DOL Issues Proposed Joint Employer Rule Enabling the Use of Corporate Standards by Contractors, Franchisors

April 05, 2019

Responding to uncertainties regarding the employment law status of franchise, contract, and staffing firm relationships, among others, the Department of Labor has proposed rules that would clarify when “joint employer” status exists.

The proposed rule would impose joint employer status under the Fair Labor Standards Act in situations where an employer actually exercises, directly or indirectly, significant control over the terms and conditions of an employee’s work.

  • However, the bill would allow employers to “set a wage floor, institute sexual harassment policies, establish workplace safety rules, … [and] adopt similar generalized business practices” without triggering the rule.

Under current DOL regulations, published in 1958, joint employer status can be triggered if employers are “not completely disassociated” with respect to an employee’s work,  According to the proposed rule, this would almost “always result in joint employer status” absent needed clarification.

Four factors, all of which must be present, are proposed for determining joint employment.  The alleged joint employer must:

  • Hire or fire the employee,
  • Supervise and control the employee’s work schedule or conditions of employment,
  • Determine the employee’s rate and method of payment, and
  • Maintain the employee’s employment records.

The “theoretical” power to control employees or an employee’s economic dependence on the purported joint employer are not to be considered under the proposed rule.

Consistent with HR Policy’s Workplace 2020 recommendation, codes of conduct would be allowed.  The concern for joint employer liability has caused many companies to abstain from imposing minimum standards on the workplace policies of other employers with whom they have relationships.  The proposed rule would allow the contractual setting of a wage floor, requiring sexual harassment policies, establishing workplace safety practices, requiring morality clauses, or similar generalized business practices that would not, in and of themselves, make joint employer status more likely.

Operating as a franchisor also would not make joint employer status more or less likely under the proposed rule.

Outlook:  HR Policy will be submitting comments during the public comment period, which will likely end around June 7, or 60 days from when the proposed rule is published in the Federal Register.