By: Maital Savin, Associate
On 1/20/16, the U.S. Department of Labor (DOL) issued guidance on joint employment under the Fair Labor Standard Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). This new guidance aggressively expanded the definition of employment to include arrangements that employers may not commonly view as employment relationships, increasing employers’ exposure for wage and hour liability. The guidance discusses two types of joint employment: horizontal and vertical joint employment.
Horizontal joint employment exists when multiple employers separately employ a worker, but are also closely associated with or related to each other. When horizontal employment exists, hours worked for each employer are combined for the purpose of determining whether overtime and minimum wage obligations are met. The guidance sets forth the following factors to help determine whether horizontal joint employment exists:
• Who owns the potential joint employers;
• Whether potential joint employers have overlapping officers, directors, executives or managers.
• Whether potential joint employers share operational control;
• Whether potential joint employers’ operations are inter-mingled.
• Whether one potential joint employer supervises the work of the other.
• Whether the potential joint employers share supervisory authority for the employee.
• Whether the potential joint employers treat employees as a pool of employees available to both of them.
• Whether potential joint employers share clients or customers.
• Whether there are any agreements between the potential joint employers.
Vertical joint employment exists when an employee of one employer (the “intermediary employer”) is economically dependent on another employer (the “potential joint employer”) for work being paid by the intermediary employer. The DOL’s guidance articulated the below factors to help analyze whether there is vertical joint employment:
• Whether work performed is controlled or supervised by the potential joint employer beyond a reasonable degree of contract performance oversight.
• Whether the potential joint employer has authority to hire or fire the employee, modify employment conditions or determine the rate or method of pay.
• The degree of permanency and duration of the relationship between parties.
• The extent to which the employee’s work for the potential joint employer is repetitive and rote and requires little training.
• Whether activities performed by the employee are an integral part of the potential joint employer’s business operation.
• Whether work is performed on premises owned or controlled by the potential joint employer.
• Extent to which the potential joint employer performs administrative functions for the employee.
Businesses, particularly those with arrangements with independent contractors, temp agencies and management companies should carefully review such arrangements in light of this guidance to help avoid liability for wage and hour violation committed by other entities, which can be very costly, including liquidated damages and attorney’s fees.