The Department of Labor’s Wage and Hour Division (“WHD”), through its Administrator, David Weil, recently issued an Administrator’s Interpretation (“AI”) to provide guidance on identifying those scenarios in which two or more employers jointly employ an employee and are thus jointly liable for compliance under the Fair Labor Standards Act (“FLSA”) and Migrant and Seasonal Agricultural Workers Protection Act (“MSPA”).
Under both the FLSA and MSPA, an employee can have two or more employers for the work that he or she is performing. In this instance, the employee’s work for the joint employers during the workweek “is considered as one employment,” and the joint employers are jointly and severally liable for compliance, including paying overtime compensation for all hours worked over 40 during the workweek.
At the outset, the Administrator noted that the scope of employment relationships subject to the protections of the FLSA and MSPA is broad. The FLSA’s definition of “employ,” which is also utilized by the MSPA, “includes to suffer or permit work,” which is “the broadest definition that has ever been included in any one act.” Furthermore, the FLSA and MSPA both specifically cover joint employment relationships. The expansive definition of “employ” as including “to suffer or permit to work” rejected the common law control standard and ensured that the scope of employment relationships and joint employment under the FLSA and MSPA is as broad as possible.
The Administrator explained that joint employment can be found in two scenarios: “horizontal” joint employment and “vertical” joint employment. The structure and nature of the relationship(s) at issue should determine whether a particular case should be analyzed under horizontal or vertical joint employment or both.
Horizontal joint employment may exist 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. The focus of a horizontal joint employment analysis is the relationship between the two (or more) employers. Examples of horizontal joint employment may include separate restaurants that share economic ties and have the same managers controlling both restaurants, or home health care providers that share staff and have common management. The Administrator clarified that the FLSA joint employment regulation provides guidance in evaluating horizontal joint employment cases, whether arising under the FLSA or MSPA (because the joint employment approaches described in the FLSA and MSPA regulations interpret the same definition of employment).
Horizontal joint employment should be considered when an employee is employed by two (or more) technically separate but related or overlapping employers. Again, the focus of this analysis is the relationship of the employers to each other. According to the FLSA regulations, “[w]here the employee performs work which simultaneously benefits two or more employers, or works for two or more employers at different times during the workweek, a joint employment relationship generally will be considered to exist in situations such as:
- arrangements between the employers to share or interchange the employee’s services;
- where one employer acts directly or indirectly in the interest of another employer in relation to the employee; or
- 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.
The following non-exhaustive list of facts may be relevant when analyzing the degree of association between, and sharing of control by, potential horizontal joint employers:
- Who owns the potential joint employers (e.g., do they have any common owners)?
- Do the potential joint employers have any overlapping officers, directors, executives, or managers?
- Do the potential joint employers share control over operations (e.g., hiring, firing, payroll, etc.)?
- Are the potential joint employers’ operations inter-mingled?
- Do the potential joint employers share supervisory authority for the employee?
- Do the potential joint employers treat the employees as a pool of employees available to both of them?
- Do the potential joint employers share clients or customers?
- Are there any agreements between the potential joint employers?
Joint employment does not exist if the employers “are acting entirely independently of each other and are completed disassociated” with respect to any employee who works for both of them. The Administrator recognized that there are many workers who have multiple jobs with multiple employers who are not joint employers. In sum, the focus of the horizontal joint employment analysis is the degree of association between the two potential joint employers – even if they are formally separate legal entities – and the degree to which they share control of the employee.
On the other hand, vertical joint employment may exist when an employee of one employer (referred to as an “intermediary employer”) is also, with regard to the work performed for the intermediary employer, economically dependent on another employer (referred to as a “potential joint employer”). The focus of the vertical joint employment analysis is the relationship between the employee and the potential employer and whether an employment relationship exists between them. The analysis must determine whether, as a matter of economic reality, the employee is economically dependent on the potential joint employer.
A threshold question in a vertical joint employment case is whether the intermediary employer (who may simply be an individual responsible for providing labor) is actually an employee of the potential joint employer. If the intermediary employer is an employee of the potential joint employer, then all of the intermediary employer’s employees are employees of the potential joint employer too, and there is no need to conduct a vertical joint employment analysis.
However, once it is determined that the intermediary is not an employee, the vertical joint employment analysis should be applied to determine whether the intermediary employer’s employees are also employed by the potential joint employer. Importantly, the vertical joint employment analysis must be an economic realities analysis and cannot focus only on the potential joint employer’s control (e.g., power to hire and fire, supervision, etc.). The economic realities factors in the MSPA regulation provide guidance for analyzing vertical joint employment cases, whether arising under the MSPA or FLSA (again, because the joint employment approaches described in the FLSA and MSPA regulations interpret the same definition of employment). These factors are:
- Directing, Controlling, or Supervising the Work Performed: To the extent that the work performed by the employee is controlled or supervised by the potential joint employer beyond a reasonable degree of contract performance oversight, such control suggests that the employee is economically dependent on the potential joint employer.
- Controlling Employment Conditions: To the extent that the potential joint employer has the power to hire or fire the employee, modify employment conditions, or determine the rate or method of pay, such control indicates that the employee is economically dependent on the potential joint employer.
- Permanency and Duration of Relationship: An indefinite, permanent, full-time, or long-term relationship by the employee with the potential joint employer suggests economic dependence.
- Repetitive and Rote Nature of Work: To the extent that the employee’s work for the potential joint employer is repetitive and rote, is relatively unskilled, and/or requires little or no training, those facts indicate that the employee is economically dependent on the potential joint employer.
- Integral to Business: If the employee’s work is an integral part of the potential joint employer’s business, that fact indicates that the employee is economically dependent on the potential joint employer.
- Work Performed on Premises: The employee’s performance of the work on the premises owned or controlled by the potential joint employer indicates that the employee is economically dependent on the potential joint employer.
- Performing Administrative Functions Commonly Performed by Employers: To the extent the potential joint employer performs administrative functions for the employee (e.g., payroll), those facts indicate economic dependence by the employee on the potential joint employer.
The Administrator stressed that these factors should not be considered mechanically or in a vacuum, but should be applied in a manner that does not lose sight of the ultimate inquiry of whether the employee is economically dependent on the potential joint employer or the expansive definition of employment under the FLSA and MSPA. The Administrator also noted that several courts have set forth additional/different economic realities factors that can be used in this analysis that are consistent with the broad scope of employment under the FLSA and MSPA. However, some courts have set forth factors that address only or primarily the potential joint employer’s control, which is not consistent with the breadth of employment under the FLSA and MSPA.
Although the WHD’s guidance is not binding on any courts, this AI will no doubt be cited to as persuasive authority by employees fighting for joint employer status, and should be considered by employers when considering what, if any, pre-emptive action to take.