U.S. Dept of Labor's Administrator Interpretation Explains Joint Employer Status Under FLSA

We recently wrote an article about how courts and agencies are embracing the concept of sharing.
That is, forced sharing of responsibility among employers for the employment law violations of one.
(You can read our article here.  EMPLOYERS FACE NEW LIABILITY FOR OTHERS’ WORKERS )  As you'll see in that article, the National Labor Relations Board weighed in on joint employer status last year in a big decision.

Almost on cue, the U.S. Department of Labor has weighed in with one if its Administrator's Interpretations.  That is an opinion letter generally explaining an area of enforcement, which is not a full fledged regulation.  The Administrator Interpretation, No. 2016-1, is here.

Entitled "Joint employment under the Fair Labor Standards Act and Migrant and Seasonal Agricultural Worker Protection Act," the Administrator of the DOL's Wage and Hour Division seeks to explain how it will apply the Fair Labor Standards Act to "joint employer" relationships.

For the government,  "joint employer" relationships are helpful in different contexts.  And by "helpful in different contexts" I mean "ways to facilitate holding as many employers responsible as possible." Let the Administrator explain just some of the ways:

When two or more employers jointly employ an employee, the employee’s hours worked for all of the joint employers during the workweek are aggregated and considered as one employment, including for purposes of calculating whether overtime pay is due. Additionally, when joint employment exists, all of the joint employers are jointly and severally liable for compliance with the FLSA and MSPA.4 Where joint employment exists, one employer may also be larger and more established, with a greater ability to implement policy or systemic changes to ensure compliance. Thus, WHD may consider joint employment to achieve statutory coverage, financial recovery, and future compliance, and to hold all responsible parties accountable for their legal obligations. the 

 Rather than issue a regulation, with its notice and comments, and possibility of congressional action to stop it, the Administrator has chosen to issue this opinion letter.  It is helpful for employers to understand the federal wage-hour agency's position on how it will treat multiple employer business relationships, such as staffing agencies, temporary firms, and subcontracts.  

Here are some of the highlights:

1.  The letter distinguishes between "horizontal" relationships and "vertical" relationships.  Horizontal means that an employee works for two employers, but they are related enough that each employer is responsible for the wage-hour issues of the other.  For example, if there is a joint employer relationship between two horizontal employers, then the hours worked in a week are aggregated for overtime purposes.   Vertical means that the employee works for an entity like a staffing agency, but economic realities are that the employee also works for a joint employer that receives the benefit of the employee's labor. 

2.  With respect to horizontal employment, the interpretation surveys cases and regulations and comes up with several bulleted factors that the DOL will consider relevant in deciding whether separately owned businesses may be considered joint employers of an employee:

• who owns the potential joint employers (i.e., does one employer own part or all of the other or do they have any common owners);
  
• do the potential joint employers have any overlapping officers, directors, executives, or managers;
  
• do the potential joint employers share control over operations (e.g., hiring, firing, payroll, advertising, overhead costs);
  
• are the potential joint employers’ operations inter-mingled (for example, is there one administrative operation for both employers, or does the same person schedule and pay the employees regardless of which employer they work for);
  
• does one potential joint employer supervise the work of the other;
  
• do the potential joint employers share supervisory authority for the employee;
  
• do the potential joint employers treat the employees as a pool of employees available
  to both of them;
  
• do the potential joint employers share clients or customers; and
  
• are there any agreements between the potential joint employers. 
  

3.  With respect to vertical employment - like temporary staffing agencies' staff working at a factory owned by another company, the DOL explains that there sometimes is NO actual employment relationship with the joint employer, whereas there usually is an employment relationship with both horizontal employers.  So, the question is whether the DOL should impute - find - a relationship based on "economic realities."
The economic realities test will include an analysis of multiple factors including

• who directs and controls the work
• who directs and controls the employment conditions
• what is the permanency of the relationship - is this a long term contract?
• how repetitive and rote is the work?
• is the work integral to the potential joint employer's business?
• is the work performed on the joint employer's premises?
• does the joint employer perform administrative tasks for the employees that employers normally do?

The Administrator concludes that the joint employer relationship will be scrutinized in future cases to ensure broad coverage:

As a result of continual changes in the structure of workplaces, the possibility that a worker is jointly employed by two or more employers has become more common in recent years. In an effort to ensure that workers receive the protections to which they are entitled and that employers understand their legal obligations, the possibility of joint employment should be regularly considered in FLSA and MSPA cases, particularly where (1) the employee works for two employers who are associated or related in some way with respect to the employee; or (2) the employee’s employer is an intermediary or otherwise provides labor to another employer. 

The result is that employers may be found liable for wage-hour issues for which they are not necessarily aware of, or in control of. Therefore, employers must ensure that they account for these potential liabilities in their business relationships and contracts.