Q: Are you a joint employer?
The US Department of Labor has issued its first major guidance of 2016 – an Administrator’s Interpretation on joint-employer status under the Fair Labor Standards Act.
The DOL’s edict, issued January 20, adopts an expansive definition of joint employment which exceeds even that advanced by the National Labor Relations Board under its recently expanded test (see DLA Piper’s Employment Alert here).
In short, the DOL has rejected the common law control test for employment and seems to adopt the position that merely doing business with another entity may be sufficient to establish joint employment. The DOL recognizes two types of joint employment − horizontal and vertical:
- Horizontal joint employment – the more traditional version – exists “where two (or more) employers each separately employ an employee and are sufficiently associated with or related to each other with respect to the employee.” The DOL provides examples that may give rise to horizontal joint employer status, including: two warehouses that share employees, home health care providers that share staff and have common management, and two separate restaurants that share economic ties and have the same employees supervising and staffing both restaurants.
- Vertical joint employment – the more expansive version – exists “where the employee has an employment relationship with one employer … and the economic realities show that he or she is economically dependent on, and thus employed by, another entity involved in the work.” The DOL has found vertical joint employment where a staffing agency, professional employer organization, or other intermediary contracts with a second employer to provide labor or other employer functions (e.g., hiring or payroll). For example, the DOL indicates that a worker placed by a staffing company to do housekeeping work at a hotel may be jointly employed by the staffing company and the hotel, particularly if the hotel sets the worker’s hours and schedule and/or supervises the worker.
Employers can expect the DOL to continue its aggressive enforcement efforts in this area, particularly in the hospitality, staffing, warehousing, agriculture, construction, and home health industries. Indeed, as noted in the Administrator’s Interpretation, the DOL “may consider joint employment to achieve statutory coverage, financial recovery, and future compliance, and to hold all responsible parties accountable for their legal obligations.” In addition to its published guidance, the DOL has created a new page on its website dedicated to the joint employer issue.