The U.S. Department of Labor announced a final rule that interprets joint employer status under the Fair Labor Standards Act (FLSA). Under the FLSA, an employee may have one or more joint employers that will require the covered employers to pay their employees at least the federal minimum wage for every hour worked and overtime for every hour worked over 40 in a workweek.
Joint employer status is determined by using the following four-factor balancing test that the FLSA has created in its final rule:
- Control to hire or fire the employee
- Supervise and control the employee’s work schedule or conditions of employment
- Determine the employee’s rate and method of payment
- Maintain the employee’s employment records
In the hospitality industry, it’s not uncommon for restauranteurs or hotel operators to own multiple units under separate legal entities and have certain employees split their time between the locations. This will force restauranteurs and hotel operators to aggregate the labor recordkeeping for their various locations. The new rule will also impact franchisors as they could be legally accountable for paying wages if they exercise any of the four specific controls referenced above over a franchisee’s staff.
Our tax specialists are available for consultation on this and other business management topics for restaurants, hotels, food distributors, or retail owners. Please contact Aaron Boker or one of our hospitality tax advisors at 301.231.6200 for more information.