Continuing its focus on joint employment issues, the U.S. Department of Labor's Wage and Hour Division has issued an Administrator's Interpretation covering joint employment under the Fair Labor Standards Act (FLSA) and Migrant and Seasonal Agricultural Worker Protection Act (MSPA).   Explaining the need for such focus, the Administrator's Interpretation states "More and more, businesses are varying organizational and staffing models by, for instance, sharing employees or using third-party management companies, independent contractors, staffing agencies, or labor providers.  As a result, the traditional employment of one employer employing one employee is less prevalent. ? In view of these evolving employment scenarios, the Administrator believes that additional guidance will be helpful concerning joint employment under the [FLSA and MSPA]."  See Administrator's Interpretation at p. 1-2.

 

In particular, the Administrator's Interpretation clarifies the distinction between horizontal and vertical joint employment relationships under FLSA and MSPA.

 

 

Horizontal joint employment occurs when an employee has an employment relationship between two employers and performs separate work or works separate hours for each employer.  When analyzing whether a horizontal joint employment relationship exits, the focus is on the relationship between the multiple employers.  Where an employee is employed by two employers that are technically separate but are related or overlapping, a horizontal joint employment relationship may be present.  As an example, the Administrator's Interpretation describes a scenario where a waitress works for two separate restaurants that are operated by the same entity.  In such a scenario, the question would be whether the two restaurants are sufficiently associated such that they jointly employ the waitress.

 

A determination that a horizontal joint employment is present in the foregoing scenario may occur if (1) arrangements exist between the employers to share or interchange the employee's services; (2) where one employer acts directly or indirectly in the interest of another employer in relation to the employee; or (3) 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".  See Administrator's Interpretation at p. 7-8 (citations omitted).  Factors that may contribute to such a determination include, but are not limited to, whether the potential joint employers

 

 

See Administrator's Interpretation at p. 8.  The Administrator's Interpretation notes that "not all or most of the foregoing facts need to be present for joint employment to exist.  Rather, these facts can help determine if there is sufficient indication that the potential joint employers are associated with respect to the employee and thus share control of the employee."  See Administrator's Interpretation at p. 8.

 

 

In contrast to horizontal joint employment, vertical joint employment occurs where a company has contracted for workers that are directly employed by an intermediary company.  In this scenario, the focus of the Department of Labor's analysis is on the economic realities of the employee's relationship with each potential joint employer.  If the employee is economically dependent on both of the potential joint employers, then a joint employment relationship may exist.  For example, where a construction worker works for a subcontractor at a general contractor's job site, or a nurse is placed at a hospital by a staffing agency, circumstances may dictate that the general contractor or hospital have a vertical joint employment relationship with the employee.

 

To assess whether vertical joint employment exists in a given case, the first question that must be answered is whether the intermediary employer is actually an employee of the potential joint employer.  If the intermediary employer is employed by the potential joint employer, then all of the intermediary employer's employees are employed by the potential joint employer as well.  If the intermediary is not an employee, then the vertical joint employment analysis will focus on the economic realities of the situation.  The Administrator's Interpretation identifies seven factors that serve as guidelines to probe "the core question of whether the employee is economically dependent on the potential joint employer who, via an arrangement with the intermediary employer, is benefitting from the work."  See Administrator's Interpretation at p. 11.  They include each potential joint employer's role in:

 

 

See Administrator's Interpretation at p. 11-12.  The Administrator's Interpretation notes that while the economic realities factors listed above have been applied by different courts analyzing joint employment issues, the factors applied may vary depending on the court, although "any formulation must address the "ultimate inquiry" of economy dependence."  See Administrator's Interpretation at p. 12-13.

 

 

Through discussion of horizontal and vertical joint employment relationships, the Administrator's Interpretation emphasizes the Wage and Hour Division's commitment to focus "to ensure that all responsible employers are aware of their obligations and to ensure compliance with the FLSA and MSPA."  See Administrator's Interpretation at p. 15.  Such compliance includes monitoring that where an employee is jointly employed by two or more employers, his/her hours worked for all joint employers are aggregated for purposes of calculating overtime.  For this reason, employers should apply the horizontal and/or vertical joint employment factors listed above where they have questions regarding whether they are joint employers.  If a determination is made that such a relationship exists, organizations will be in a better position to manage the concomitant legal obligations that may arise well before the Department of Labor comes knocking.