Joint Employment Is the Focus of DOL's Latest Interpretation
Author: Michael Cardman, XpertHR Legal Editor
January 29, 2016
Employers that use third-party management companies, independent contractors, staffing agencies or labor providers are on notice: the US Department of Labor (DOL) says many of these relationships constitute joint employment that makes both parties liable for any minimum wage and overtime violations.
"The growing variety and number of business models and labor arrangements have made joint employment more common," the DOL states in a new Administrator's Interpretation.
The DOL's latest guidance shares much in common with the Administrator's Interpretation about independent contractors it issued last summer, as they both:
- Take a broad view of the employer-employee relationship;
- Represent more of a repackaging of existing case law and regulations rather than a groundbreaking new interpretation;
- Are not inherently entitled to any deference from the courts, but could be heeded depending on their "power to persuade";
- Give employers a clear picture of the agency's enforcement posture; and
- Could draw the attention of the plaintiffs' bar and provide a blueprint of sorts for private lawsuits.
The new administrator's interpretation posits two types of joint employment under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA).
- In horizontal joint employment, "two (or more) employers each separately employ an employee and are sufficiently associated with or related to each other with respect to the employee." For example, two locations of the same restaurant brand with the same majority owner, shared management, joint coordination of scheduling and the same payroll processor would be horizontal joint employers. By contrast, two restaurants that do not have an arrangement to share employees or operations, and do not otherwise have any common management or ownership, are not horizontal joint employers.
- In vertical joint employment, one employer "typically has contracted or arranged with [an] intermediary employer to provide it with labor and/or perform for it some employer functions, such as hiring and payroll." For example, a general contractor that trains a subcontractor's workers, provides them necessary equipment and materials, offers them workers' compensation insurance, reserves the right to remove them from a project, controls their schedule, and otherwise makes them economically dependent, would be a vertical joint employer with the subcontractor.
FAQs, fact sheets, infographics and other resources can be found at the DOL's new Joint Employment Under the FLSA and MSPA page.