We are back with our scintillating discussion about the US Department of Labor’s take on joint employment. Last week we established that the DOL defines “employer”, “employee” and “employment” and “joint employment” broadly, and its rationale for doing so. (Click here for review.) But wait there’s more–like how to determine if you are a joint employer, and what that might mean for you. That’s what we’re going to begin tackling this week after the jump…
For FLSA purposes, there are two types of joint employment, horizontal joint employment and vertical joint employment. Time and space do not permit us to tackle both in one post in one week, so we’ll talk about horizontal employment this week, and we’ll finish up next week with vertical joint employment.
Horizontal Joint Employment exists when two or more companies separately employ a worker ( or several workers) and are sufficiently affiliated with or related to each other with respect to the employee(s). What does that mean? First, the employee will usually have an admitted employment relationship with each entity. The employee may perform separate work and work separate hours for each. While the relationship between the employee and each employer is the starting point it is not the focal point. The focal point is the relationship between each of the employers.
Let’s look at some examples: Suppose Willie the Waiter is employed at Restaurant A and Restaurant B. If both restaurants are under the same management and ownership, and/or share some other economic ties, then they are affiliated with and related to each other. The two restaurants are probably joint employers of Willie and anyone else that works for both of them. If you would like a real-life case example see Chao v Barbecue Ventures, LLC No. 08-1284. ( 8th Cir., Nov 28, 2008). Similarly, two separate home health care providers that share staff and management. For an actual case example, see Chao v A-One Med. Servs., 346 F.3d at 918 (9th Cir 2003). The point is, when you see employees working for two or more entities that are technically separate but that overlap or are related in any way, you need to consider the possibility of horizontal joint employment. Once a horizontal joint employment relationship is established, “the employee’s work for the joint employer during the workweek is considered as one employment” (29 CFR 791.2(a) and all joint employers are jointly and severally liable for compliance, including payment for all overtime hours worked (i.e. any hours in excess of the regular 40-hour workweek).
Horizontal joint employment will generally be found in situations, such as: a) arrangements between the employers to share or interchange the employee’s services; (b) where one employer acts directly or indirectly in the interest of another employer in relation to the employee; or (c) where the employers are associated “with respect to the employment of a particular employee and may be deemed to share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer.” (See 29 CFR 791.2(b). So how does one determine if the two or more entities share sufficient control over the employee(s) in question or if the multiple employers are sufficiently associated/related? According to the DOL, you consider these factors:
- Any overlapping officers, directors, executives, or managers;
- Shared control over operations (e.g., hiring, firing, payroll, advertising, overhead costs);
- Inter-mingled operations (e.g. one administrative operation for both employers, same person scheduling and paying the employees regardless of which employer they work for);
- One potential joint employer supervising the work of the other;
- Share supervisory authority over the employee(s);
- Potential joint employers treating the employees as a pool of employees available to both of them;
- Shared clients or customers; and
- Any agreements between the potential joint employers.
If these factors describe your company and other companies with which you have a relationship, then you probably share some employees. If so, you and the other company (or companies) will all be responsible for ensuring that those employees that are not classified as exempt are paid at least minimum wage for the first 40 hours they work in each week and overtime pay for all hours worked in excess of the regular 40 hours in a given workweek. Each one of you employers will also be responsible for complying with any and all other requirements of the Fair Labor Standards Act. The employee and the DOL can pursue minimum wage and overtime claims and any other claimed breach of the FLSA against any one of you separately or all of you together. If an employee or the DOL seeks back pay from only your company, you can then pursue a claim against the other entity or entities for what is known as contribution, which means that you attempt to get what presumably is the other entity’s portion of the liability. So yes, that means that you have the right to sue. (I realize that for many of you knowing this doesn’t make your day. Sorry).
The above factors may not describe your company, but you’re not off the hook yet. We still need to see if any of your employment arrangements constitute vertical joint employment. See how long this post has gotten though? That’s why we’re going to talk about vertical joint employment next week. See you then.
Disclaimer: Contents of this post are for educational/informational purposes only, are not legal advice, and do not create an attorney-client relationship. Consult with competent employment counsel in the state(s) in which you employ people with your specific questions.
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