In 2016, the Wage Hour Administrator for the U.S. Department of Labor (“DOL”) issued the first Administrator Interpretation (“AI”) for 2016.[1]  The issue of joint employment has long been important in determining employers’ obligations toward its employees because where joint employment is determined to exist, the work performed for each employer may be aggregated and considered as one employment for the purposes of determining when overtime pay is due.  According to the AI, joint employment-where workers have two or more employers-is becoming more common and is part of hundreds of investigations conducted by the DOL each year. 

According to the stated purpose of the AI, joint employment is being used as a means to expand coverage to more employers.  Of note, if joint employment is found to exist, each employer may be liable for the entire amount of wages due.  Accordingly, a finding of joint employment can also increase the ability of the DOL to enforce financial recovery.  Under the FLSA and MSPA the terms “employee” and “employer” are defined broadly and each statute specifically covers joint employment relationships. 

The AI addresses for the first time, a distinction between two types of joint employment: horizontal and vertical[2].  Horizontal joint employment exists where an employee has an employment relationship with two or more employers and those employers are sufficiently associated or related to each other.  The determination of whether horizontal joint employment exists focuses on the relationship between the two employers.  One example of horizontal joint employment would be where an employee works for two different restaurants but both restaurants have the same manager making employment decisions.  The following is a list of facts relevant to determining the degree of association between employers that may be horizontal joint employers:

• Ownership-does one employer own part of all of the other or is there any common ownership;
  
• Any overlap in officers, directors, executives or managers;
  
• Any control over operations such as hiring, firing, payroll, overhead;
  
• Any intermingling of operations-does one person do the payroll for both employers;
  
• Joint supervision;
  
• Are employees treated as a pool available to both employers;
  
• Shared clients or customers; and
  
• Any agreement between the potential joint employers. 
  

Vertical joint employment exists where an employee has an employment relationship with one employer but the facts show that the worker is economically dependent on another entity and therefore, may be jointly employed by both employers.  In these instances, the focus is on the economic reality of the working relationship between the employee and the business that contracted with the intermediary.  An example of vertical joint employment is where a farmworker is jointly employed by the farm labor contractor and the grower.  The analysis focuses on the economic reality between the worker and the potential joint employer.  Using the above example, analyzing the economic relationship between the farmworker and the grower will be the factor relevant to determining vertical joint employment.  Vertical joint employment is often used to get to deep pockets or to hold a company liable that is larger, stable and economically sound with a greater ability to implement policy changes to ensure compliance.  Seven factors are relevant to determining whether vertical joint employment exits:

• The degree to which the potential joint employer directs, controls and/or supervises the work performed;
  
• The ability to hire, fire, change rate of pay or otherwise modify employment conditions;
  
• Permanency and duration of the relationship that suggests economic dependence;
  
• Repetitive and rote nature of work;
  
• Whether the employee’s work is integral to the potential joint employer’s business;
  
• Whether the work is performed on the employer’s premises; and
  
• Whether administrative functions are commonly performed for both employers.
  

The issuance of this guidance by the DOL reflects the importance being placed on this issue of joint employment in investigations.  The Administrator’s Interpretation on Joint employment can be found on the United States Department of Labor website: http://www.dol.gov/whd/opinion/adminIntrprtnFLSA.htm.


[1] The AI specifically addresses joint employment under two different statutes-the Fair Labor Standards Act (“FLSA”) and Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”).  While MSPA only applies to agricultural employers, the FLSA applies to most employers.  The test for joint employment under the FLSA and MSPA is different from other labor statutes such as the National Labor Relations Act (“NLRA”) and the Occupational Safety & Health Administration (“OSHA”). 

[2] In some situations both horizontal and vertical employment can exist.  The example given of this is when two warehouses share the same employees and also use a staffing agency to provide the employees. 

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DOL Issues Administrator Interpretation on Joint Employment

Law Office of David Miklas, P.A.

Labor & Employment law - Employers only