On April 1, 2019, the Department of Labor issued a new proposed rule on joint employer.

The rule introduces a four-question test to determine when employers are joint employers. A clear test is needed because joint employers can both be held liable for violations of the Fair Labor Standards Act. The test asks:

1. Does the potential joint employer hire or fire the employee?
2. Does the potential joint employer supervise and control the employee’s work schedules or conditions of employment?
3. Does the potential joint employer determine the employee’s rate and method of payment?
4. Does the potential joint employer maintain the employee’s employment records?

The new rule also provides examples on when there is a joint employer in typical employment scenarios and when there isn’t.

In the Department of Labor press release, Secretary of Labor Alexander Acosta gave the reasons for the rule:

"This proposal will reduce uncertainty over joint employer status and clarify for workers who is responsible for their employment protections. Providing public notice and comment is the best way to move forward with another significant deregulatory proposal."

Interestingly, during the previous administration, the Department of Labor had issued an Administrator’s Interpretation in 2016, which broadened the definition of joint employer. That interpretation led to confusion for employers and workers.   

This new rule would clarify for employers when they are joint employers and reduce the number of lawsuits.

As a result, this new rule would help many employers, but mostly franchises.

As Matt Haller, Senior Vice President of Government Relations and Public Affairs at the International Franchise Association (IFA) explains in IFA’s press release:

“Through this proposal, the Department of Labor has the chance to undo one of the most harmful economic regulations from the past Administration and replace it with a rule that creates certainty for America’s 733,000 franchise businesses. An expanded joint employer standard has held back tens of billions of dollars in economic output each year due to a proliferation of frivolous lawsuits, precipitating significant changes to the way franchise brands interact with their local owners. The effect has rippled across the economy, causing tens of billions of dollars in lost economic output and job creation.” 

For these reasons, Americans for Tax Reform and the Center for Worker Freedom strongly support the new proposed rule on joint employer and thank the Trump administration, Secretary Acosta and the Department of Labor for supporting American workers and businesses.