Joint Employers

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Q: What does the latest decision on joint employer liability mean for businesses?

A: On September 8, 2020, the United States District Court for the Southern District of New York issued a decision overturning the U.S. Department of Labor’s (DOL) March 2020 Final Rule, which had adopted a narrow four-factor test for determining joint employer liability in “vertical” employment relationships, such as contractor/subcontractor, franchisor/franchisee and company/staffing agency relationships. The test set forth in the Final Rule looked at whether the putative joint employer (i) hires or fires the employee; (ii) supervises and controls the employee’s work schedule or conditions of employment to a substantial degree; (iii)  determines the employee’s rate and method of payment; and (iv) maintains the employee’s employment records. These factors looked to the degree of control as the standard for determining joint employment, which was a sharp departure from prior DOL guidance which looked more broadly at the economic dependence between the parties.

Q.  As a franchisor, could I potentially be held liable for the wage and hour violations committed by franchisees of my organization against their employees?

A.  On October 1, 2019, a three-judge panel of the Ninth Circuit Court of Appeals ruled that McDonald’s Corporation was not liable as a joint…

Q.  What is the current rule for determining whether two employers are considered to be “joint employers” under the National Labor Relations Act?

A.  On September 14, 2018, the National Labor Relations Board (NLRB) proposed a new regulation that would make it more challenging to establish joint employer status under the National Labor Relations Act. The proposed rule dictates that two entities will be joint employers only if each exercises substantial direct and immediate control over employees.