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Joint Employers Under the Fair Labor Standards Act

Under certain circumstances when an employee works for more than one employer those employers may be considered joint employers under the Fair Labor Standards Act (“FLSA”).   If employers are determined to be joint employers then both employers, jointly and severely, must comply with the FLSA.   Violating the FLSA by failing to comply jointly and severely when a joint employment relationship exists can open employers up to claims and penalties.  One example of a time when joint employers may inadvertently violate the FLSA, includes those occasions when an employee works for each employer for less than forty hours in a week, but the combined total of hours worked is over 40.  Thereby, requiring that the employee be paid overtime for all hours worked over 40 in the week even though the employee never worked over 40 hours for one single employer.  Not all employers whose employees work for multiple companies meet the definition of a joint employer.

A joint employment relationship will be deemed to exist when employment by each employer is not completely disassociated from the employment by the second employer.  In order to decide if employment is completely disassociated or not there must be a determination made of whether the two employers are technically separate, but related or associated with one another and whether one employer provides labor to the other employer where the workers are economically dependent on both entities. 

Recently the U.S. Court of Appeals for the Fourth Circuit issued two separate decisions which clarified the standards to determine whether two employers were “not completely disassociated” and therefore, were joint employers under the FLSA: Hall v. Direct TV and Salinas v. Commercial Interiors.  The six factors used by the court are:

  1. Whether, formally or as a matter of practice, the employers jointly determine, share, or allocate the power to direct, control, or supervise the worker, whether by direct or indirect means;

  2. Whether, formally or as a matter of practice, the employers jointly determine, share, or allocate the power to, directly or indirectly, hire or fire the worker or modify the terms or conditions of the worker's employment;

  3. The degree of permanency and duration of the relationship between the joint employers;

  4. Whether, through shared management or a direct or indirect ownership interest, one joint employer controls, is controlled by, or is under common control with the other joint employer;

  5. Whether the work is performed on a premises owned or controlled by one or more of the joint employers, independently or in connection with one another; and

  6. Whether, formally or as a matter of practice, the employers jointly determine, share, or allocate responsibility over functions ordinarily carried out by an employer, such as handling payroll; providing workers' compensation insurance; paying payroll taxes; or providing the facilities, equipment, tools, or materials necessary to complete the work.

The Court went on to state these six factors are not an exhaustive list of all that will determine if joint employment exists, but they encompass the fundamental factors that the Department of Labor considers when making a decision. 

The two factual scenarios involved in the recent Fourth Circuit court decisions in which the court found joint employment were in the construction industry and the technical service industry.   The court found that a general construction contractor who subcontracted with a drywall installation company to assist on the general contractors’ projects was a joint employer, and therefore both the general contractor and the subcontractor were liable, jointly and severely, for overtime payments under the FLSA.  In separate Fourth Circuit case, the court found that a home service provider that provided installation technicians to a network provider was a joint employer with the network provider.  In both of these cases the court examined the six factors set forth above and determined that the employers were not completely disassociated. 

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