“Joint employment” arises in circumstances in which a worker has an employment relationship with two or more entities at the same time. Where a joint employment relationship is found to exist, both employers are responsible for ensuring full compliance with the Fair Labor Standards Act (“FLSA”), including overtime pay obligations.
Companies that rely on staffing agencies to directly hire workers for their labor force have often done so to simplify their obligations and reduce the legal exposure arising from direct employment relationships. However, depending on the factual circumstances in play, such an arrangement may cause both the staffing agency and the company it serves to assume joint employer status.
Earlier this year, the Wage and Hour Division of the U.S. Department of Labor (“WHD”) issued an Administrator’s Interpretation (“AI”) expanding the circumstances under which a company may be deemed a joint employer under the FLSA. The guidance set forth by the new AI is detailed and complex, but the bottom-line is this: according to the AI, the “economic realities” of a worker’s employment relationship – as opposed to merely the “control” a company is able to exert over a worker – should dictate whether a company is a joint employer. According to the AI, “[t]he analysis must determine whether, as a matter of economic reality, the employee is economically dependent on the potential joint employer.” The AI sets forth the following seven “economic reality” factors which must be considered to determine whether joint employment exists:
In light of the evolving regulatory landscape, companies should be mindful of the structure of their staffing agency relationships to help reduce compliance risks. A company sharing joint employer status with another entity should work to ensure that the other entity – staffing agency or otherwise – complies with the FLSA and other state and federal laws in relation to the joint employees.
Please contact Wright Beamer for your company’s employment and labor law needs.