Department of Labor Sets Broad Definition of Joint Employer

Employers who contract out for services are increasingly being held responsible by enforcement agencies for wage and hour and other labor violations.

Yesterday, the U.S. Department of Labor (DOL) issued new joint employer guidance in an attempt to hold more companies responsible for workers they may hire indirectly, such as when a company uses a temp agency. In addition to the guidance, the DOL created a webpage devoted to joint employment issues which includes answers to frequently asked questions and additional fact sheets.

The DOL notes the increasing trend of joint employment situations. According to the DOL, economic forces and technological advances have led to increasingly changing labor arrangements, including outsourcing, sharing employees, third-party management companies, independent contractors, staffing agencies and other labor providers. Examples might include nurses placed at a hospital by a staffing agency, production line workers supplied by a temp agency for a specific function or restaurant workers shared between two different, but related, restaurants.

Dr. David Weil, the administrator of the DOL’s wage and hour division, calls this “the fissured workplace” — where there is no longer a traditional brick and mortar company owned and operated by a single employer, but instead companies have contracted out or shed activities to be performed by other businesses. In this situation, according to Weil, an employee might not know whom they actually work for.

For example, last year the DOL obtained a joint employment judgment against DirectTV to pay $395,000 in back wages and damages to installers. DirectTV subcontracted installation to another corporation and claimed that it was not the installers’ employer and not responsible for federal wage and hour violations. A court disagreed, finding that DirectTV was a joint employer of the installers and responsible for the wage and hour violations.

In its newly released guidance, the DOL clearly intends that joint employment be defined broadly, focusing on the “economic realities” of the working relationship between the employee and the potential joint employer. For instance, according to the DOL, the core question in determining joint employer status where there is an intermediary employer, like a staffing agency, is whether the worker is “economically dependent” on the company that hired the staffing agency and whether the company is ultimately benefitting from the work. There are several factors to be applied, but none of them should be applied in a manner that loses sight of the core question.

This stance is similar to guidance issued by the DOL on the matter of independent contractor misclassification last July.

Moreover, the National Labor Relations Board also recently redefined the joint-employer standard, increasing collective bargaining power for temp workers through its decision in Browning Ferris Industries of California , 362 NLRB No. 186 (August 27, 2015).

California has already implemented legislation that increased liability on employers who contract for labor. Labor Code section 2810.3 holds companies accountable for wage-and-hour and other violations when they use staffing agencies or other labor contractors to supply workers.

Source: CalChamber and DOL  |   2015 © Copyright Payroll Masters

Payroll Masters is not a licensed insurance broker or agent and does not provide professional or legal advice. This document has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please contact your employment attorney in connection with any fact-specific situation in which you intend to take significant employment action. Readers agree that they will hold Payroll Masters in indemnity and Payroll Masters assumes no liability. Payroll Masters is not engaged in rendering legal or accounting services. Therefore, Payroll Masters assumes no responsibility for claims arising from the use or implementation of the above information.