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DOL Gives Continued Attention To Joint Employment

In recent years, the U.S. Department of Labor has paid particular attention to misclassification of employees as independent contractors. It has worked with other federal and state agencies to help misclassified employees get the wages, benefits, and protections to which they are entitled. On January 20, 2016, the Administrator of the Department’s Wage and Hour Division issued Interpretation No. 2016-1, entitled Joint employment under the Fair Labor Standards Act and Migrant and Seasonal Agricultural Worker Protection Act. The interpretation emphasizes that joint employment should be defined expansively. It discusses two different types of joint employment:

  • Horizontal joint employment occurs when two or more employers each separately employ an employee and are sufficiently associated with or related to each other with respect to the employee. DOL regulations address this type of joint employment at 29 CFR section 791.2.
  • Vertical joint employment occurs when an employee of one employer (which the Administrator calls an “intermediary employer”) is also, with regard to the work performed for the intermediary employer, economically dependent on another employer.

To determine whether horizontal joint employment exists, the following questions should be asked: (1) 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), (2) do the potential joint employers have any overlapping officers, directors, executives, or managers, (3) do the potential joint employers share control over operations (e.g., hiring, firing, payroll, advertising, overhead costs), (4) are the potential joint employers’ operations inter-mingled (for example, is there one administrative operation for both employers, or does the same person schedule and pay the employees regardless of which employer they work for), (5) does one potential joint employer supervise the work of the other, (6) do the potential joint employers share supervisory authority for the employee, (7) do the potential joint employers treat the employees as a pool of employees available to both of them, (8) do the potential joint employers share clients or customers, and (9) are there any agreements between the potential joint employers.

The interpretation provides the following example of horizontal joint employment: An employee is employed at two locations of the same restaurant brand. The two locations are operated by separate legal entities (Employers A and B). The same individual is the majority owner of both Employer A and Employer B. The managers at each restaurant share the employee between the locations and jointly coordinate the scheduling of the employee’s hours. The two employers use the same payroll processor to pay the employee, and they share supervisory authority over the employee.

To determine whether vertical joint employment exists, the following factors should be considered: (1) Directing, Controlling, or Supervising the Work Performed, (2) Controlling Employment Conditions, (3) Permanency and Duration of Relationship, (4) Repetitive and Rote Nature of Work, (5) Integral to Business, (6) Work Performed on Premises, and (7) Performing Administrative Functions Commonly Performed by Employers.

The interpretation provides the following example of vertical joint employment: A laborer is employed by ABC Drywall Company, which is an independent subcontractor on a construction project. ABC Drywall was engaged by the General Contractor to provide drywall labor for the project. ABC Drywall hired and pays the laborer. The General Contractor provides all of the training for the project. The General Contractor also provides the necessary equipment and materials, provides workers’ compensation insurance, and is responsible for the health and safety of the laborer (and all of the workers on the project). The General Contractor reserves the right to remove the laborer from the project, controls the laborer’s schedule, and provides assignments on site, and both ABC Drywall and the General Contractor supervise the laborer. The laborer has been continuously working on the General Contractor’s construction projects, whether through ABC Drywall or another intermediary.

You can find a summary of the DOL’s views on joint employment in Fact Sheet 35.