HR Policy Supports DOL’s Proposed Joint Employer Rule and Seeks Further Guidance in Final Rule

June 28, 2019

HR Policy applauded the U.S. Department of Labor on its proposed update to the joint employer rules under the Fair Labor Standards Act and asked for additional clarity on the types of corporate social responsibility (CSR) standards that can be included in business arrangements without triggering joint employer status.

The regulations were last updated over 60 years ago.  Prevailing uncertainty regarding joint employer risk often thwarts corporate efforts to advance employee-friendly standards via contract requirements with vendors, suppliers, and contractors through corporate social responsibility programs.

The proposed rule would create a four-factor test for determining joint employer status and provide specific examples of what types of business arrangements and agreements would, and would not, create a joint employer situation.  The four-factor test includes:

  • The power to hire and fire the employees;
  • Supervision and control over employee work schedules or conditions of employment;
  • Determination of the rate and method of payment; and
  • Maintenance of employment records.

CSR standards for contractor's employees, such as setting a wage floor and instituting sexual harassment policies, would be allowed under the proposed rule.  The proposal also clarifies that companies will only be joint employers if they actually exercise control over employees’ terms and conditions of employment, as opposed to unexercised or even potential control.

The Association’s comments, consistent with recommendations in our Workplace 2020 report, asked for additional examples of CSR initiatives to be included in the final rule, including establishing training practices and ensuring work is performed by individuals who have passed criminal background checks or drug tests and are properly licensed.

Outlook:  A final rule is likely to be published towards the end of 2019 or early 2020.