United States Department of Labor Issues New Rule Limiting Franchisor Joint Employer Liability

Franchisor Joint Employer Liability

In January, the United States Department of Labor (“DOL”) issued a rule that will make it more difficult for workers to hold franchisors like McDonald’s and other fast food, convenience store, and gas station outlets liable for wage violations committed by their franchisees. The rule goes into effect this month. This rule is a natural extension of the DOL’s previous move rescinding Obama-era guidelines that expanded the definition of “joint employer” under the Fair Labor Standards Act to encompass more franchisors.

The new rule reiterates a longstanding four-factor balancing test to determine whether an alleged joint employer is liable for wage violations, specifically examining whether the joint employer: (1) hires or fires the employee; (2) supervises and controls the employee’s work schedule or conditions of employment to a substantial degree; (3) determines the employee’s rate and method of payment; and (4) maintains the employee’s employment records.

However, the new rule now expressly deems irrelevant the previous guidance that an employee’s “economic dependence” on the alleged joint employer should also be considered in the test, which looked at subfactors such as “the nature of the work being performed,” and whether the work was “integral to the [alleged joint employer’s] business.”

If you have questions about joint employer liability and /or you are not being paid minimum wage or overtime pay for working over forty hours per week, please contact Borrelli & Associates, P.L.L.C. immediately to schedule a consultation.