Jan 21, 2016

“Joint Employer” to be Defined as Broadly as Possible

The Department of Labor’s Wage and Hour Division (“WHD”) recently issued an Administrative Interpretation (“AI”) to provide guidance on a nebulous term, “joint employer.”  Joint employment exists when two or more employers each employ the same employee and either (1) the employers are sufficiently related to each other or (2) the employee is economically dependent on both employers.  The first instance creates “horizontal joint employers;” the second creates “vertical joint employers.”

For example, if two restaurants owned by the same company each hire the same waiter, and that waiter works 20 hours per week at one restaurant and 20 hours per week at the other restaurant, then the two restaurants are likely “horizontal joint employers.”  Conversely, vertical employment often occurs where an employer uses a third party, staffing agency, or labor provider to hire employees.  For example, a farmer may contract with a labor contractor to harvest his crops.  The contractor hires farm workers to harvest the crops, and, if the farmer remains sufficiently engaged in the job, such as by providing tools and setting work hours, then both the farmer and the contractor may be “vertical joint employers.”

The distinction is important, but ultimately, a finding of either form of joint employment leads to the same result.  Under the Fair Labor Standards Act (“FLSA”) and the Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”), all employers, joint or otherwise, must comply with statutory regulations concerning employees, such as providing certain wages, recording hours, and paying proper overtime.  Notably, joint employers are each jointly and severally liable for violations of the FLSA and MSPA.

Because of these liability implications, the AI is intended to ensure that all employers are aware of their obligations under the FLSA and MSPA.  The joint employer test under these two statutes is different than the test under the Occupational Safety and Health Act and the National Labor Relations Act.  The WHD seeks an expansive definition of “joint employer” to protect employees by holding more, rather than less, employers responsible for wage and hour compliance.  In fact, the FLSA and MSPA already define the term “employ” very broadly for the same purpose.  Additionally, because courts have taken different approaches to the “joint employer” analysis, the AI provides a thorough explanation and examples to illustrate the nebulous and now expansive term, “joint employer.”  While courts are not necessarily bound by such administrative interpretations, many courts do look to them for instruction and persuasive guidance.

If you have any questions regarding these issues, please contact your labor and employment counsel at Smith, Gambrell & Russell, LLP.

This client alert is intended to inform clients and other interested parties about legal matters of current interest and is not intended as legal advice.

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