By Susan Prince, JD, MSL, Legal Editor at BLR
Sometimes, HR has to deal with joint employment. Do you know what you need to create and maintain a legal joint employment relationship? Today we’ll hear what Susan Prince, JD, MSL, and legal editor at BLR®, has to say about it.
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A joint employment relationship and the responsibilities that go with it can be very confusing for employers. Just establishing whether or not a joint employment relationship even exists can be a point of contention. Therefore, on January 20, 2016, the federal Department of Labor’s (DOL) Wage and Hour Division released Administrator’s Interpretation No. 2016-1: Joint employment under the Fair Labor Standards Act and Migrant and Seasonal Agricultural Worker Protection Act.
The DOL also released Q&A and two fact sheets on the topic of joint employment:
The following information includes excerpts from these documents in order to provide an overview of the guidance.
What is Joint Employment?
According to the DOL, joint employment exists when an employee is employed by two or more employers such that the employers are responsible, both individually and jointly, for compliance with a statute. Both the FLSA and the MSPA provide for joint employment. The FLSA and the MSPA share the same definition of employment, which includes “to suffer or permit to work.”
Who Pays Overtime?
If an employee works for two completely independent employers at the same time, no overtime is owed as long as the employee works no more than 40 hours for either employer. If, however, an employee is employed jointly by two or more employers, overtime is owed if the employee’s combined hours for the joint employers exceeds 40 in a workweek.
Joint Employer Relationships Common in Certain Industries
The DOL lists several industries in which joint employer relationships are common. These include:
- Home health care agencies that share staff and common management;
- Construction (workers who work for a subcontractor and possibly a general contractor);
- Agriculture (farmworkers who work for a farm labor contractor and possibly a grower);
- Warehousing and logistics;
- Staffing (providing labor to multiple industries); and
- Hospitality.
FLSA and MSPA
Fact Sheet #35: Joint Employment under the Fair Labor Standards Act (FLSA) and Migrant and Seasonal Agricultural Worker Protection Act (MSPA) states that the most likely scenarios for joint employment are the following:
- Where the employee has two or more technically separate but related or associated employers, or
- Where one employer provides labor to another employer and the workers are economically dependent on both employers.
FLSA regulation 29 CFR 791.2 provides guidance regarding the first scenario for joint employment, and MSPA regulation 29 CFR 500.20(h)(5) provides guidance regarding the second scenario. Because the FLSA and the MSPA share the same definition of employment, both types of joint employment can exist under either the FLSA or the MSPA.
Scenario 1: Where the employee has two or more technically separate but related or associated employers.
Joint employment exists where two or more employers benefit from the employee’s work and they are sufficiently related to or associated with each other. For example:
- 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.
According to the DOL, the focus of this type of joint employment is the degree of association between the two or more employers, and it is sometimes called horizontal joint employment by the courts. For example, 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 that employee’s work.
In these cases, it is important to consider facts that shed light on the degree of association between the two or more employers and how these employers may jointly control the employee. Although not all or even most of these facts need to be present for there to be joint employment, some facts to consider include:
- Who owns or operates the possible joint employers?
- Do the employers have any overlapping officers, directors, executives, or managers?
- Do the employers share control over operations?
- Are the operations of the employers 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 they share clients or customers?
- Are there any agreements between the employers?
Scenario 2: Where one employer provides labor to another employer and the workers are economically dependent on both employers.
Joint employment also exists where a worker is, as a matter of economic reality, economically dependent on two employers: an intermediary employer (such as a staffing agency, farm labor contractor (FLC), or other labor provider) and another employer that engages the intermediary to provide workers. The workers are employees of the intermediary, and the issue is whether they are also employed by the employer who engaged the intermediary to provide the labor.
This type of joint employment is common not only in agriculture but also in other industries that use subcontracting, staffing agencies, or other intermediaries, such as construction, warehouse and logistics, and hotels. This type of joint employment exists in both FLSA and MSPA cases.
For example, in agriculture, a grower may contract with an FLC to provide farm workers. In another example, a higher-tier contractor may contract with a subcontractor to provide construction workers for a project. In these types of relationships, the question is whether the employees (farm workers or construction workers) are jointly employed by the other employer (the grower or higher-tier contractor).
The focus of this type of joint employment is the employee’s relationship with the other employer (as opposed to the intermediary employer). This type of joint employment analysis must include an examination of the economic realities of the relationship to determine the degree of the employee’s economic dependence on the other employer—the potential joint employer. Some courts have called this vertical joint employment.
In these cases, it is important to consider factors that demonstrate whether a worker is economically dependent on, and therefore employed by, the other employer. The MSPA regulation provides the following economic realities factors to consider:
- Does the other employer direct, control, or supervise (even indirectly) the work?
- Does the other employer have the power (even indirectly) to hire or fire the employee, change employment conditions, or determine the rate and method of pay?
- How permanent or lengthy is the relationship between the employee and the other employer?
- Does the employee perform repetitive work or work requiring little skill?
- 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 for the employee typically performed by employers, such as handling payroll or providing tools, equipment, or workers’ compensation insurance, or, in agriculture, providing housing or transportation?
Any other evidence that indicates economic dependence should be considered as well; these seven factors are not exhaustive. Moreover, there are likely other economic realities factors that, consistent with the broad scope of employment under the FLSA and the MSPA, may be considered when determining whether vertical joint employment exists. The analysis, however, cannot focus solely on control. The degree of control is only one consideration, and joint employment can exist even when the other employer exercises little control over the workers.
This joint employment analysis is necessary in cases where the FLC, staffing agency, or intermediary employer is an independent contractor, as opposed to an employee, of the other employer (the potential joint employer). This joint employment analysis is not necessary in cases where the FLC, staffing agency, or intermediary employer is not an independent contractor but is an employee of the other employer. In that situation, the intermediary and its employees are all employed by the other employer.
Under the FLSA, each of the joint employers must ensure that the employee receives all employment-related rights under the FLSA (including payment of at least the federal minimum wage for all hours worked and overtime pay at not less than one and one-half the regular rate of pay for hours worked over 40 in a workweek, unless an exception or exemption applies). Furthermore, joint employers must combine all of the hours worked by the employee in a workweek to determine if the employee worked more than 40 hours and is due overtime pay.
Under the MSPA, each of the joint employers must ensure that the employee receives all employment-related rights granted by the MSPA, such as accurate and timely disclosure of the terms and conditions of employment, written payroll records, and payment of wages when due.
However, a joint employer is not necessarily responsible for complying with MSPA housing and/or transportation requirements. An employer is responsible for MSPA-covered housing only if it “owns or controls” the housing occupied by a migrant agricultural worker. An employer is responsible for transportation requirements only if it is “using or causing to be used” any vehicle for providing transportation.
Tomorrow, how FMLA factors in joint employment situations, plus an introduction to the essential magazine for HR professionals: HR Decisions Magazine.