New guidance on joint employment relationships may bring clarity – and likely surprises – about who’s liable under the Fair Labor Standards Act (FLSA).
The “one employer employing one employee” scenario is less prevalent than in the past, the Dept. of Labor (DOL) noted in Administrator’s Interpretation No. 2016-1.
For example, there has been an increase in sharing employees and in using staffing agencies.
If your company is considered a joint employer with another company, then in addition to being aware of shared liability, you’ll also need to make sure you’re correctly paying employees for overtime.
You may need to aggregate the hours of an employee who works at two different locations to determine if that person has exceeded 40 hours in a workweek.
2 terms you should know
The DOL guidance uses the terms horizontal and vertical to describe joint employment relationships.
1. Horizontal joint employment focuses on the relationship of the two employers to each other.
To determine if joint employment exists, here’s a sample of questions the DOL says you should ask:
- 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 employers share control over operations (e.g., hiring, payroll, advertising, overhead costs)?
2. Vertical joint employment focuses on the employee’s relationship with the potential joint employer.
The ultimate question is whether the employee is economically dependent on the potential joint employer.
The DOL says employers should consider the seven factors of the Migrant and Seasonal Agricultural Worker Protection Act (MSPA), such as who controls employment conditions. Note: The guidance pertains to the MSPA as well as the FLSA.