The Department of Labor States its View on Joint Employment Liability
The issue of joint employment continues to garner considerable interest with lawmakers and state and federal enforcement agencies. The Department of Labor’s (“DOL”) Wage and Hour Division issued an Administrator’s Interpretation (“Interpretation”) on January 20, 2016 providing its two cents on how joint employment liability under the Fair Labor Standards Act (“FLSA”) should be analyzed.
In its Interpretation, the DOL discusses two types of joint employer relationships that it commonly encounters in its enforcement efforts. One is referred to as horizontal joint employment. Horizontal joint employment exists when there are two or more distinct legal entities that are sufficiently associated or related with respect to the employee that they in fact jointly employ the employee. An example provided in the Interpretation is where an employee works for two separate restaurants that share economic ties and have a common management. The Interpretation identifies several non-exhaustive facts that should be considered, including common ownership and management, shared control over operations and shared supervision over employees, among others.
The second joint employer relationship discussed in the Interpretation is vertical joint employment. Vertical joint employment exists when an employee of one entity (e.g., a staffing company) is, with regard to the work being performed, economically dependent on another employer. The DOL’s focus on whether or not an employee is economically dependent on multiple entities is consistent with the approach taken by some, but not all federal courts who have dealt with this issue. Additionally, the DOL’s approach is for once broader than California’s own analysis on joint employment liability, which focuses exclusively on whether or not the putative joint employer exercises control over the employee. It is possible under the DOL’s approach that an entity could be considered the joint employer of an employee without exercising any control. Such an outcome is not possible under California law. When analyzing for vertical joint employment liability, DOL utilizes an “economic realities” test with seven factors borrowed from the Migrant and Seasonal Agricultural Worker Protection Act. Some of these factors focus on control over the employee’s work, while others focus on the permanence and duration of the working relationship, the nature of the work being performed, whether the work is integral to the business and whether or not the work is performed on the potential joint employer’s premises.
It should be pointed out that the Interpretation only applies to the FLSA. Other federal laws, like the Family Medical Leave Act and Occupational Safety and Health Administration law, utilize different tests. It is extremely important that employers be aware of what laws apply to them and consult with their experienced legal counsel to determine if they may be in a joint employer relationship.
Below is a link to the DOL’s Interpretation.