DOL Issues Proposed Joint Employer Rule

On April 23, the U.S. Department of Labor (DOL) issued a proposed rule that would clarify joint employer status under the Fair Labor Standards Act (FLSA) [91 F.R. 21878, 4-23-26]. The proposed rule aligns with some aspects of the DOL’s 2020 rule. The rule also would apply to the Family and Medical Leave Act (FMLA).

When a joint employment relationship exists, employers are jointly and individually liable for any wages, damages, and other relief owed to employees as well as paying overtime for all hours an employee worked for the joint employers.

The proposed ruled addresses “vertical” and “horizontal” joint employment.

Four Factors to Determine Vertical Joint Employment

Vertical joint employment is generally when an employee is jointly employed by two or more employers that simultaneously benefit from the employee’s work. The proposed rule includes four factors to determine whether vertical joint employment exists based on whether the employer:

1. Hired the employee or has the authority to terminate employment
2. Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree
3. Determines the employee’s rate and method of payment
4. Maintains the employee’s employment records

Situations That Create Horizontal Joint Employment

The proposed rule readopts most of the text regarding horizontal joint employment from the DOL’s 2020 rule. Horizontal joint employment generally exists when two or more employers are related enough in regards to the employment of an employee.

Rayna Alexander, Esq., is Editor of Payroll Information Resources for PayrollOrg.