Thursday, February 18, 2016

The Complex World of Joint Employment

Here’s Wikipedia’s definition of joint employment:
Joint employment, or co-employment, is the sharing of control and supervision of an employee’s activity among two or more business entities.
Pretty simple, right?  Most employment lawyers will tell you that it’s not that simple, and that there are significant legal issues that can arise when workers are jointly employed.
The concept of joint employment has been around for a long time, but in the last nine months, both the National Labor Relations Board and the Department of Labor have issued new guidance on the subject.  These new interpretations have sparked criticism and legislative action.  Even with new guidance available, joint employment remains a mystery for many employers, in part because an organization could be a joint employer without even knowing it.
In his Administrator’s Interpretation, Wage and Hour Administrator David Weil described various situations that can lead to joint employment.  The first is the so-called “horizontal” joint employment where two (or more) entities are working on a project together, employees work side-by-side, and the two entities are “sufficiently associated with or related to each other” so that the employee may receive direction from both.  Imagine two restaurants across the street from one another, one Mexican the other Italian.  The restaurants are managed by the same management company and share some of the same upper-level managers, but have wait staff employed only by one restaurant or the other.  Because of staffing shortages, wait staff move back and forth between the restaurants to fill shifts.  Under Weil’s interpretation, this is a horizontal joint employment situation.  If a server works 40 hours at one restaurant and 10 at the other during the same workweek, he would be entitled to overtime under the FLSA and both restaurants would be liable for the overtime payment, as well as statutory damages and attorneys’ fees if there’s a dispute.
Another type of joint employment is known as “vertical” joint employment. In this case, one company contracts with another to provide workers. The company seeking help often uses a staffing company, believing that the staffing company remains the employer while the contracting company provides the specific project or tasks.  Under Weil’s interpretation and the NLRB’s “indirect” control test, both the staffing company and the contracting company would be joint employers, liable for claims brought by the workers. 
Other joint employment relationships can arise when a parent company controls the work of a subsidiary’s employees, when employees are affected by a merger or acquisition, or between a franchisor and franchisee. 
  • Here are some of the questions employers should ask in order to understand and manage their risk of joint employer liability:
  • Who are the workers we control and direct, regardless of where they work? Who manages them, and who pays them?
  • If our employees work with another employer’s managers and supervisors, do we understand and approve of the other employer’s policies and practices?
  • Who controls and directs the workers in our workplace? If control and direction comes from outside our organization, do we understand and approve of the policies and practices imposed on the workers in our workplace?
  • If we use a staffing agency, what does our agreement with that agency say about liability for employment law violations?
  • If we use a staffing agency, do we approve of the agency’s policies and practices? Are we sure that those policies and practices comply with the law?
  • If we are a franchisor or franchisee, what does our franchise agreement say about liability for employment law violations? What does it say about control and direction of employees?
Any of these questions may lead to more questions, given the complicated nature of joint employment.  If they do, we recommend that you seek guidance from in-house or outside counsel.
Posted by Judy Langevin and Kate Bischoff