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U.S. Department of Labor

The U.S. Department of Labor announced a final rule to provide more clarity in the methodology of determining joint employer status under the Fair Labor Standards Act (FLSA). The rule aims to provide more certainty regarding joint employer's responsibility to pay federal minimum wage and overtime for all hours worked over 40 in a workweek.

In the final rule, the Department of Labor provides a four-factor test for determining joint employer status when an employee performs work for one employer that simultaneously benefits another entity or individual. The test examines whether the potential joint employer:

  • Hires or fires the employee;
  • Supervises and controls the employee's work schedule or conditions of employment to a substantial degree;
  • Determines the employee's rate and method of payment; and
  • Maintains the employee's employment records.

The rule also clarifies when additional factors may be relevant to a determination of joint employer status and identifies certain business models, contractual agreements with an employer, and business practices that do not make joint employer status more or less likely. However, additional factors will only be relevant when they show whether the potential joint employer exercises significant control over the terms and conditions of an employee's work. The new rule will take effect on March 16.

The National Association of Home Builders (NAHB) "welcomes" the new rule that provides clarity on definitions of joint employment. Under previous broader interpretations of joint employer status, there was greater uncertainty about what level of oversight and coordination with subcontractors might trigger joint employer liability, according to the NAHB.