Earlier this week, the Wage and Hour Division (WHD) of the Department of Labor issued an Administrator’s Interpretation No. 2016-01 (AI) on joint employment under the Fair Labor Standards Act (FLSA) and the Migrant Seasonal Agricultural Worker Protection Act (MSPA). The guidance reconfirms existing WHD policy, which identifies common scenarios in which two or more employers jointly employ an employee and are thus jointly liable for compliance. The DOL’s plug for the Interpretation says: “It pulls together all the relevant authorities – statutory provisions, regulations, case law and examples – to provide comprehensive guidance on joint employment under FLSA and MSPA so that employers can properly analyze a potential joint employment scenario.”
What do employers need to know? The DOL confirms it’s very broad perspective on the concept of joint employment and its intent to aggressively enforce the FLSA and MSPA against those it believes to be joint employers. The DOL views joint employment more broadly under the statutes than the common law.
Specifically, the WHD will consider joint employment a possibility where (1) the employee works for two employers who are associated or somehow related to the employee (horizontal joint employment); or (2) the employee’s employer is an intermediary or otherwise provides labor to another employer (vertical joint employment).
One of the horizontal joint employment examples in the AI discusses a waitress who works for two separate restaurants that are operated by the same entity (think Olive Garden and the Capital Grille, both Darden Restaurants). The question is whether the two restaurants are sufficiently affiliated such that they jointly employ the waitress. The factors considered:
- who owns the potential joint employers (does one employer own part or all of the other or do they have any common owners);
- are there any overlapping officers, directors, executives or managers;
- is there shared control over operations (hiring, firing, payroll, advertising, and the like);
- are the operations intermingled (one administrative operation for both employers or does the same person schedule and pay the employees regardless for which employer the work is performed);
- does one employer supervise the work of the other employer;
- do the employers share supervisory authority for the employee;
- are the employees treated as a pool available to both employers;
- are clients and customers shared; and
- are there any agreements between the employers.
If there is a horizontal joint employment relationship, the employee’s work for the joint employers during the workweek is considered as one employment and the joint employers are jointly and severally liable for compliance.
The vertical joint employment scenario focuses on the relationship between employee and employer and whether the employee is economically dependent on both. The typical scenario here is whether employees of a subcontractor are also employed by the general contractor.
The first hurdle is assessing if the intermediary employer is itself an employee of the potential joint employer. If so, the analysis stops and the WHD says the intermediary’s employees are also then employees of the other employer. If the intermediary employer is not, however, an employee of the other employer, then there is a analysis of the following:
- the extent of control or supervision by the potential joint employer over the work performed by the employee;
- the power of potential joint employer to hire, fire, or affect other terms and conditions of employment of the employee;
- the permanency and duration of relationship;
- the extent to which employee’s work for potential joint employer is repetitive and rote;
- whether the employee’s work is an integral part of the potential joint employer’s business;
- whether the employee performs work on premises owned or controlled by the potential joint employer;
- whether the potential joint employer perform administrative functions for the employee (payroll, worker’s compensation, safety equipment, materials, and the like).
There is significant potential for an employer who uses a staffing company to find itself on the hook under this vertical joint employment relationship.
The AI signals that those working in “fissured” industries (where more than one business is involved in the work being performed), particularly construction, agriculture, janitorial, warehouse and logistics, staffing, and hospitality, are likely targets moving ahead. Employers should be sure to review their agreements and relationships with other businesses to assess and minimize risk, where appropriate.