Under the terms of guidance recently issued by the Department of Labor (DOL), chances are the answer is “yes.”

Traditionally, joint employment has existed when an employee works for two different organizations which are closely enough related that they could be considered essentially the same. For instance, if someone works for two “sister” companies that are owned and operated by all the same people and provide related services or products, they would probably be considered a joint employee of the two companies.

Why is this important?

When two companies are considered joint employers, the hours that people spend working for each of the companies must be combined for the purposes of calculating overtime. So if an employee works, say, 30 hours for one of the “sister” companies and 20 hours for the other, that employee would have incurred 10 hours of overtime, and should be paid accordingly.

Recently, a group of three restaurants in Arizona had to pay employees $105,000 in back wages and damages because of this very issue. All the three restaurants were owned by the same people and employees would sometimes work at more than one of the restaurants in the same workweek. Unfortunately, because the owners treated each restaurant as a separate business, each one calculated payroll separately and issued its own paychecks. The DOL determined they were, in fact, joint employers, and should have been combining the time the employees worked at all restaurants for the purpose of calculating overtime.

That was an expensive lesson!

When two organizations are considered joint employers, both are responsible for making sure the workers are treated correctly under the law, and both will be on the hook if there are employment law violations.

What has changed?

In a recent Administrative Interpretation (AI), the DOL has expanded the definition of joint employer. They define both “horizontal” joint employment (the traditional definition) and “vertical” joint employment. Vertical joint employment occurs when:

“…the employee has an employment relationship with one employer (typically a staffing agency, subcontractor, labor provider, or other intermediary employer) and the economic realities show that he or she is economically dependent on, and thus employed by, another entity involved in the work.”

The factors that contribute to those “economic realities” include the following:

  • who directs, controls, or supervises the workers
  • who has the power to hire, fire, and modify the employment conditions, including rates of pay
  • the degree of permanency and duration of the parties’ relationship
  • the extent to which the service rendered by the workers is repetitive or rote by nature
  • whether the work performed is integral to your overall business
  • whether the work is performed on your premises
  • who performs the administrative functions commonly performed by employers

So if you hire a staffing agency to provide “temps” for your business, you might think the staffing agency is their employer, and you’re off the hook if there are any wage and hour disputes. However, if those temps are performing tasks that are integral to your business, working in your facilities at your direction, managed by your supervisors, and you have the right to “fire” anybody who doesn’t meet your standards… there’s a good chance you could be considered a joint employer under these new guidelines.

And that could mean that you might find your business paying back wages and damages because your staffing agency didn’t pay workers the way it should have, or paying penalties for employment discrimination because of actions taken by the agency.

What do employers need to do now?

First, it’s probably important to note, this AI is a guideline. It doesn’t carry the same weight as an actual regulation, but it is likely to be taken under strong consideration in the courts. So while it’s not time to panic, it is time for employers to take notice and take action.

If you think there is the potential you could be considered a joint employer, you have two basic alternatives to limit your potential liability.

  • First, you can restructure your business operations so you are no longer a joint employer. The fewer indications there are that workers are “economically dependent” on you, the less likely it is you’ll be considered a joint employer.

    Unfortunately, for many businesses, this probably isn’t viable. You may not want to leave it entirely up to your staffing agency to set all the conditions of employment for your staffers, determine when and where they’ll work, assign them specific duties, supervise them, judge their performance, make all hiring and firing decisions, etc.

  • So, for most of us, the more feasible solution is to take steps to protect ourselves from potential employment issues that might arise. Make sure any staffers provided by your agency are treated the same as similarly-situated in-house employees. Only work with reputable agencies, and verify that they are aware of (and comply with) all relevant employment laws. Don’t hire an agency with a “handshake agreement” — get everything in writing — and have your lawyer review the agreement to ensure it properly protects you from unnecessary liability.

One of the best ways to avoid problems with the DOL is to accurately track work time for all your employees — including those supplied by staffing agencies. And, of course, if you are a staffing agency, you need to accurately track staffers’ time not only for payroll but also for billing purposes.

A cloud-based solution such as AcroTime® is perfect for these sorts of applications, whether you’re a staffing agency or a hiring company.

For hiring employers, AcroTime can save you money in several ways. If you use staffing agencies to cover seasonal or temporary staffing needs, you won’t pay for extra “seats,” licenses or software capacity when you don’t need to — you pay only for the active workers whose time you’re tracking. Better still, the scheduling module will help ensure your staffing levels are where you need them to be to accommodate your anticipated business activity so you don’t over-hire to start with.

For staffing agencies, AcroTime allows you to centrally gather and report on staffers’ work time, while staffers can easily record their time from any location where they might be working. Because it’s cloud-based, AcroTime can be accessed anytime, anywhere. With the addition of payroll, scheduling and human resources modules, AcroTime can automate many of the labor-intensive aspects of managing your agency, saving you time, money and headaches.

Visit the AcroTime website today to learn more and schedule a personalized demo.

Did you find this article useful? Subscribe to our free email newsletter and enjoy informative articles like this every month!