Yesterday (Feb. 26, 2020), eighteen (18) state Attorney Generals filed suit against the Department of Labor to challenge its new “joint employer” rule that makes it harder for affiliated businesses to share liability for wage violations.  The new rule is scheduled to take effect in mid-March.  [See Debes Law Firm blog dated Feb. 12th for more information about the new rule.] 

If two business are found to be “joint employers” under the federal wage laws (i.e. the Fair Labor Standards Act or FLSA), they would both be responsible to ensure that their employees are paid the correct minimum and overtime wages.   The previous test for “joint employer” status has been in effect for almost 75 years and focuses primarily on whether one or both of the businesses had control over the employee’s work.   

The FLSA defines an “employer” as “any person acting directly or indirectly in the interest of an employer in relation to an employee.” This definition allows for an employee to have one or more joint employers who will be jointly and severally liable for any wage and hour violations.  Under the existing “complete disassociation” test, an employer is a joint employer if the two potential employers do not act entirely independently of each other

The new test, however, makes it far more difficult for businesses to be considered “joint employers” for purposes of the FLSA.  Specifically, the DOL’s new regulation gets rid of the “complete disassociation” test and adopts a four-factor balancing test for determining whether two or more affiliated businesses jointly employ workers in situations where workers perform tasks for one employer that simultaneously benefit another business.

The four factors are: (i) whether a business can hire or fire employees, (ii) whether it controls their schedules or conditions of employment to a substantial degree, (iii) whether it determines workers’ pay rates and the methods by which they are paid, and (iv) if it maintains workers’ employment records.

The fear is that many businesses will be relieved of their duty to ensure that proper wages are paid — which can leave millions of workers at risk for being improperly paid and without relief to recover what they are legally owed. 

Attorney Generals from the states of New York, California, Pennsylvania, Colorado, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, Virginia, Washington, and the District of Columbia joined together to file the suit.  [The case is styled: State of New York et al. v. Eugene Scalia et al., Case number 1:20-cv-01689, in the U.S. District Court for the Southern District of New York.] 

If you have any questions concerning the impact of this new Regulation on your employment status, feel free to contact us for more information.