On April 1, 2019, the U.S. Department of Labor (“DOL”) announced proposed changes to its joint-employer test.

Specifically, the DOL set out a four-factor balancing test, which inquires whether an entity that does not directly employ an individual employee:

1. hires or fires the employee;

2. supervises and controls the employee’s work schedule and/or conditions of employment;

3. determines the employee’s rate and method of payment; and

4.  maintains the employee’s employment records

The proposed changes clarify that merely having the ability, power or contractual right to affect the other employer’s employees’ terms and conditions of employment is not relevant to the analysis.  Rather, the putative joint employer must actually exercise or exert control over the other employer’s employees to be considered a joint employer.  In addition, certain business models, such as a franchisor relationship, do not make a finding of joint-employment more likely.  And if adopted, the proposed changes would also provide examples to assist with determining joint employment status. 

Once the proposed changes are published in the Federal Register, the public will have 60 days to submit comments.

These proposed changes mark the first time since 1958 that the DOL has meaningfully revised the joint-employer regulations.  According to the DOL, the proposed changes are meant to provide courts with clear guidance when considering joint employer status and reduce litigation.  Notably, the DOL’s proposed changes to the joint-employer test come on the heels of the National Labor Relations Board’s proposed joint employer rule, which provides that joint employment turns, in part, on whether a putative joint employer actually exercises control over the other employer’s employees’ terms and conditions of employment. 

The DOL’s proposed changes would bring welcome clarity and certainty to employers that make use of another entity’s employees or that operate under certain business models.  We will keep you posted as the proposed changes move through the notice and comment period.