The Department of Labor’s (DOL) proposed rule on joint employer status, released Thursday into the Federal Register, revives an effort hanging over from the first Trump administration to create a framework for when a worker can be seen as effectively having two employers.
Given the level of subcontracting that goes on in trucking, it’s a proposal that has the potential to become an issue when a driver-related issue becomes the subject of an enforcement action of DOL, such as by the Wage & Hour division.
The proposed rule looks at both vertical joint employer relationships–which would involve subcontracting, like what goes on in trucking–or a horizontal employer relationship. It is open for comment
A horizontal employment relationship, according to the DOL’s post about the rule in the Federal Register, is one “where an employee works separate hours for two (or more) employers in the same workweek that are sufficiently associated with each other with respect to the employment of the employee.”
Soon after the notice was posted, the trucking-focused Scopelitis law firm put out an email message to its clients, noting the proposed rule’s structure and how it would impact trucking companies.
Vertical vs. horizontal; the former matters for trucking
“For many clients, the proposed rule’s test for vertical joint employment—where, for example, a motor carrier contracts with a fleet contractor with employee drivers and the issue is whether the motor carrier is the joint employer of those drivers—is of most relevance,” the law firm said.
A Wage & Hour division rule on joint employer status at the Department of Labor was implemented in the first Trump administration. But it ultimately was tossed out by a court.
And what happens if a company is found to be a joint employer with another that it thought it was just contracting with?
As the Shipman & Goodman law firm said in an online commentary, “Joint employer status carries real consequences. If two businesses are found to be joint employers under the Fair Labor Standards Act, they are jointly and severally liable for wages, overtime, damages,
and penalties owed to the employees.”
Expanding on that, the Shipman firm said such a finding would mean that “an employee’s total hours worked each week for all joint employers must be aggregated to determine overtime eligibility. Under the FMLA, both joint employers must count the employee for purposes of employer coverage and employee eligibility.”
Four key points
Scopelitis said the latest test of whether there is a vertical joint employer relationship has been modified somewhat from the first Trump rule. But it it similar in that it calls for four factors to be considered by regulators seeking to determine the nature of the employers’ structure. (Other online commentary from various law firms noted, as did Scopelitis, that most of the proposed rule is identical to the blocked rule from the first Trump administration).
The four tests , Scopelitis said, look to see whether the potential joint employer:
Can hire or fire the employee in question
”Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree.”
“Determines the employee’s rate and method of payment.”
“Maintains the employee’s employment records.”
None of the four are dispositive, viewed as carrying more weight than the others, the firm said. But they are more important than any other considerations that might come into play.
“The proposal allows for wider consideration of other factors but emphasizes that if the four delineated factors point in the same direction, the additional factors are highly unlikely to outweigh that result,” Scopelitis said.
The Scopelitis email noted another aspect of the proposed rule that also drew commentary from other law firms posting their analysis online: the question of control.
“The test will consider a potential joint employer’s power or reserved right to act in relation to the employee, but considers actual exercise of control more relevant,” the firm said.
But it added that the wording on control is not identical to what was in the Trump rule in 2020. The latest proposal “also notably provides that compliance with and monitoring of general (as opposed to specific as in the 2020 regulation) legal obligations or health and safety standards does not weigh in favor of or against joint employment,” Scopelitis said.
In its commentary, the Shipman firm said of that same provision that it would have the DOL “examine whether the potential joint employer acts ‘directly or indirectly’ with respect to each factor, meaning that reserved or indirect authority over workers may be sufficient even if the potential joint employer is not exercising that authority day to day.”
Rule wouldn’t be the ultimate word
As the various commentaries said, a DOL guidance is not the final legal authority on various questions. For example, it has been noted that the back-and-forth Wage & Hour Division rules on independent contractor status, actual or proposed, would go into the pool of dozens of legal precedents in courts and state regulations and that court cases are far more important in setting legal precedents. The DOL’s standard on joint employer status could be similar.
Or as Scopelitis said, “Recognizing that there are a variety of tests utilized for determining joint employment, DOL intends the proposal to provide clarity and a level of uniformity.”
Regardless of how much clout the rule if adopted ultimately will have, the Shipman commentary recommended an employer determine how its policies line up against it.
“If you use staffing agencies, subcontractors, franchise arrangements, or any other business model in which another entity’s employees perform work that benefits your business, now is the time to review those relationships,” the law firm said. “Look at how much control you actually exercise over the workers, whether you maintain any of their employment records,and whether you have any role in setting their schedules or pay.”
Part of that, the firm said, involves reviewing contracts to determine the issue of control.
Joint employer battle at NLRB
The proposed DOL rule on joint employer status follows by several weeks a reinstatement of a joint employer rule at the National Labor Relations Board (NLRB). That rule will govern the issue in that venue.
Like the latest DOL proposal on the issue, the NLRB rule traces back to the first Trump administration. But that rule was not thrown out by court. Rather, it was superseded by a Biden-era rule; that one was tossed out by a federal judge in Texas.
The proposed rule at the DOL comes as the Teamsters are pursuing a joint employer declaration by the NLRB for Amazon (NASDAQ: AMZN) and its direct service providers. But earlier success in its efforts may be thwarted by a recent NLRB-Amazon deal that the Teamsters is challenging.
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