Joint employment can mean different things to different people. For stoners, it could mean a groovy new job selling weed at the dispensary. For rheumatologists, it could mean hiring a new medical assistant to check elbows and knees.
But for most everyone else, it has nothing to do with joints at all. Joint employment just means that two companies both serve as the employer of an employee.
Last week, the Department of Labor (DOL) proposed a new test for determining whether joint employment exists under the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA).
Click here to read more, circulated yesterday (April 28) as a BakerHostetler Alert.
According to the NYC Department of Transportation, there are just under 3 million free, on-street parking spots in New York City, Of course, they’re all taken, and if you want one, you’ll be circling for blocks.
But not if you have a parking spot holder. Can you really hire someone to do that? You most certainly can. but if you, you’d better properly classify those spotholders.
After a four-day bench trial, a federal judge ruled that 329 parking spot holders in New York City were employees, not independent contractors, of the two small companies that engaged them. These individuals were engaged for the sole purpose of holding parking spots so that the two companies’ primary client, a large utility company, could perform services around the city. The case was decided under the Fair Labor Standards Act (FLSA).
Not only is paid spotholding an actual thing, it’s quite a lucrative thing. Between 2016 and 2021, the two small companies who were defendants in this case were paid $80 million to be the exclusive spotholder for the utility company. That’s not a typo. And yes, I agree, we are all in the wrong line of work.
The companies’ contracts required them to comply with the FLSA, but the companies’ accountant recommended classifying the spotholders as independent contractors, a classification he felt confident would be permitted under the Internal Revenue Code.
This case, of course, is not about federal tax law compliance, and many of you know that the test for who is my employee is different under the Internal Revenue Code than under the FLSA. Even if the workers were contractors under federal tax law, that wouldn’t mean they are contractors under the FLSA.
And alas, they were not — at least according to this ruling.
The judge applied a five-part economic realities test. She found that the companies exercised substantial control over how the spotholding work was performed. The judge seemed particularly moved by testimony that the workers could not take bathroom breaks without permission and, if permission was denied, they would sometimes pee in bags. That’s a swing and a miss. Strike one.
She found that the spotholders had no opportunity for profit or loss. The only way to earn more was to work more. The spotholders invested no capital in their work. Together, that makes strike two.
The judge found that the spotholders had no special skills. Insulting perhaps, but probably true. That’s the third factor in the FLSA economic realities test, and that’s strike three.
The judge also found that the relationship was indefinite in nature. That’s another missed factor and another strike.
And she ruled that the work was indispensable to the companies’ spotholding business. That’s another strike (strike five, I guess). All five factors pointed toward employee status.
The court ordered the companies to pay $3 million in back wages for unpaid overtime, plus another $3 million in liquidated damages.
There’s one other fact worth noting here. The case was not brought by an enterprising plaintiff’s lawyer. It was brought by the US Department of Labor. Even though we have a Republican administration that tends to be pro-business, but that doesn’t mean the DOL will ignore what it perceives to be misclassification.
I was in Italy two weeks ago and visited Vatican City. Passport control at the Rome airport was annoyingly slow, but getting in and out of Vatican City – a sovereign nation – was surprisingly easy. Here is a photo of border control at the Vatican.
Navigating the border between independent contractor and employee status is usually more Rome airport than Vatican City, but a proposed new regulation from the Department of Labor (DOL) would make it a bit easier to support independent contractor status under the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA).
The proposed rule would adopt a five-factor “economic reality” test, consistent with the test adopted during the first Trump administration. The defining feature of this test is that it highlights two core factors. If these two factors are met, the worker would almost always be an independent contractor under the FLSA and FMLA.
Click here to read more, originally posted on the BakerHostetler blog, Employment Law Spotlight.
[Update 3/2/2026: A new proposed rule was released last Thu, a few days after this post. A blog post with further details will follow shortly. there’s still no new rule, but now there is a proposed new rule.]
A daycare teacher in St. Charles, Illinois, was arrested this month after she allegedly gave the children candy-flavored laxatives. The plan, apparently, was to cause them to get diarrhea, which meant they would have to be sent home. The teacher’s motivation? She was overwhelmed at work. Fewer kids means less work.
I would counsel against this. If overwhelmed at work, there are generally better options than making a bunch of kids get watery poops. But what do I know?
A client last week alerted me to a mess of a different type. She received a flyer from an HR training firm, offering (for a fee, of course) to train HR professionals and lawyers on the “New Rule Issued by the Department of Labor” on independent contractor classification. Failure to comply with this rule, they warned in the flyer, could result in “the IRS penalizing you for back income taxes, FICA and states going after you for unpaid income taxes, workers compensation premiums and unemployment payments.”
I’d say there’s just one problem here, but that’s not true. So much of this is wrong.
First, there is no new DOL rule on the test for independent contractor classification. The DOL has indicated its intent to propose a new rule at some point in the near future. The proposed rule, whenever it is prepared, would then have to be published and go through a public comment period. Even if a proposed rule were to be released tomorrow, we are many months away from any new rule being finalized and implemented.
The current status of any proposed, not-yet-published, possible rule is here, where the DOL indicates that “The Department intends to rescind the 2024 IC rule and is considering how it will proceed with respect to independent contractor classification under the FLSA employee or under the FLSA.” Nothing has happened yet.
Second, even if the DOL does publish a new rule (which can only happen after a notice-and-comment period), that rule will have no effect on federal or state taxes, withholdings, workers compensation premiums, or unemployment. The DOL rule would impact only the determination of employee status under the Fair Labor Standards Act (FLSA), which governs when workers must be paid a minimum wage and overtime. The DOL has no oversight or jurisdiction over any of those other laws.
Other laws — and other tests — determine whether someone is an employee for federal tax purposes, and the states have their own laws to determine whether someone is an employee for state law tax purposes, workers compensation purposes, and unemployment insurance purposes.
It is true that misclassifying a worker can result in all of these bad outcomes, but a new DOL rule would have no effect on any of them. Companies using independent contractors should remember that there are a myriad of standards for determining whether someone is an employee or an independent contractor, and these tests all exist simultaneously and apply to different laws at the federal and state level. A worker can be an employee under some laws and an independent contractor under other laws, at the same time. (Fun!)
Apparently anyone can advertise to speak on topics with legal significance, even if they’re just plain wrong on what they plan to say.
If all of this seems overwhelming, just take a deep breath and let’s wait for the DOL to propose a new rule, which undoubtedly will make it easier to classify someone as a contractor under the FLSA. In the meantime, if you still feel overwhelmed, please do not resort to giving children diarrhea.
I took last week off work to visit Asheville. The first morning, we woke up at 5 am for a sunrise hike at Craggy Pinnacle, along the Blue Ridge Parkway. This was our view at the top.
Fortunately, the fog burned off after an hour or so. We waited and were rewarded with some spectacular views. Our 7-month old puppy Louie was just happy there were other dogs at the top to play with. Here he is, admiring the view.
The lesson, of course, is to be patient and sometime the fog will clear. (Or check the weather report?)
Franchisors are hoping for the same reward, through the proposed American Franchise Act, introduced in the House in September and now before the House Committee on Education and Workforce.
The bill, which has at least some bipartisan support, would change the definition of joint employment under the NLRA and FLSA for franchisee-franchisor relationships.
The bill would establish that a franchisor can be a joint employer only if it exercises “substantial direct and immediate control” over one or more “essential terms and conditions of employment of the employees of the franchisee.”
“Essential terms and conditions of employment” means wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.
To be a joint employer, the franchisor would have to control these terms with respect to individual employees. Setting baseline standards and brand guidelines would not create joint employment.
The risk of joint employment liability is an ongoing concern for franchisors. The franchise business model requires a level of control to ensure brand consistency and a uniform customer experience across locations. The American Franchise Act, if passed, would help to protect the franchise model and establish clear guidelines for what level of control is needed to create a joint employment relationship.
For three hours each night, a policeman appears out of thin air in a busy park in Seoul, South Korea. His presence has, according to police data, reduced crime in the park by 22%. The policeman, however, has never arrested anyone, and he doesn’t even move around the park.
That’s because he’s a hologram.
The police chief attributes the program’s success to “citizens’ perceived safety,” although I’m not sure why anyone would perceive themselves safer in the presence of a hologram. Maybe I should not be so cynical. If it works, it works.
A new federal bill seeks to increase employers’ perceived safety, but without holograms.
The Save Local Business Act, H.R. 4366, would amend the National Labor Relations Act (NLRA) and the Fair Labor Standards Act (FLSA) to create a uniform test for joint employer status. By adding a new joint employer test to the statutes, Congress would prevent the NLRB and DOL from trying to change the test every time there’s a new party in the White House.
The Act is a pro-business bill. If it passes, joint employer status would be much harder to establish.
Under the proposed text, joint employer status could exist “only if each employer directly, actually, and immediately, exercises significant control over the essential terms and conditions of employment of the employees of the other employer.”
“Essential terms and conditions” would mean, for example, “hiring such employees, discharging such employees, determining the rate of pay and benefits of such employees, supervising such employees on a day-to-day basis, assigning such employees a work schedule, position, or task, or disciplining such employees.”
The bill is sponsored by James Comer (R-Ky.). It was introduced July 14, 2025. Previous versions of the bill were introduced in 2021 and 2023. Obviously, they failed.
With Republicans controlling the House, passage in the House seems possible, but the likelihood of getting 60 votes in the Senate is pretty remote.
So the bill, while it seems good for businesses, is probably the legislative equivalent of a Korean holographic police officer. It looks nice but exerts no real authority.
This is Louie. He’s 11 weeks old. He has the teeth of a shark. If you play with him and there’s no toy in his mouth, your arm is the toy. Or your foot. Or sometimes your face. In my house, we all look like we just played with a blender. But he’s awfully cute.
Late last week, the Department of Labor (DOL) made some news that won’t bite companies in the face.
The Aztec Death Whistle is shaped like a human skull and produces a hideous shrieking sound, as if conjuring up 1000 piercing human screams. These whistles have been discovered in burial site excavations. Scholars believe that they played a role in warfare or burial ceremonies.
Either way, they make a pretty awful sound. Here’s a youtube video demonstration. Enjoy! 😳
Rep. Kevin Kiley (R-CA) hopes that two new bills will sound a death whistle to the confusing morass of independent contractor tests.
The Modern Worker Empowerment Act (MWEA) would codify the test for employee status under the Fair Labor Standards Act (FLSA) and the National Labor Relations Act (NLRA). The new test would create a two-part test. It would be a blend of the Right to Control Test and the Economic Realities Test.
An individual would be deemed an independent contractor if (1) the hiring party does not exercise significant control over how the work is performed, and (2) the person performing the work has the opportunities and risks inherent to entrepreneurship.
The bill would also prohibit consideration of certain facts, such as any requirement to comply with legal and safety standards.
The Modern Worker Security Act (MWSA) would create a safe harbor so that companies could provide portable benefits to independent contractors.
These laws would apply only to classification under the FLSA and NLRA. The bills do not attempt to modify the IRS’s Right to Control standard or any state law tests.
So are these bills a death whistle for the current IC tests?
Probably not. My Aztec-themed prediction device says the bills are not likely to become law. But I like the thinking. Any increase in clarity for the IC tests would be helpful to the business community.
Meanwhile, if you’d like to learn more about Aztec death whistles, there’s an actual study published in Nature that investigates the “Psychoacoustic and Archeoacoustic nature of ancient Aztec death whistle.” Here’s the link.
This Thursday, Feb 27 marks National Toast Day, an important annual celebration that commemorates this versatile form of bread. Toast for breakfast? Toast for brunch? Snack? PB&J? Is there anything toast can’t do?
National Toast Day is celebrated on the last Thursday of February each year, which means that this year it overlaps with National Polar Bear Day, National Strawberry Day, and National Kahlua Day.
Put all those things together and you’ve got one helluva picnic.
But why do I mention toast? Because of independent contractor classification tests, of course. Here’s what I mean.
Remember the 2024 DOL independent contractor rule — you know, the one that the Biden DOL passed in January 2024? We hardly had a chance to get acquainted.
I’ll tell you something that won’t surprise you. The Trump Administration is likely going to rescind it. Or maybe ignore it. Or maybe allow a court to reject it. One way or another, it’s gonna be toast.
There are several lawsuits challenging the 2024 rule, and one of them — Frisard’s Transportation v. US DOL — was scheduled for oral argument at the Fifth Circuit Court of Appeals in early February.
The DOL, however, asked the court to postpone oral argument to allow it time to consider how it wants to proceed. How it wanted to proceed under Biden was to defend the rule. Now, not so much.
However the case proceeds, we can expect that the Trump DOL will not apply the Biden Administration’s independent contractor test.
So what does that mean for the independent contractor test?
In reality, not much.
That’s because, first, the rule applied only to the Fair Labor Standards Act (FLSA), which is the federal wage and hour statute. It didn’t apply to tax law, benefits law, labor law, unemployment or workers’ comp law, or any state law.
And second, the test for who is an employee under the FLSA has always been an Economic Realities Test, and courts know what that test is. Every circuit court has a long line of case law describing the Economic Realities test. The courts don’t need the Biden or Trump Administration to tell them how to interpret the FLSA. The FLSA has been on the book since the 1930s, back when Biden and Trump were mere teenagers.
So what does this mean for employers? Again, not much. Employers should assume that under federal wage and hour law, the test for whether someone is an employee or independent contractor is the same as it has been for decades.
This anticipated change is not really going to change anything at all.
Now, if instead of toast, the Trump Administration made the rule into Kahlua, that would seem to be worth celebrating.
My impression of European electrical outlets is that they seem surprised, as if they don’t know what might be coming. I saw this one in our Airbnb in Lake Como.
Am I wrong? Didn’t think so.
The outlet should not be surprised at what’s coming. And DOL Acting Director Julie Su should not have been surprised either when she was issued a subpoena by the House Committee on Education and the Workforce.
The committee, chaired by Rep. Virginia Foxx (R-NC) has been at odds with the DOL for some time. In particular, Foxx et al. have doubts about the legitimacy of the Su-led DOL’s belief that independent contractor misclassification is rampant. The Committee believes that the DOL is being too aggressive in seeking to find misclassification in relationships that are, in reality, properly classified as independent contractor relationships.
In March, the Committee sent the DOL a series of inquiries about its enforcement efforts. But the DOL largely evaded the questions. After ongoing back and forth, the Committee has finally issued a subpoena to the DOL, demanding production of specific information about the DOL’s enforcement activities.
More specifically, the subpoena requests documents sufficient to show, since January 20, 2021:
The number of instances of misclassification that Wage and Hour Division (WHD) inspectors have found.
The number of misclassification enforcement investigations that WHD has initiated.
The number of misclassification enforcement investigations that WHD has jointly undertaken with the NLRB.
The number of misclassification enforcement investigations that WHD has jointly undertaken with the FTC.
Responses to the subpoena are due October 7th. I don’t expect we’ll see direct answers.
Who Is My Employee? 