The Department of Labor (DOL) continues to make dramatic changes to what we know and understand of minimum wage and overtime requirements.  This time, in January of 2016, the DOL’s Wage & Hour Division (WHD) issued an Administrator’s Interpretation (AI), AI No. 2016-1, providing guidance on the subject of joint employment under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA).  The guidance in this AI signals potentially dramatic employer risks.

Today’s evolving workforce presents a plethora of staffing options not as routinely used in the past.  Third-party staffing companies, management companies, professional employer organizations, and independent contractors all present a variety of staffing options for contemporary workplaces.  Companies on both ends of this arrangement – those that lend and those that borrow workers – may be deemed joint employers, as this signaled by the WHD’s recent AI.

According to WHD AI No. 2016-1, these relationships will be reviewed for both horizontal and vertical joint employment.  Horizontal joint employment exists when two or more businesses that are associated with, or related to each other, both separately employ the same individual.  This might be seen, for instance, when two separate restaurants with common ownership employ the same waiter on different days of the week.  Conversely, an employee who works directly for one employer but who is also economically dependent on another organization working in collaboration with the employer, might find himself or herself in a vertical joint employment relationship.  For instance, an employee hired by a construction subcontractor may be considered in certain circumstances to be a joint employee of the general contractor on the project.

AI No. 2016-1 provides some guiding questions for concerned enterprises, but also foreshadows the demanding expectations we are likely to see from the WHD when it comes to joint employment evaluations and determinations:

  • who owns the potential joint employers (i.e., 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 have control over operations (e.g. hiring, firing, payroll, advertising, overhead costs);
  • are the potential joint employers’ operations inter-mingled (for example, 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 of them; and
  • do the potential joint employers share clients or customers;
  • are there any agreements between the potential joint employers.

For those enterprises that are deemed joint employers, both may face liability for minimum wage and overtime pay requirements, and can face much greater liability under countless other labor and employment laws applicable to joint employers.

To read the complete AI, click here.  If you work through a staffing enterprise or PEO, or if you share workers directly with other operations, we encourage you to seek experienced labor and employment counsel to ensure that you are compliant with applicable law.