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Joint Employment Under the Fair Labor Standards Act

by Martin Salcedo, Esq. - The Human Equation on 3/9/2016
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FLSA puzzle piece

Are you a joint employer? According to the Department of Labor (DOL), instances of joint employment are increasing due to economic forces and technological advancements. Since joint employers may be held responsible for violations of various federal employment laws, like the Fair Labor Standards Act, employers must know whether they may be involved in a potential joint employment situation.

Joint employment exists when an employee is employed by two or more employers in a way that makes both employers responsible, individually and jointly, for FLSA compliance. In other words, each joint employer must make sure shared employees are paid the required minimum wage and overtime compensation. For example, joint employers must combine all of the hours worked by the employee in a workweek to determine whether the employee is entitled to overtime compensation.

Employers need to be aware of two common joint employment scenarios.

1. Horizontal Joint Employment

In this scenario, multiple employers that are sufficiently related to or associated with each other, benefit from the employee’s work. This may occur when:

  • the employers have an arrangement to share the employee’s services;
  • one employer acts in the interest of the other in relation to the employee; or
  • the employers share control of the employee, directly or indirectly, because one employer controls, is controlled by, or is under common control with the other employer.

The focus is on the degree of association among the employers and how they may jointly control the employee. Various factors may be considered to establish horizontal joint employment, such as:

  • Who owns or operates the employers?
  • Are there overlapping officers, directors, executives or managers?
  • Do the employers share operational control?
  • Are their operations intermingled?
  • Does one employer supervise the work of the other?
  • Do the employers share supervisory authority over the employee?
  • Do the employers treat the employees as a pool of workers available to both of them?
  • Do the employers share clients or customers?
  • Are there any agreements between the employers?

2. Vertical Joint Employment

In this scenario, a worker is, as a matter of economic reality, economically dependent on two employers: an intermediary employer (such as a staffing agency or other labor provider) and another employer who engages the intermediary to provide workers. This type of joint employment is common in industries that use subcontracting, staffing agencies, or other intermediaries, such as construction, warehouse/logistics and hotels.

Since employees are clearly employed by the intermediary employer (the staffing agency), the primary issue is whether they are also employed by the employer who engaged the intermediary to provide workers (the staffing agency’s client). The focus is the employee’s relationship with the other employer and whether the worker is economically dependent on, and therefore employed by, the other employer. Factors to consider include:

  • Does the other employer direct, control, or supervise (even indirectly) the work?
  • Does the other employer have the power (even indirectly) to hire, fire, change employment conditions or determine the rate and method of pay?
  • Is the relationship permanent or lengthy?
  • Is the employee’s work integral to the other employer’s business?
  • Is the work performed on the other employer’s premises?
  • Does the other employer perform functions typically performed by employers, such as handling payroll or providing tools, equipment or workers’ compensation insurance?

In light of the Administrator’s Interpretation released in January 2016, it’s safe to assume that the DOL is on the lookout for actual and potential joint employment situations. Since joint employers can be held individually and jointly liable for FLSA violations, don’t assume the ‘other employer’ will take care of things. Make sure.

Additional information about various employment related liabilities, including the FLSA, is available in The Human Equation’s library of online HR Training. Please contact us if you would like to discuss ways to address and prevent various employment-related liabilities.

The Human Equation prepares all risk management and insurance content with the professional guidance of Setnor Byer Insurance &Risk.

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Categories: Human Resources

Comments

6/15/2016 9:12:56 AM #

New White Collar Overtime Exemption Rules Are Coming...Now What?

New White Collar Overtime Exemption Rules Are Coming...Now What?

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