Who’s on First? New Regulations on Joint Employment under the FLSA – Part 1.

You know, over the years we have had occasion to discuss the issue of joint employment under the FLSA.  It was a big deal during the last administration.  In fact, back then we were talking about an Administrator’s Interpretation that the Obama DOL issued to “clarify” joint employer status under the FLSA.  That guidance was concerning in that it appeared to really broaden the scope of when a joint employer relationship existed.  It was such a big deal that we at WNJ spent a fair amount of time talking about what it meant.  We even did a panel discussion or two on the issue.  And then we got a new administration, and that new administration withdrew the guidance.  And we waited. 

The wait is over.  On January 16, 2020 the Department of Labor published final regulations on the issue.  These regulations amend 29 CFR Part 791 and are an attempt to clarify when a joint employer relationship exists.  As the DOL points out, it has been a while since Part 791 was updated:  “Since this 1961 update, the Department has not published any other updates to part 791 until this final rule.”  I think we would all agree that 59 years is a long time and a lot has changed about how the workplace works in that time.  So, what do the new regulations provide?  Well, including the preamble and all the required stuff, the Federal Register publication of the new regulations is 42 pages long.  We are not going into all of that.  I’m going to try to boil it down to a manageable bite-size bit or two for you.

Let’s start with why we care.  Under the FLSA if two employers are joint employers, both employers are “jointly and severally liable” for making sure the employee gets the minimum wage and probably more importantly, overtime.  So the new regulations say that there are really two scenarios under the FLSA where the joint employer analysis is relevant. 

(a)(1) In the first joint employer scenario, the employee has an employer who suffers, permits, or otherwise employs the employee to work, see 29 U.S.C. 203(e)(1), (g), but another person simultaneously benefits from that work. The other person is the employee’s joint employer only if that person is acting directly or indirectly in the interest of the employer in relation to the employee.


29 CFR § 791.2(a)(1)

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What are we talking about here?  Most commonly we are talking about a situation where you run a company and you hire a temporary service agency to provide you with employees.  In this case, the DOL has articulated a 4-factor test to determine if a joint employer relationship exists:

Those four factors are whether the other person:

(i) Hires or fires the employee;

(ii) Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;

(iii) Determines the employee’s rate and method of payment; and

(iv)  Maintains the employee’s employment records.


Id

Now there are some ruffles and flourishes that explain all that but the important thing to remember is no single factor standing alone is enough and the fourth factor (maintaining records) is not enough standing alone.

So how are you supposed to know how to apply that to a real life situation, like for example I own a company and I retained a temp agency go send me temps?  Well, the DOL was nice enough to include some examples in the regs.

(6)(i) Example. A packaging company requests workers on a daily basis from a staffing agency. Although the staffing agency determines each worker’s hourly rate of pay, the packaging company closely supervises their work, providing hands-on instruction on a regular and routine basis. The packaging company also uses sophisticated analysis of expected customer demand to continuously adjust the number of workers it requests and the specific hours for each worker, sending workers home depending on workload. Is the packaging company a joint employer of the staffing agency’s employees?


29 CFR § 791.2(g)(6)(i).

Sound familiar?  Sure it does, it’s you if you use temps.  So what is the answer?  DOL gives us that too.

(ii) Application. Under these facts, the packaging company is a joint employer of the staffing agency’s employees because it exercises sufficient control over their terms and conditions of employment by closely supervising their work and controlling their work schedules.


29 CFR § 791.2(g)(6)(ii).

OK Steve, now give me an example where there is a joint employer relationship.  Don’t have to, the DOL did.

(7)(i) Example. A packaging company has unfilled shifts and requests a staffing agency to identify and assign workers to fill those shifts. Like other clients, the packaging company pays the staffing agency a fixed fee to obtain each worker for an 8-hour shift. The staffing agency determines the hourly rate of pay for each worker, restricts all of its workers from performing more than five shifts in a week, and retains complete discretion over which workers to assign to fill a particular shift. Workers perform their shifts for the packaging company at the company’s warehouse under limited supervision from the packaging company to ensure that minimal quantity, quality, and workplace safety standards are satisfied, and under more strict supervision from a staffing agency supervisor who is on site at the packaging company. Is the packaging company a joint employer?


29 CFR § 791.2(g)(7)(i)

(ii) Application. Under these facts, the packaging company is not a joint employer of the staffing agency’s employees because the staffing agency exclusively determines the pay and work schedule for each employee. Although the packaging company exercises some control over the workers by exercising limited supervision over their work, such supervision, especially considering the staffing agency’s supervision, is alone insufficient to establish that the packaging company is a joint employer without additional facts to support such a conclusion.


29 CFR § 791.2(g)(7)(ii).

See the difference?  Here it seems to be that the DOL considers day-to-day supervision the deciding factor.  And in most cases you supervise your temps, so you are (and always have been) a joint employer with the temp agency.

OK, that’s cool and surprisingly not that surprising.  What about scenario number 2?  Well, let’s talk about that next time shall we?