NEW DOL GUIDANCE LIKELY TO ENSNARE MORE BUSINESSES IN WAGE AND HOUR DISPUTES

The U.S. Department of Labor (DOL) recently clarified the standard by which it thinks courts, businesses, and workers should analyze situations involving workers who perform services for more than one business to determine if the workers have two or more employers.  While acknowledging that the proper analysis to be used to determine joint employment is the economic reality test, the DOL’s recently released guidance on the subject seeks to recast the focus of the test away from the amount of control exerted by a potential joint employer.  Instead, the DOL’s guidance shifts the focus of the analysis to the worker’s economic dependence on the potential joint employer.

In Sharp contrast to well-established 5th Circuit case law, the DOL’s guidance significantly expands the reach of a joint employment analysis by broadening the factors to be used and shifting the focus of the analysis.   The DOL’s guidance includes recommending seven “economic realities” factors that it believes provides “useful guidance” in analyzing joint employment cases.  The ultimate question to be answered by the application of these seven factors is whether the employee is economically dependent on the potential joint employer. Under the DOL’s economic realities factors, economic dependence depends on: (1) whether the potential joint employer directs, controls, or supervises the work performed, (2) whether the potential joint employer controls employment conditions, (3) the permanency and duration of relationship between employee and potential employer, (4) the repetitive and rote nature of work, (5) how integral the employee’s work is to potential joint employer’s business, (6) the amount of work performed on potential joint employer’s owned or controlled premises, and (7) whether the potential joint employer performs administrative functions commonly performed by employers.  The DOL’s guidance completely rejects the notion that the entire point of the economic realities test is to determine the extent of control exerted by the potential joint employer.

The DOL says that its new expansive interpretation of joint employment is being driven in part by companies’ increased use of outsourcing for labor needs.  By shifting the focus of the analysis from control to economic dependence, the DOL’s guidance ensures that many more businesses will likely be ensnared in wage and hour litigation by plaintiff attorneys looking for the deep pockets.

 

Antonio U. Allen

NEW DOL GUIDANCE LIKELY TO ENSNARE MORE BUSINESSES IN WAGE AND HOUR DISPUTES