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Employment Blog

Caution, Caution – Are You a Joint Employer?

Authored by Dean R. Dietrich
Posted on January 28, 2016
Filed under Employment

Recent guidance from the Department of Labor has created a stir regarding two or more businesses that could be considered joint employers and thereby held jointly and severally responsible for complying with minimum wage and overtime pay requirements of the federal Fair Labor Standards Act. 

Under guidance issued by Wage and Hour Division Administrator, Dr. David Weil, the Department of Labor has focused on “fissured industries” and identified specific situations where businesses will be considered joint employers and therefore jointly liable for obligations under the FLSA.  Some examples of these types of businesses are shared-employee situations, staffing company usage or using a large number of independent contractors to perform routine type work at a company. 

Under the Interpretation Guidance, the Department of Labor/Wage and Hour Division has said that the Department will look at various situations with a great deal of scrutiny to determine whether two businesses are actually joint-employers.  One setting involves “horizontal” joint employment where an employee performs work for two different companies that are setup in some fashion to be considered independent companies but have many indicia of joint ownership.  Under these circumstances, both companies will be considered responsible for overtime pay liability. 

Another potential area involves “intermediary employers” where one company will hire another company to provide workers and the workers will likely be considered employees of both companies.  Much will depend upon the amount of control exercised by the two companies.  Under these circumstances, both companies will be considered responsible for overtime pay liability.  If the contracted employee is actually governed by the working conditions of the contracting employer, there will be a strong likelihood of joint employer status and then potential joint liability under the FLSA. 

This pronouncement from the Department of Labor Wage and Hour Division means there will be a great deal of scrutiny regarding various employment settings where the individual employees are not directly employed by the company that is having the work performed at its work site.  Companies need to be careful about the use of staffing agencies in order to create separate employer status and avoid the joint liability for compliance with the Wage and Hour Division regulations.