The Department of Labor (DOL) has issued a final rule to revise and update its regulations under the Fair Labor Standards Act (FLSA) aimed at clarifying when a worker, including those outsourced, are employed by more than one company.

The final rule, set to take effect Mar. 16, 2020, created a four-part test to determine whether a company is a joint employer. The test considers whether the potential joint employer actually exercises the power to:

• Hire and fire employees.
• Supervise the employees’ work schedules.
• Set the employees’ pay rate.
• Maintain the employees’ records.

Contrary to popular belief, employees’ economic dependence on the employer is not relevant in the determination process. Additionally, not all parts of the test need to be met to establish joint employer status under FLSA.

Downfalls of Joint-Employer Status

The consequences of being deemed a joint employer can become serious. When companies in such relationships become sufficiently intertwined, one entity becomes bound by another entity’s collective bargaining obligations and may be held jointly liable for the federal employment law violations. Be sure to consider this and limit any potential liability you might incur by avoiding the exercise of control over other parties’ employees.