On January 20, 2016, the U.S. Department of Labor’s (“DOL”) Wage and Hour Division Administrator David Weil issued guidance1 for determining when companies are considered joint employers for the purpose of the Fair Labor Standards Act (“FLSA”) and the Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”). Both the FLSA and the MSPA broadly define the term “employ” as to “suffer or permit to work,” which can lead to multiple companies being deemed to jointly employ the same people. When multiple entities jointly employ individuals, all of the employers are jointly and severally liable for compliance with the FLSA and MSPA.
The DOL’s new guidelines identify two types of potential joint-employer arrangements: (1) vertical joint-employment and (2) horizontal joint-employment.
(1) A vertical joint-employment relationship may exist when an employee has an employment relationship with an intermediary entity, typically a staffing agency or subcontractor, but the employee is economically dependent on, and essentially employed by, another entity. Factors to consider in determining whether a vertical joint-employment relationship exists include:
- which entity is directing, controlling or supervising the work performed,
- which entity is controlling employment conditions,
- the permanency and duration of relationship,
- whether the nature of the work is repetitive and rote,
- whether the employee’s work is integral to the business,
- whether work is performed on premises, and
- whether the potential joint employer is performing administrative functions commonly performed by employees.
(2) A horizontal joint-employment relationship may exist when an employee has employment relationships with two or more related or overlapping entities that are only technically separate, such as affiliates. The following factors may be relevant when analyzing the degree of association between, and sharing of control by, potential horizontal joint employers:
- Who owns the potential joint employers (i.e., does one employer own part or all of the other or do they have any common owners)?;
- Do the potential joint employers have any overlapping officers, directors, executives or managers?;
- Do the potential joint employers share control over operations (e.g., hiring, firing, payroll, advertising, overhead costs)?;
- Are the potential joint employers’ operations intermingled (e.g., is there one administrative operation for both employers, or does the same person schedule and pay the employees regardless of which employer they work for)?;
- Does one potential joint employer supervise the work of the other?;
- Do the potential joint employers share supervisory authority for the employee?;
- Do the potential joint employers treat the employees as a pool of employees available to both employers?;
- Do the potential joint employers share clients or customers?; and
- Are there any agreements between the potential joint employers?.
This new guidance could have significant implications for employers, particularly those entities utilizing subcontractors, staffing companies or affiliated entities to perform functions relating to their employees.