Legislative lowdown: DOL proposes business-friendly joint employer standard

The Department of Labor (DOL) recently issued a proposed rule that seeks to establish a blanket standard for determining when multiple businesses are considered a “joint employer” of a group of workers.

The proposed joint employer standard, which would apply to the Fair Labor Standards Act, the Family and Medical Leave Act, and the Migrant and Seasonal Agricultural Worker Protection Act, seeks “to address the dearth of departmental regulatory guidance,” on this matter, per a DOL press release published on April 22.

HR compliance teams have been operating without a federal joint employer standard since 2021, when the Biden administration rescinded a DOL rule issued during President Donald Trump’s first term.

Business groups have applauded the proposed rule, as it’s expected to make it harder for companies to qualify as a joint employer, thus making multiple parties liable for labor violations that affect workers in their purview.

How the new joint employer standard would work. Under the new standard the DOL has proposed, four factors would determine whether two or more businesses are considered a joint employer. Joint employment is determined by whether an entity can:

• Hire or fire an employee
• Supervise and control an employee’s work schedule or conditions of employment “to a substantial degree”
• Determine an employee’s pay rate and pay method
• Maintain an employee’s payment records

If a business answers unanimously in the affirmative to these four questions, there’s a “substantial likelihood” they’d be considered a joint employer of a group of employees with another company, the DOL indicated.

What this means for HR. Should the new standard take effect, it will likely ease compliance burdens for employers in industries such as staffing or franchise. In a notice of its proposed rule, the DOL said that simply “sharing a vendor or being franchisees of the same franchisor” isn’t sufficient enough on its own to establish joint employment.

The standard “protects the independence of franchise small businesses, safeguards the equity franchisees have built in their local operations, and prevents the kind of regulatory overreach that has threatened jobs and growth in previous administrations,” the International Franchise Association, whose members include chains such as McDonald’s and the UPS Store, said in a statement.

On the other hand, the back-and-forth over this issue in recent years has arguably made it harder for businesses to operate, Paul Parisi, a partner in the employment and labor group at law firm Armstrong Teasdale, told HR Brew via email. While this proposed standard might be more business friendly, “this kind of volatility makes it very difficult for businesses to manage their compliance and run their operations because they know the rule could change tomorrow with a new administration,” he wrote.

The National Labor Relations Board also recently returned to a less stringent joint employer standard, reinstating a 2020 rule in February.

While the proposed DOL standard gives an indication of how the agency will view joint employment as it relates to federal labor law violations, courts won’t necessarily be required to adhere to the same test, Reuters reported.