The Clarity Project: The U.S. Department of Labor Issues New Guidance on the Joint Employer Standard

On Monday April 1, 2019, the United States Department of Labor (“DOL”) released a Notice of Proposed Rulemaking to adopt a new standard for determining whether two or more enterprises are joint employers for purposes of the Fair Labor Standards Act (FLSA). The FLSA requires, inter alia,that employers whose annual revenues equal or exceed $500,000 or who are engaged in interstate commerce pay their employees for each hour worked and pay overtime compensation for each hour worked in excess of forty (40) in a workweek. The DOL joint employer standard defines when two employers will be considered responsible for the same employee and subject to joint and several liability for violations of the FLSA’s minimum wage and overtime requirements.

If the proposed rule is adopted, it will represent the first revision to the regulations in fifty-eight (58) years. The proposed rule has significant implications for employers who: franchise; utilize contractors or staffing firms to perform any segment of their business; and for employers who provide temporary or contingent workers to other businesses or use such temporary and contingent workers. In sum, it is likely that the proposed new rule would make it more difficult to establish that a user of labor or services is the joint employer of the supplying entity’s employees and to establish that a franchisor is the joint employer of its franchisee’s employees.