While it has been said that “no one can serve two masters,” in our modern society many people work for two or more employers at the same time. This multiple employment can have significant consequences under state and federal wage and hour laws and other areas. Thus, without realizing it, under the Fair Labor Standards Act, an employer may become liable financially for the unpaid or underpaid wages of an employee, or for a discrimination claim brought by an employee under Title VII because of the employee’s connections to a second or third employer.
In managing their employment risks, employers should be aware of the joint employment doctrine, which says that two or more related companies may — independently and together — be liable for the total hours of an employee who works for both of them. Thus, the hours of an employee who works at multiple, related employers may be aggregated and, thereby, exceed daily or weekly overtime thresholds. This can mean not only that the companies have joint liability for employment claims, but also that liability could be created that would not exist at all if they were wholly separate entities.
There is no “magic formula” for determining when joint employment has arisen. Instead, the courts or the governmental agencies will examine the facts in each case and apply one of more of the commonly used factors, often focusing on the “economic realities” of the relationship between the multiple employers. Here are some of the commonly used factors:
- Do the employers have an arrangement to share the employee? Does the employee work for both employers at different times during the same workweek? Does the employee perform work that simultaneously benefits both employers?
- Do the employers act directly or indirectly in the interest of the other with respect to the employee?
- Do the employers share or together decide terms and conditions of employment, such as the hiring and firing, supervision and control of work performance, work schedules, the rate and method of payment, and the maintenance of employee records?
- Do the two entities use a common hire date for any purposes?
- Do the employers share common management or ownership? Does one employer control, or is controlled by, or is under common control with, the other employer?
- Do the employers share HR administration or policies?
- Do the employers share the same location?
Employers should be aware that the precise factors may differ from state to state, and from agency to agency. Unfortunately for employers, they cannot use labels — such as an employee’s job title — or the terms of the contract to protect themselves against such statutory claims.
Employers who have direct or indirect relationships with other employers, or who are planning changes that will result in such relationships, should keep these factors in mind to avoid facing unanticipated, and unbudgeted, liability for employment claims.