June 22, 2021

Volume XI, Number 173

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June 21, 2021

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DOL Issues Administrator's Interpretation of Joint Employment under FLSA

In the 21st century, the theory of joint employment - that is, that an individual can have more than one employer - is alive and well. In the context of the Fair Labor Standards Act ("FLSA"), that means, in the eyes of the U.S. Department of Labor ("DOL"), that (1) the hours worked for all of the joint employers are aggregated for, among other things, determining whether overtime must be paid, and (2) joint employers are jointly and severally liable for compliance with the FLSA. On January 20, 2016, the DOL's Wage and Hour Division ("WHD") issued Administrator's Interpretation No. 2016-1 ("AI"), which provides guidance for identifying those scenarios where two or more entities may be considered joint employers under the FLSA.

The first type of joint employment situation is called "horizontal joint employment" and may arise when an individual has employment relationships with two or more employers which are sufficiently associated with or related to one another such that they are considered to jointly employ the person. Here, the focus is on the relationship between the two potential joint employers and the degree to which they share control of the employee. The AI cites as examples of possible horizontal joint employer situations where a waitress works for two separate restaurants that are operated by the same entity; a farmworker who picks produce at two separate orchards, each of which has an arrangement to share farmworkers; or a home health care provider who works for two different companies that share staff and have common management.

The AI cites nine facts that may be relevant when analyzing the degree of association between, and sharing of control by, potential horizontal joint employers. The questions which reveal those facts include:

  • Who owns the potential joint employers and do they have any overlapping officers, directors, executives, or managers?

  • Do the potential joint employers share control over operations such as hiring, firing and payroll, and are those operations inter-mingled?

  • Does one potential joint employer supervise the work of the other and do they both share supervisory authority for the employee?

  • Do the potential joint employers treat the employees as a pool of employees available to both?

  • Do the potential joint employers share clients or customers?

  • Are there any agreements between the potential joint employers?

The AI makes clear that not all, or even most, of these facts need be present for joint employment to exist. Rather, these facts, according to the AI, can help determine if the potential joint employers are sufficiently associated and share control of the employee.

The second type of joint employment situation is called "vertical joint employment." This occurs when one entity, the potential joint employer, typically contracts with another intermediary entity to provide it with labor and/or perform some employer function. Here, the relevant analysis focuses on the economic realities of the relationship between the employee and the potential joint employer. The AI cites as examples of possible vertical joint employer situations a garment worker who is directly employed by a contractor who contracts with a garment manufacturer to perform a specific function or a nurse who is placed at a hospital by a staffing agency.

According to the AI, the initial question to be asked in a vertical joint employment case is whether the intermediary employer is an employee of the potential joint employer. If that is so, then all of the intermediary's employees are employees of the potential joint employer and the analysis ends there. Where the intermediary is not an employee of the potential joint employer, the analysis should, according to the AI, focus on a number of factors which are probative of whether the employee is economically dependent on the potential joint employer who, through some arrangement with the intermediary employer, benefits from the individual's work. The AI identifies the following factors which it maintains are suggestive of economic dependence on the potential joint employer:

  • Where the potential joint employer supervises or controls the employee's work beyond a reasonable degree of contract performance oversight;

  • Where the potential joint employer has the power to hire or fire the employee, modify employment conditions, or determine the rate or method of pay;

  • Indefinite, permanent, full-time, or long term relationships with the potential joint employer;

  • Work that is repetitive and rote, relatively unskilled, and/or requires little or no training;

  • Work that is an integral part of the potential joint employer's business;

  • Work that is performed on premises that are owned or controlled by the potential joint employer; and

  • Where the potential joint employer performs administrative functions for the employee, such as administering payroll, providing workers' compensation insurance, and supplying tools and materials.

The AI notes that not all courts agree what factors should be considered in applying the economic realities test and that additional factors which are consistent with the broad scope of employment under the FLSA might be helpful in the analysis. The AI rejects those analyses that focus solely or primarily on the potential joint employer's control over the employee.

To be sure, the AI represents only guidance from the WHD and does not carry the imprimatur of a federal district judge or appellate court. Notwithstanding that, the AI is an important tool for companies to better understand how the WHD may approach a complaint under the FLSA where a worker may be considered to have been employed by more than one employer.

Gonzalez Saggio & Harlan LLP | Copyright © 2021National Law Review, Volume VI, Number 27
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About this Author

David H. Ganz, Gonzalez Saggio, Employment Counseling Lawyer, New jersey, Workplace Litigation Attorney
Partner

David H. Ganz concentrates his practice on employment counseling and litigation.  He advises companies on a wide range of employment issues, including hiring, discipline, reasonable accommodation, and terminations, as well as compliance with federal and state employment laws.  He also reviews and drafts employment agreements, separation agreements, employee handbooks, and human resources policies.

His litigation practice involves representing management in employment-related matters, including claims involving discrimination, sexual harassment,...

(973) 256-9000
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