Wage & Hour Issues New Interpretation Of “Joint Employment”

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Davi Bowen

The Obama administration regulatory juggernaut continues, and now the Department of Labor’s Wage & Hour Division has issued a new interpretation of what constitutes “joint employment.” We asked Chris Schulte of CJ-Lake LLC, who advises AmericanHort on labor and employment matters, to walk us through what it all means.

For years, there has been a fairly clear understanding of the employer-employee relationship with respect to who the “employee” is and their “employer” is. Generally speaking, an “employer” is the company with the power to hire, fire, direct, and pay a worker. Those abilities and responsibilities would typically be vested in a single entity, so identifying a given worker’s “employer” tended to be simple: who issues the paychecks, and who hires, fires, and directs the worker?

That understanding could fundamentally change under the new “interpretation” from the Administrator of the U.S. Department of Labor’s (DOL) Wage & Hour Division (WHD). Administrator’s Interpretation No. 2016-1 and new DOL Fact Sheet #35, both issued January 20, 2016, describe how WHD will look at the question of who is the “employer” for purposes of whether that company has met all of the obligations owed to a given worker. Those companies most likely to be affected by this will be those who use staffing agencies or labor contractors, but this could potentially expand to situations like landscaping work performed on property owned by someone other than the “employer” as that has been understood.

WHD Administrator David Weil has been discussing for several months WHD’s concern with a “fissured” workplace, reflecting a trend toward outsourcing and treating workers who had been “employees” as independent contractors, or replacing employees with workers provided through an outside staffing company. These strategies for securing labor for a business can trigger findings of “joint employment” according to WHD in two general scenarios: “horizontal” joint employment (one employee shared back-and-forth between two related employers sharing a common pool of workers) or “vertical” joint employment (workers supplied by an outside labor contractor or staffing agency). For the nursery and landscape industry, the idea of “vertical” joint employment is relatively more likely to arise than “horizontal” joint employment.

As an initial note – companies using the H-2A or H-2B program are clearly the “employer” for their own workers (U.S. and foreign); that has always been the case and is perfectly clear. The concern is that companies that they perform work for – e.g., where they supply landscape workers to perform a job for a business – might now be found responsible for ensuring that the workers are paid correctly, and that all disclosures and other obligations associated with being an “employer” are met. Even for the H-2 employer, there could be consequences of this new interpretation to the extent that these business clients seek to include language in their agreements with the employer to protect them against such responsibilities.

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