The Federal Department of Labor (“DOL”) recently proposed two new rules addressing joint employer status and overtime pay calculation under the Fair Labor Standards Act (“FLSA”). These proposals are significant because the underlying regulations had not been updated in decades.

Joint Employer Status

On April 1, 2019, the DOL proposed the new rule for determining joint employer status. The proposed rule would establish a four-factor test that would consider whether the potential joint employer actually exercises power to:

  • hire or fire the employee;
  • supervise and control the employee’s work schedules or conditions of employment;
  • determine the employee’s rate and method of payment; and
  • maintain the employee’s employment records.

The proposed rule also includes 9 examples analyzing potential joint employer relationships, which will be open to the public for comment.

This proposed rule would be the first major revision of the joint employer regulations since 1958. In addition, it would cement the current administration’s position on joint employer status.  Recall that the DOL under President Obama issued guidance in 2016 that scrutinized joint employer relationships. In 2017, the current administration rescinded that guidance. Thus, finalizing this new rule would completely overturn the previous administration’s rule and reinforce the new administration’s position.

Overtime Pay Calculation

Last week, the DOL proposed another new rule to clarify and update the regular rate requirements for purposes of calculating overtime under the FLSA. The FLSA generally requires that employers pay overtime of at least one and one-half times the regular rate for hours worked in excess of 40 hours per workweek. Under the current rules, employers are discouraged from offering more perks (e.g., gym memberships or bonuses) because it may be unclear whether those perks must be included in the calculation of an employee’s regular rate of pay.

The proposed rule clarifies whether certain kinds of perks, benefits, or other miscellaneous items must be included in the employee’s regular rate. For instance, the rule clarifies that the following perks are excluded from the employee’s regular rate of pay:

  • the cost of providing wellness programs, onsite specialist treatment, gym access and fitness classes, and employee discounts;
  • payments for unused paid leave, including sick leave;
  • reimbursed expenses, even if not incurred “solely” for the employer’s benefit;
  • reimbursed travel expenses that do not exceed the maximum travel reimbursement permitted under the Federal Travel Regulation System regulations and that satisfy other regulatory requirements;
  • discretionary bonuses;
  • Benefit plans, including accident, unemployment, and legal services; and
  • Tuition programs, such as reimbursement programs or repayment of educational debt.

The overtime calculation rule has been submitted for public comment. Click this link to submit a comment. The joint employer status rule is being finalized and will be published for public comment soon. We will keep you updated on the developments. Please feel free to contact us if you have any questions.