fair Labor Standards Act (FLSA), where joint employer status is determined by asking whether two or more parties are “not completely disassociated with respect to the employment of a particular employee.”

Keep in mind that this applies only to the FLSA (dealing with minimum wage, overtime, etc.), so recent rulemaking rollbacks under the National Labor Relations Board (NLRB) (dealing with collective bargaining rights, unfair labor practices, etc.) still need to be accounted for separately. That said, if we’re reading the tea leaves, recent actions from both of these agencies appear to indicate gravitation of the rules away from more nebulous or stricter standards to easier-to-identify standards that could become a simplified checklist; giving comfort and certainty to businesses.

Another way to put it would be that federal agencies may be shifting away from finding companies to be joint employers for doing things like retaining indirect control over employees, or having merely associative relationships with staffing companies.  Future rules may lessen these stricter standards by requiring proof of direct control, or substantial input over working conditions, to be present before you’re found to be a joint employer.  While businesses should not expect an easy road in interpreting or adhering to these types of standards (should they become final law), today’s proposed rulemaking speaks to a common-sense shift in current standards and more predictability in utilizing staffing agencies.

On its face, the test certainly looks much more straightforward and simpler to apply than previous iterations. That said, as always, the devil is in the details, so once the final rule is clearly defined, we’ll see whether and to what extent it has changed from today’s proposed rule, and then track its application to see how it gets interpreted.

The world of contingent workforce continues to be as active as ever, so keep watching this space for key takeaways and insights. TalentWave will be following it closely and providing updates along the way.

See the full, DOL proposed rule at https://www.dol.gov/whd/flsa/jointemployment2019/joint-employment_NPRM.pdf