DOL Issues New Guidance on Joint Employer Standard

By: Daniel M. Drewry, Drewry Simmons Vornehm, LLP

Last month the DOL published an Administrator’s Interpretation addressing the Joint Employer standard under the Fair Labor Standards Act (FLSA) and Migrant and Seasonal Agricultural Worker Protection Act (MSPA).  In a joint employment setting, each employer is jointly and severally liable for the FLSA/MSPA violations of the other as to the joint employee.  For example, the exposure for joint employment under the FLSA can be particularly problematic with respect to overtime, as the hours of the joint employee for both employers are totaled and measured against the 40 hour work week.  For example, if an employee worked 30 hours for joint employer A and 20 hours for joint employer B in the same week, both employers are jointly and severally liable to that employee for 10 hours of overtime – despite the fact that separately the employee was well under the 40 hour work week.  This should be distinguished from the National Labor Relations Board (NLRB) interpretation of joint employment, which concerns shared collective bargaining obligations and the joint and several liability for violations of the National Labor Relations Act.

While the joint employment concept is not new under the FLSA, the version of the standard to establish joint employment set forth in Administrator’s Interpretation is a shift to a more liberal and employee-friendly standard (not unlike its NLRB counterpart).  Under the Administrator’s Interpretation the focus of the joint employment inquiry is on the economic reality of any given situation.  Courts are instructed to use factors such as (1) whether the purported employer directs, controls or supervises workers; (2) whether the purported employer has the power to hire, fire and modify employment conditions (incl. rates of pay); (3) the degree of permanency and duration of the parties’ relationship; (4) the extent to which the service rendered by the workers is repetitive or rote by nature; (5) whether the work performed is integral to the overall business of the purported employer; (6) whether the work is performed on the putative employer’s premises; and (7) whether the responsibilities performed by the putative employer are those commonly performed by employers.  In essence, this is a more liberal standard which is based on the DOL’s broad view that joint-employer liability may be imposed based solely on “economic dependence” and potentially even if there has been no showing of traditional control.  Employers – particularly those utilizing third party staffing or labor providers, should examine their practices and contractual arrangements in light of this new interpretation.