Nicole Rice

USDOL issues joint employer liability rules

By Nicole Rice, Policy Director, Government Relations

Capitol Update, Jan. 22, 2016

The US Department of Labor (USDOL) Wage and Hour Division (WHD) has issued guidance on when companies can be classified as “joint employers” and thereby held responsible for violations of federal labor law under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA).  The guidance could affect manufacturers who contract with temporary staffing agencies or third-party labor contractors as part of their business model, potentially making them jointly and severally liable for compliance with the FLSA and MSPA.

In their document, WHD explains how to analyze joint employment in “vertical” arrangements (when one company contracts with another company) and “horizontal” arrangements (when one worker is employed by two related companies). This guidance comes as the Obama Administration is moving to make more Americans eligible for overtime pay under the FLSA.

In its introduction, WHD states:

The growing variety and number of business models and labor arrangements have made joint employment more common. In view of these evolving employment scenarios, the Administrator believes that additional guidance will be helpful concerning joint employment under the Fair Labor Standards Act (FLSA), 29 U.S.C. 201, et seq., and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA), 29 U.S.C. 1801, et seq. … Certainly, not every subcontractor, farm labor contractor, or other labor provider relationship will result in joint employment. This Administrator’s Interpretation (AI) provides guidance on identifying those scenarios in which two or more employers jointly employ an employee and are thus jointly liable for compliance under the FLSA or MSPA. This AI first discusses the broad scope of the employment relationship under the FLSA and MSPA. It then discusses the concepts of horizontal and vertical joint employment and relevant joint employment regulations.

Just recently California adopted its own policy on joint employers. AB 1897  (Chapter 728, Statute of 2014) holds companies with at least 25 employees legally liable for the wage and hour, workers’ comp and workplace injuries of its third party contracted labor force for work performed within the companies “usual course of business.”

A copy of the USDOL joint employer liability document can be found here (see attached to link).

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