Department of Labor Proposes New Interpretation of Joint Employer Status Under The Fair Labor Standa
On April 9, 2019, the United States Department of Labor (“DOL”) published a notice of proposed rulemaking (the “NPRM”) to amend its existing regulations regarding so-called “joint employer” status under the federal Fair Labor Standards Act (the “FLSA” or the “Act”).
The FLSA requires covered “employers” to pay nonexempt employees at least the federal minimum wage for all hours worked and overtime for all hours worked over 40 hours in a workweek. The Act also contemplates scenarios in which other “persons,” in addition to the nominal employer, may be jointly liable for wages due to an employee under the Act. This concept is generally known as joint employer wage liability (although the term “joint employer” is not specifically used in the language of the FLSA). Joint employer status under the FLSA implicates questions such as:
Is a franchiser liable for the wage obligations of its franchisees?
Is an institutional investor liable for the wage obligations of its portfolio businesses?
Is a parent corporation liable for the wage obligations of its subsidiaries?
In 1958, the DOL issued regulations interpreting joint employer status under the Act. Those regulations instructed that multiple persons or entities may be jointly liable for wage obligations due to an employee if they are “not completely disassociated with” respect to the employment of an employee. This open-ended standard, which remains the current DOL benchmark on the subject, has been the subject to debate for nearly sixty years.
The DOL indicates that the purpose of the NPRM is to make the determination of joint employer status under the FLSA “simpler and more consistent.”
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