Are You a Joint Employer?

In our ever-evolving workplace, it has become more common for employees to have two or more employers. This can happen when companies use staffing agencies, independent contractors, or professional employer organizations.

The Department of Labor (“DOL”) recently issued an Administrator’s Interpretation dealing with co-employer liability. The following are the takeaways from the interpretation:

  • The employee’s hours worked for both of the joint employers during the workweek are aggregated and considered to be “one employment.” This means both employers are responsible for overtime pay calculations and are jointly and severally liable for legal compliance.
  • The DOL is going to apply an expensive definition of “employer” when determining co-employment status. This means the risk of liability is high.
  • When an employee works for two or more employers, two potential structures can exist: (1) horizontal joint employment or (2) vertical joint employment.
    • Horizontal joint employment is possible when the employee has employment relationships with two (or more) employers and the employers are sufficiently associated or related with respect to the employee. An example of horizontal joint employment is separate restaurants that share economic ties and have the same managers overseeing both restaurants.
    • Vertical joint employment is possible when the employee has an employment relationship with one employer and s/he is also economically dependent on another entity involved in the work. Vertical joint employment includes employees hired by a staffing agency, subcontractor, labor provider or other intermediary to work for another company. An example of a vertical joint employer is a construction worker who works for a subcontractor and is also employed by a general contractor.

Employers must consider whether they are a joint employer to insure compliance with overtime compensation and liability regulations.

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