Joint employers and what you need to know

April 6, 2016
The U.S. Department of Labor rescinded administrative interpretations surrounding joint employment and independent contractors on June 7, 2017. The following article provides background information on the former guidance that had been released under the Obama administration, but has since been withdrawn.

What are joint employers? What responsibility do joint employers have to an employee? The administrator of the U.S. Department of Labor Wage and Hour Division has set guidelines on the standards used to determine who is a joint employer under the Fair Labor Standards Act and what responsibilities they have.

The first step is to determine if a joint employer relationship exists, so employees’ rights and employers’ obligations are met. If there is a joint situation, you as an employer must follow the guidelines set by the FLSA and Migrant and Seasonal Agricultural Worker Protection Act.

Joint employment can be defined two ways:

  1. An employee has two or more technically separate but related employers, known as horizontal joint employment.
  2. An employer provides labor to another company and the employee is economically dependent on both, known as vertical joint employment.

Consider these scenarios as examples:

Horizontal joint employment – an employee is employed at two locations of the same restaurant brand. They are owned by separate entities, but the same individual is majority owner of both locations. The employee is a manager for both locations, and both employers share supervisory authority and coordinate the employee’s hours jointly. The payroll is processed by the same payroll processor for both employers. These facts are revealing of horizontal joint employment.

Vertical joint employment – a truck driver is employed for a trucking firm that is an independent contractor to a paving company. The firm was engaged with the paving company for a project. The firm hired and pays the driver. The paving company provides the training for the project, all the materials and the workers’ compensation insurance. The paving company also reserves the right to the driver’s schedule and assignments, but shares in the supervising of the driver. These facts are revealing of vertical joint employment.

In both cases, joint employment exists and the FLSA guidance on the handling of the employee’s hours and overtime calculations must be followed. Employee’s hours worked for both employers for the workweek must be aggregated and considered as one employment in the determination of overtime calculation. If this calculation is calculated incorrectly, or not at all, both employers can be liable for the wages. The Wage and Hour Division of the U.S. Department of Labor regularly encounters joint employer scenarios and does bring enforcement actions against both employers that do not meet their legal obligations.

So, if you are, or think there is a possibility you have joint employment, please contact your Schenck payroll specialist for guidance and ways to comply with the U.S. Department of Labor and the FLSA.

Tags: Payroll