Guidance: On January 20, 2016, the US Department of Labor’s (DOL) Wage and Hour Division issued guidance stating that a growing number of companies are joint employers for liability purposes under the Fair Labor Standards Act (FLSA) and the Migrant Worker Seasonal Agricultural Worker Protection Act (MSPA). In the guidance, the DOL emphasizes that the concept of joint employment under the FLSA and MSPA is “notably broader” than under common law and that the laws should be applied to ensure that the scope of joint employment “is as broad as possible.” According to the DOL, courts should reject the common law control test traditionally used in many jurisdictions and instead assess the “economic realities” of the working relationship by applying the factors developed for migrant farm workers under the MSPA. The DOL believes that this will “ensure that all responsible employers are aware of their obligations and [will] ensure compliance with the FLSA and MSPA.”

Impact: Following in the footsteps of the National Labor Relations Board’s controversial Browning-Ferris decision, the DOL is also taking an expansive view of joint employment under the FLSA. Although recognizing that more and more businesses are in a franchisor/franchisee relationship, or that they rely on staffing agencies to hire staff and handle day-to-day employment issues, the DOL believes joint employment under the FLSA should be determined using the factors developed specifically for migrant farm workers. The DOL is also intending to use its joint employer interpretation to target larger companies because this will help it “achieve statutory coverage, financial recovery and future compliance” with the FLSA. Employers should also keep in mind that the DOL guidance raises, but does not address, the question of whether a joint employer must verify, on Form I-9, the employment authorization of an “employee” that is not on its payroll.

For now, the Office of the Chief Administrative Hearing Officer, which has jurisdiction over I-9 issues, continues to adhere to a traditional notion of “employee” for I-9 purposes. With the DOL taking a broader view of joint employment under the FLSA, employers should proactively review any existing franchisor, staffing agency, or outsourcing agreements to determine whether they may be considered a joint employer and what the implications that designation may have with respect to compliance and potential liability under the FLSA.