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DOL Issues Guidance on Third-Party Joint Employment Under New FLSA Rule

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DOL Issues Guidance on Third-Party Joint Employment Under New FLSA Rule

June 20, 2014
Late Thursday, the Department of Labor (DOL) released long-awaited guidance on joint employment situations. The guidance comes in the form of a new Administrator's Interpretation (AI) and an updated fact sheet. The AI is a longer document which includes detailed legal analysis and citations, while the fact sheet is a more plain-language summary. The DOL also recently updated sections of its Frequently Asked Questions (FAQs) to provide additional guidance on topics including independent contractors, respite workers, paid family members, sleep time, and travel. 
Since the finalization of the rule "Application of Fair Labor Standards Act [FLSA] to Domestic Service" in October 2013, the DOL has worked closely with stakeholders, including significant consultation with ANCOR,  to issue guidance to assist states, providers, and people served implement the new rule. This most recent guidance focuses specifically on the impact of the rule to Medicaid-funded consumer-directed programs. DOL notes that the final rule did not change any prior guidance about joint employment, though it may create new minimum wage and overtime obligations for provider or state agencies which "will require every potential employer to evaluate whether it may be a joint employer under the FLSA". The guidance summarizes existing case law on joint employment principles and provides hypotheticals analyzing how these principles would apply in various common home-care situations. 
The guidance notes that joint employment is determined by applying the "economic realities" test, which examines several factors to determine whether a worker is economically dependent on his or her purported employer to the extent that an employment relationship is created. The test is subjective and highly fact-specific. Among factors considered are:
  • whether a possible employer has the power to direct, control, or supervise the worker(s) or the work performed;
  • whether a possible employer has the power to hire or fire, modify the employment conditions or determine the pay rates or the methods of wage payment for the worker(s);
  • the degree of permanency and duration of the relationship;
  • where the work is performed and whether the tasks performed require special skills;
  • whether the work performed is an integral part of the overall business operation;
  • whether a possible employer undertakes responsibilities in relation to the worker(s) which are commonly performed by employers;
  • whose equipment is used; and
  • who performs payroll and similar functions.

DOL emphasizes that “a determination of whether joint employment exists must be based upon all the facts of the particular case” and that “no one factor is controlling.” The ultimate question, DOL explains,  is one of economic dependence.

DOL asserts that “many home care providers are jointly employed by two or more entities,” which may include a consumer, a private home care agency, a non-profit organization, or a public entity. The Department particularly points out that “a public entity and a consumer may jointly employ a provider through a Medicaid-funded consumer-directed program.” Other third parties, such as a provider agency or a Managed Care Organization (MCO), may also be joint employers in consumer-directed programs.

The rule does not allow third-party employers to claim either the companionship exemption or the exemption from overtime for live-in domestic services, even when that third-party employer is in a joint employment relationship with a family or individual who may properly claim the exemption. The rule requires that workers working for a single third-party employer, even if they serve multiple consumers, be compensated at the overtime rate for all hours worked over 40 in a workweek, as well as compensated for travel time when moving between multiple work locations.  

DOL hosted a call with stakeholders on Thursday to go over the guidance, and noted on the call that the Centers for Medicare and Medicaid Services (CMS) is currently developing guidance to assist state Medicaid programs to structure their systems to support the FLSA obligations to pay for overtime and travel time in situations where workers serve multiple individuals. That guidance is expected "soon", but as of yet there is no firm estimated date for its issuance. DOL representatives also noted that they have heard clearly the request from multiple stakeholders to delay implementation of the rule, but did not indicate that the implementation date would be extended beyond the current date of January 1, 2015.