DOL Issues Joint Employment Guidance Under FLSA and MSPA | Practical Law

DOL Issues Joint Employment Guidance Under FLSA and MSPA | Practical Law

The US Department of Labor (DOL) issued an administrative interpretation (AI) that explains its expansive view of joint employment under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA).

DOL Issues Joint Employment Guidance Under FLSA and MSPA

Practical Law Legal Update w-001-3904 (Approx. 6 pages)

DOL Issues Joint Employment Guidance Under FLSA and MSPA

by Practical Law Labor & Employment
Published on 01 Feb 2016 • USA (National/Federal)
The US Department of Labor (DOL) issued an administrative interpretation (AI) that explains its expansive view of joint employment under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA).
On January 20, 2016, the DOL issued an administrative interpretation (AI) that explains its expansive view of joint employment under the FLSA and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA) (DOL Administrator's Interpretation No. 2016-1). Although the AI is not binding, it will guide the DOL's enforcement efforts, and some courts may view it as persuasive authority.
The AI emphasizes the remedial purposes of the FLSA, noting that the statute more broadly defines the employment relationship than other statutes as follows:
  • Employee, defined as "any individual employed by an employer" (29 U.S.C. § 203(e)(1)).
  • Employer, defined as "any person acting directly or indirectly in the interest of an employer in relation to an employee" (29 U.S.C. § 203(d)).
  • Employ, which "includes to suffer or permit to work" (29 U.S.C. § 203(g)).
The AI notes that:
  • Courts have recognized that both the FLSA and the MSPA cover joint employment relationships (Antenor v. D & S Farms, 88 F.3d 925, 929 (11th Cir. 1996).
  • FLSA regulations expressly acknowledge that an employee may have more than one employer at the same time (29 C.F.R. § 791.2(a)).
  • MSPA regulations acknowledge that the statute's "employ" definition incorporates the FLSA's recognition of joint employment (29 C.F.R. § 500.20(h)(5)).
  • Joint employment under both the FLSA and MSPA can be either:
    • horizontal; or
    • vertical.

Horizontal Joint Employment

Under the AI, a horizontal joint employment relationship may exist when two (or more) employers separately employ an employee and are sufficiently related with respect to the employee. The DOL's analysis focuses on the relationship between the primary employer and the potential joint employer. Horizontal joint employment generally exists where two employers share an employee's services, or where two employers are associated with respect to their workers and share common control over them (see 29 C.F.R. § 791.2(b); Schultz v. Capital Int'l Sec., Inc., 466 F.3d 298, 306 (4th Cir. 2006)).
The DOL identified certain non-exclusive factors as relevant to analyzing potential horizontal joint employer relationships, including whether and to what extent the potential joint employers:
  • Are commonly owned or have an overlap in ownership.
  • Have overlapping officers, directors, executives, or managers.
  • Share control over operations, including hiring, firing, payroll, advertising, and other overhead costs.
  • Intermingle their operations, such as in administration and payroll functions.
  • Supervise or have supervisory authority over the work of the other potential joint employer's employees.
  • Treat the employees as a part of a common pool available to both of them.
  • Share clients or customers.
  • Are party to any agreements between them.
(See 29 C.F.R. 791.2.)
The AI offers examples of horizontal joint employment, including:
  • A waitress working for two separate restaurants that share economic ties with the same managers controlling both restaurants.
  • Home health care providers that share staff and common management.

Vertical Joint Employment

Under the AI, a vertical joint employment relationship may exist when an employee of an intermediary employer is economically dependent on another employer, the potential joint employer. The focus in the DOL's vertical joint employment analysis is the employee's relationship with the potential joint employer, not the relationship between the employers. This analysis commonly applies when a potential joint employer has contracted with an intermediary to provide it with labor (such as through a temporary staffing agency) or to perform some employer functions, such as hiring and payroll.
As a threshold matter, if the intermediary employer is actually an employee of the potential joint employer, and not an independent contractor, then all of the intermediary's employees are employees of the joint employer, and no further analysis is necessary.
If the intermediary is not an employee, the economic realities (and not the degree of control) dictate the joint employment analysis. The DOL takes guidance from the seven economic realities factors from MSPA regulations applied to agricultural laborers, and may consider (along with other or different factors) the degree to which the potential joint employer:
  • Directs, controls, or supervises the work performed.
  • Controls employment conditions, such as the right to:
    • hire or fire; or
    • determine the rate of pay.
  • Engages in a permanent, indefinite, or long-term relationship with the employee.
  • Uses the employee:
    • for repetitive, rote, or unskilled work; or
    • to perform work that is integral to its business.
  • Has the work performed on its premises.
  • Performs administrative functions commonly performed by employers.
(See 29 C.F.R. 500.20(h)(5)(iv).)
The DOL's examples of vertical joint employment analysis include:
  • A garment worker who is employed by an intermediary that contracted with the manufacturer to perform a specific function.
  • A construction worker who works for a subcontractor who has been retained by the general contractor.
  • A farm worker hired by a farm labor contractor to provide services to a grower.
  • The relationship of an individual employed by a corporate subsidiary to the corporate parent.
  • A nurse placed at a hospital by a staffing agency.
The DOL proposes that either or both the horizontal and vertical joint employment analyses may be applied to a specific employment arrangement.
Although the DOL recognizes that the courts use varying tests and factors, the DOL cautions that any test must address the "ultimate inquiry" of economic dependence and recognize the broad scope of joint employment under the FLSA. It specifically criticizes courts that have taken a more narrow view. The DOL concludes that the possibility of joint employment has become more common in recent years.