On January 20, 2016, the Wage and Hour Division released an Administrator’s Interpretation concerning joint employment under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act. The interpretation identifies common scenarios in which two or more employers jointly employ an employee and are thus jointly liable for compliance. It pulls together all the relevant authorities – statutory provisions, regulations, and case law – to provide comprehensive guidance on joint employment under FLSA and MSPA so that employers can properly analyze a potential joint employment scenario.
Joint employment exists when a person is employed by two or more employers such that the employers are responsible, both individually and jointly, for compliance with a statute.
The Fair Labor Standards Act (1938) (“FLSA”) and the Migrant and Seasonal Agricultural Worker Protection Act (1983) (“MSPA”) share the same definition of employment. This definition, which includes “to suffer or permit to work,” was written to have as broad an application as possible. Under these laws, it is possible for a worker to be jointly employed by two or more employers who are both responsible, simultaneously, for compliance. It is a longstanding principle under both the FLSA and MSPA that an employee can have two or more employers for the work that he or she is performing.
When two or more employers jointly employ an employee, the employee’s hours worked for all of the joint employers during the workweek are aggregated and considered as one employment, including for purposes of calculating whether overtime pay is due. Additionally, when joint employment exists, all of the joint employers are jointly and severally liable for compliance with the FLSA, MSPA, and other laws.
The Interpretation discusses “horizontal” and “vertical” joint employer analyses for determining whether joint employment exists. Horizontal analysis focuses on whether two or more employers each separately employ an employee and are sufficiently associated with or related to each other with respect to the employee to consider them joint employers. Horizontal joint employment does not exist, however, if the employers “are acting entirely independently of each other and are completely disassociated” with respect to an employee who works for both of them.
The following facts may be relevant when analyzing the degree of association between, and sharing of control by, potential horizontal joint employers:
- Who owns the potential joint employers (i.e., does one employer own part or all of the other or do they have any common owners);
- Do the potential joint employers have any overlapping officers, directors, executives, or managers;
- Do the potential joint employers share control over operations (e.g., hiring, firing, payroll, advertising, overhead costs);
- Are the potential joint employers’ operations inter-mingled (for example, is there one administrative operation for both employers, or does the same person schedule and pay the employees regardless of which employer they work for);
- Does one potential joint employer supervise the work of the other;
- Do the potential joint employers share supervisory authority for the employee;
- Do the potential joint employers treat the employees as a pool of employees available to both of them;
- Do the potential joint employers share clients or customers; and
- Are there any agreements between the potential joint employers.
Vertical analysis focuses on the employee’s relationship with the potential joint employer and whether that employer jointly employs the employee. In these situations, one employer typically has contracted or arranged with the intermediary employer to provide it with labor and/or perform for it some employer functions, such as hiring and payroll. There is typically an established or admitted employment relationship between the employee and the intermediary employer. That employee’s work, however, is typically also for the benefit of the other employer. The analysis is essentially whether the worker is economically dependent on the potential joint employer.
Some “economic reality” factors to consider in vertical analyses include:
- Directing, Controlling, or Supervising the Work Performed. To the extent that the work performed by the employee is controlled or supervised by the potential joint employer beyond a reasonable degree of contract performance oversight, such control suggests that the employee is economically dependent on the potential joint employer. The potential joint employer’s control can be indirect (for example, exercised through the intermediary employer) and still be sufficient to indicate economic dependence by the employee. Additionally, the potential joint employer need not exercise more control than, or the same control as, the intermediary employer to exercise sufficient control to indicate economic dependence by the employee;
- Controlling Employment Conditions. To the extent that the potential joint employer has the power to hire or fire the employee, modify employment conditions, or determine the rate or method of pay, such control indicates that the employee is economically dependent on the potential joint employer. Again, the potential joint employer may exercise such control indirectly and need not exclusively exercise such control for there to be an indication of joint employment.
- Permanency and Duration of Relationship. An indefinite, permanent, full-time, or long-term relationship by the employee with the potential joint employer suggests economic dependence. This factor should be considered in the context of the particular industry at issue. For example, if the work in the industry is by its nature seasonal, intermittent, or part-time, such industry condition should be considered when analyzing the permanency and duration of the employee’s relationship with the potential joint employer.
- Repetitive and Rote Nature of Work. To the extent that the employee’s work for the potential joint employer is repetitive and rote, is relatively unskilled, and/or requires little or no training, those facts indicate that the employee is economically dependent on the potential joint employer.
- Integral to Business. If the employee’s work is an integral part of the potential joint employer’s business, that fact indicates that the employee is economically dependent on the potential joint employer.
- Work Performed on Premises. The employee’s performance of the work on premises owned or controlled by the potential joint employer indicates that the employee is economically dependent on the potential joint employer.
- Performing Administrative Functions Commonly Performed by Employers. To the extent that the potential joint employer performs administrative functions for the employee, such as handling payroll, providing workers’ compensation insurance, providing necessary facilities and safety equipment, housing, or transportation, or providing tools and materials required for the work, those facts indicate economic dependence by the employee on the potential joint employer.
If you are or could be a joint employer, you should be aware of this increased liability, take appropriate measures to ensure compliance with all employment laws, and coordinate closely with the other joint employer(s). If you have questions or concerns about this or any other legal issue, please feel free to contact me.