US Department of Labor Expands Joint Employer Liability

By Ravi S. Nagi on February 19, 2016Posted in Labor & Employment

New U.S. Department of Labor guidelines issued in January are expected to swell the ranks of companies classified as joint employers, thus subjecting them to the regulations outlined by the Fair Labor Standards Act.

At issue in recent years has been the rise of joint employment, which is a result of the growing use of contract labor, temporary employment agencies and franchising—all of which provide businesses with the workers they need without requiring them to directly employ them. What the Labor Department’s new guidelines call for is for joint employers to be held accountable when workers are not treated properly under the FLSA.

Originally passed in 1938 and amended a number of times in the ensuing decades, the FLSA established and holds employers to standards for matters like minimum wage, overtime pay and youth employment. Until recently, a temporary agency, for example, could pay one of its employees less than minimum wage without the firm for which the person was doing the work being held accountable in any way. The new recommendations from the Labor Department aim to apply joint liability to both employers in such a situation.

Vertical and horizontal employment

The key distinction made by the Department of Labor involves determining whether joint employment exists in a vertical or a horizontal arrangement.

Vertical joint employment occurs when an employee works for a company through a different employer. Perhaps the most common form of vertical employment involves a worker who is technically employed by a staffing agency that serves the company for which the employee is working.

Horizontal joint employment, meanwhile, occurs when an employee works for two separate employers whose businesses are similar and whose management or owners are the same. An example of a horizontal employment situation might involve a service industry worker who is employed part time at two branches of the same company, such as a restaurant, retail store or hotel.

Although the Labor Department’s recommendations do not have the same power as written laws or court rulings, they do provide guidance that lawmakers, courts and employers may use in decision-making going forward—and which they have historically taken very seriously.

Issues related to the FLSA are of considerable importance to employers and employees alike, including in territories like the U.S. Virgin Islands. If you have questions about how the Labor Department’s new guidelines pertaining to joint liability might impact your company, speak with a knowledgeable employment law attorney right away.

BoltNagi is a widely respected and well-established labor and employment law firm serving businesses and organizations throughout the U.S. Virgin Islands.

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