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Wage and Hour Division’s First Administrator’s Interpretation of 2016 Highlights Joint Employment

By: Lisa M. Schonbeck, Esq. 

On January 20, 2016, the Wage and Hour Division (“WHD”) of the U.S. Department of Labor (“DOL”) issued Administrator’s Interpretation No. 2016-1, which focused on joint employment under the Fair Labor Standards Act (“FLSA”) and the Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”). This Interpretation provides additional guidance concerning joint employment and highlights the DOL’s continued attention to joint employment as it relates to the payment of employees’ wages.

Joint Employment Under the FLSA and MSPA

The Interpretation discusses the FLSA and MSPA together in the context of joint employment because they define “employ” in the same way – “to suffer or permit to work.” Instead of the common law test, which looks to the amount of control an entity has over a worker to determine if the worker is an employee, the FLSA and MSPA require the use of a broader “economic realities” test.

The Interpretation focuses on the concept of vertical joint employment, where the “economic realities” test comes into play. In a typical vertical joint employment scenario, an employee is employed by an intermediary employer, which contracts with another employer (the potential joint employer) to provide it with labor. The inquiry in a vertical joint employment analysis is focused on the employee’s relationship with the potential joint employer. According to the WHD, the core question is whether the employee is economically dependent on the potential joint employer who, via an arrangement with the intermediary employer, is benefitting from the work. If the answer to this question is yes, both employers are responsible for compliance with the FLSA and can be held liable thereunder.

The Interpretation advises that the MSPA regulations, which describe seven economic realities factors, provide useful guidance to analyze any joint employment case, including cases involving the FLSA.

The MSPA’s seven factors include:

(1) The extent to which the potential joint employer directs, controls, or supervises the work performed by the employee;

(2) Whether the potential joint employer has the power to hire or fire the employee, modify employment conditions, or determine the rate or method of pay;

(3) Whether the relationship between the employee and the potential joint employer is indefinite, permanent, full-time or long-term;

(4) The extent to which the employee’s work for the potential joint employer is repetitive and rote, is relatively unskilled, and/or requires little or no training;

(5) Whether the employee’s work is an integral part of the potential joint employer’s business;

(6) Whether the employee’s work is performed on premises owned or controlled by the joint employer; and

(7) The extent to which the potential joint employer performs administrative functions for the employee (i.e., handling payroll, providing workers’ compensation insurance, necessary facilities or safety equipment, or tools or materials required for the work).

According to the WHD, these factors will not be used exclusively by all courts; however any analysis should address the “ultimate inquiry” of economic dependence.

Guidance for Employers

The Interpretation provides examples of joint employment scenarios to further guide employers’ understanding of the concept of joint employment and its impact on their obligations under the FLSA.

Leech Tishman’s Employment Practice Group has extensive experience working with the Department of Labor’s Wage and Hour Division and other federal, state and local employment agencies. We have assisted clients through a variety of DOL audits as well joint employment issues and are available to assist you in evaluating whether you have responsibilities under the FLSA as a joint employer.

Lisa M. Schonbeck is a Partner in the Employment and Litigation Practice Group. She is based in the Pittsburgh office. Lisa can be reached at 412.261.1600 or lschonbeck@leechtishman.com.

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