The current test allows a finding of joint employment when the employers are “not completely disassociated.” The proposed regulation would replace this analysis and instead institute a four part balancing test. Joint employer status would rest on whether the alleged joint employer actually exercises the power to (1) hire and fire employees, (2) supervise and control the employee’s work schedules and conditions of employment, (3) set the employee’s wages, and (4) maintain the employee’s records. The test is derived from a 1983 decision by the Ninth Circuit Court of Appeals, Bonnette v. California Health & Welfare Agency.
Interestingly, the new rule also sets out a number of factors it considers irrelevant to the determination of joint employer status. These include franchiser-franchise relationships, the establishment of employment practices such as an employee handbook, and contractual agreements. These concerns seem tailored to business groups who expressed concerns that the National Labor Relations Board’s Browning-Ferris decision would raise joint employer questions in a host of standard business relationships and introduce considerable uncertainty into the labor marketplace.
The rule also follows in the wake of some high-profile litigation in the appellate courts. The Supreme Court, in 2018 denied Certiorari in a case challenging the Department of Labor’s joint employer test under the Fair Labor Standards Act. That case, Hall v. DirectTV, also implicated questions regarding the classification of independent contractors. Both employers and labor advocates have pushed for greater clarity, predictability, and uniformity in this area; the host of different tests for joint employer status depending on the context and jurisdiction complicates matters for everyone. While the new DoL rule seeks to set a consistent standard, it also upset labor advocates who had pushed for a more employee friendly test under the Obama administration.
Changes in this area of law seem to occur monthly these days. Employment related lawsuits are expensive. Employers need to stay up to date on the latest changes and make sure their agreements with their employees, contractors, and other individuals to not needlessly expose them to expensive litigation or labor disputes. Companies should take the time to make sure their policies limit their exposures as much as possible in light of the applicable law and regulations.