On January 20, 2016, the Wage and Hour Division of the U.S. Department of Labor issued guidance on joint employment under the Fair Labor Standards Act and Migrant Seasonal Agricultural Worker Protection Act. The DOL’s guidance comes on the heels of a landmark decision of the NLRB, which, as discussed in greater detail here, broadened the definition of “joint employer” for purposes of the National Labor Relations Act. These developments reflect a trend of extending application of the labor and employment statutes to employment relationships traditionally thought to be exempt from such regulation.
Indeed, the DOL’s January 20, 2016 Administrator’s Interpretation (the “Interpretation”) reaffirms from the outset the broad scope of employment relationships subject to the FLSA and MSPA. The Interpretation explains that the definition of employment under these statutes is far broader than the common law concept of employment, which is based on the amount of control the employer exercises over a worker. Accordingly, the DOL recently declared that “most workers are employees under the FLSA.” For more on this issue, see here. As the DOL observes in its Interpretation, this broad concept of employment suggests that an employee can – and often does – simultaneously have two or more employers, i.e., joint employers. Importantly, the Interpretation explicitly provides that joint employment may exist even where the businesses are separate legal entities.
The DOL distinguishes between two forms of joint employment – horizontal and vertical – which are not necessarily mutually exclusive. Horizontal joint employment is characterized by a sufficiently close relationship between two employers. As an example of such joint employment, the DOL discusses a waitress who works for two separate restaurants operated by the same entity. On the other hand, the existence of vertical joint employment depends on the employee’s relationship with each of the potential joint employers. The DOL notes that vertical joint employment is most common in situations where one business contracts with an intermediary business to provide it with labor and/or employment-related services. A vertical joint employment may therefore exist, for example, when a business retains a third-party management company, independent contractor, or staffing agency.
Notwithstanding the distinctions above, the DOL concludes that the existence of joint employment ultimately turns on whether the employee is economically dependent on the employer. As observed above, the FLSA and MSPA’s economic dependence standard is far broader than the common law concept of employment. Given the foregoing, the Interpretation expressly recognizes that joint employment is increasingly common.
Significantly, joint employers can be held jointly and severally liable under the FLSA and MSPA. As a practical matter, this means that a business may be held liable for another business’s wage violations, if the two are determined to be joint employers. Accordingly, employers are advised to evaluate their relationships with both workers and businesses with whom they contract to ensure compliance with these statutes to avoid joint employer liability.