Are You a Joint Employer? New DOL Guidance Broadens the Definition
The Department of Labor Wage and Hour Division recently issued guidance expansively interpreting who qualifies as a “joint employer” under the Fair Labor Standards Act (FLSA). The impact is significant because all hours an employee works for joint employers are considered as one employment for which the joint employers are jointly and severally liable for FLSA compliance. The Department of Labor specifically indicated it intends to use the joint employer doctrine to expand FLSA coverage to smaller employers and to hold larger employers responsible for unpaid back wages and overtime compensation.
According to the Department of Labor, joint employment can be horizontal or vertical. Horizontal joint employment occurs when an employee has two or more technically separate but related or associated employers. The employers are joint employers if they both benefit from the employee’s work and are sufficiently related to or associated with each other. The Department of Labor highlighted the following factors as relevant in analyzing whether two employers sufficiently jointly control an employee to be considered joint employers:
- Who owns the employers (i.e. does one employer own part or all of the other or do they have common ownership)?
- Do the potential joint employers have any overlapping officers, directors, executives or managers?
- Do the employers share control over operations, such as hiring, firing, payroll, advertising and overhead?
- Are the employers’ operations intermingled?
- Does one employer supervise the work of the other?
- Is supervisory authority for an employee shared?
- Do the employers treat employees as a pool available to both of them?
- Do the employers share clients or customers?
- Are there any agreements between the employers?
For example, horizontal joint employment may exist where an employee works for two restaurants that are technically separate but have the same managers, jointly coordinate the scheduling of the employee’s hours and both benefit from the employee’s work.
Conversely, vertical joint employment occurs where an employee has an employment relationship with one employer, typically a staffing agency, subcontractor or labor provider, and the economic realities indicate he or she also is economically dependent on another entity involved in the work. The guidance indicates the following seven factors suggest vertical employment:
- Directing, controlling or supervising the work performed;
- Controlling employment conditions;
- The permanency and duration of the relationship;
- The repetitive nature of the work;
- Whether the work is integral to the business;
- Whether the work was performed on the premises; and
- Whether the work was administrative functions commonly performed by employers.
Ultimately, the new guidance evidences the Department of Labor’s intent to closely scrutinize employment relationships and take an aggressive position with regard to joint employment. In response, employers should carefully review their employment relationships in accordance with the factors above to determine if a joint employment relationship may exist. The guidance specifically identifies the construction, agricultural, janitorial, warehouse and logistics, staffing and hospitality industries as frequently having unacknowledged joint employer situations. Accordingly, these industries should take particular note of this recent guidance document.
Disclaimer: The article in this publication has been prepared by Eastman & Smith Ltd. for informational purposes only and should not be considered legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney/client relationship.