Are You a Joint Employer?

Today, the U.S. Department of Labor (DOL) issued guidance on joint employment in the form of an administrator's interpretation. In addition to the guidance, they also published a post on the DOL Blog, Are you a Joint Employer? This interpretation is a wake-up call prompting companies to review their relationships with staffing agencies, labor providers, independent contractors, and subcontractors.

After studying the guidance, companies should evaluate whether they will be considered joint employers with their business partners converting the employee of the business partner to employees of the company. If found to be a joint employer, companies will be jointly and severally liable for payment of minimum wage, overtime, and damages and penalties if their business partners violate the Fair Labor Standards Act (FLSA) or the Migrant and Seasonal Agricultural Worker Protection Act (MSPA), two federal laws that govern how employees are paid.

According to the DOL, this issue of joint employment exists in all industries, especially the construction, agricultural, janitorial, warehouse and logistics, staffing, and hospitality industries. This DOL interpretation demonstrates the DOL's belief that the concept of joint employment, "should be defined expansively" under the FLSA and MSPA. The DOL's guidance describes two types of joint employment relationships — horizontal and vertical. Whether to apply a horizontal or vertical joint employment analysis depends on the circumstances of the case.

HORIZONTAL JOINT EMPLOYMENT. The focus of a horizontal joint employment analysis is the relationship and association between the two potential joint employers. The joint employment regulation under the FLSA provides guidance in evaluating these cases. Typically, in a horizontal joint employment case there exists an established or admitted employment relationship between the employee and each of the employers. Often the employee performs separate work or works separate hours for each employer. Examples of relationships that may give rise to horizontal joint employment include:

VERTICAL JOINT EMPLOYMENT. The focus of the vertical joint employment analysis is the relationship between the employee and the potential employer and whether an employment relationship exists between them. The analysis must determine whether, as a matter of economic reality, the employee is economically dependent on the potential joint employer. The DOL's position on joint employment is similar to its position on misclassification of independent contractors communicated in an administrator's interpretation in July of 2015. Examples of relationships that may give rise to a vertical joint employment include:

Spotts Fain publications are provided as an educational service and are not meant to be and should not be construed as legal advice. Readers with particular needs on specific issues should retain the services of competent counsel.


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