U.S. Department of Labor Issues Guidelines on “Joint Employment” Under Federal Law

In order for a worker to assert their rights under many employment statutes, they must establish that an employment relationship exists. This is often not as simple as it might seem. Multiple separate business entities are often present on a worksite, with a complicated web of legal and contractual relationships. Under a “joint employment” (JE) theory, a worker might have multiple employers for the purposes of certain legal claims. The U.S. Department of Labor’s Wage and Hour Division (WHD) recently issued guidance regarding joint employment under two federal statutes: the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq.; and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA), 29 U.S.C. § 1801 et seq. Administrator’s Interpretation No. 2016-1 (“AI”) (WHD, Jan. 20, 2016).

What Is Joint Employment?

The WHD defines JE very broadly. A worker might be the employee of a business entity that has contracted to provide services to another business. The AI uses the example of a hotel that subcontracts functions like housekeeping or catering to another business. Housekeeping and catering workers, in this scenario, might wear hotel uniforms. To the public, they would appear to be hotel employees. The hotel has authority over them at its worksite, including hours worked. Applying a standard model of employment, a worker could only bring a claim under a wage and hour statute like the FLSA against the staffing agency. If the hotel is a joint employer, however, it and the staffing agency might be jointly and severally liable for the worker’s damages.

The AI begins by describing a wide range of “evolving employment scenarios” that have made JE much more common around the country. AI at 1. It states that JE plays a role in hundreds of WHD investigations every year. The purpose of the AI is to offer “additional guidance” because of the increase in JE. Id. It identifies two types of JE: horizontal joint employment (HJE) and vertical joint employment (VJE).

Horizontal Joint Employment

If a worker has multiple employers—in the sense that both the worker and the employer acknowledge the existence of an employment relationship—HJE exists when “the employers are sufficiently associated or related with respect to the employee such that they jointly employ the employee.” Id. at 2-3. This rather circular definition calls for an analysis of the alleged employers’ relationship to one another. This includes formal contractual relationships and informal agreements.

The AI provides the example of a registered nurse who works a total of fifty hours per week, splitting time equally between two nursing homes. HJE might exist if the two nursing homes have made an arrangement “to share or interchange the employee’s services,” if one employer directs the employee’s work in a way that benefits the other employer, or the two employers exercise “common control” over the employee. Id. at 7-8. See also 29 C.F.R. § 791.2.

Vertical Joint Employment

The hotel example provided above is an example of VJE, where a worker has one employer—described by the AI as the “intermediary employer”—that is contracted to, or otherwise affiliated with, another business. AI at 10. The test for VJE is based on “economic realities” rather than “control.” Id. See also 29 C.F.R. § 500.20(h)(5)(iii). The AI also describes this as “economic dependence.” AI at 13.

If you need to speak to an attorney about an employment law matter in New Jersey or New York, please contact the Resnick Law Group online, at 973-781-1204, or at (646) 867-7997.

More Blog Posts:

NLRB Issues Important Ruling Regarding “Joint Employers”, The New Jersey Employment Law Firm Blog, October 15, 2015

NLRB Allows McDonald’s Employees to File Complaints Against McDonald’s and Individual Franchisees as “Joint Employers”, The New Jersey Employment Law Firm Blog, November 3, 2014

Third Circuit Court of Appeals Addresses Legal Definition of “Employer” in Sexual Harassment Case, The New Jersey Employment Law Firm Blog, February 21, 2014

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