Federal and New Jersey employment laws protect employees against a variety of actions by their employers, such as discrimination, retaliation, and failure to pay minimum wage or overtime. The Fair Labor Standards Act (FLSA) sets a nationwide minimum wage and establishes overtime compensation rules. For the FLSA and other statutes to apply, an employment relationship must exist between a worker and a business. When multiple individuals or businesses exercise authority over a worker, the “joint employer” rule states that each employer could be liable for wage and hour claims and other employment law violations. The U.S. Department of Labor (DOL) changed its rule regarding joint employment under the FLSA in 2020. This year, new management at the DOL rescinded the new rule and reverted to the old joint-employer rule.
What Is a Joint-Employer?
Joint employers each have control over the terms of an employee’s job, such as job duties, hours, and wages or salary. Examples of joint employment include:
– Business A contracts with Business B to provide services at Business B’s worksite. The contract states that Business B may determine the hours of work and other conditions for employees sent by Business A. Although Business A writes the paychecks, they may both be considered an individual’s “employers.”
– Business 1 operates a franchise under a contract with Business 2, the franchise owner. The franchise agreement gives Business 2 control over many or most of the terms and conditions of employment, while making Business 1 responsible for day-to-day HR matters.
What Is the Joint-Employer Rule?
The joint-employer rule states that the employers are jointly and severally liable for employment law violations. No single rule exists regarding joint employment. Instead, statutes or regulations establish a joint-employer rule for different laws. For the FLSA, the DOL established a rule holding that joint employment existed when:
– Employers have agreed to “share [an] employee’s services”;
– One employer is “acting directly or indirectly in the interest of” another employer regarding the employee; or
– One employer controls the other employer, or they are under “common control,” and they are “deemed to share control of the employee, directly or indirectly.”