Workplace Wise - Iowa Employment Law Attorneys

Friday, January 22, 2016

Whose Employees Are They Anyway? DOL Issues Guidance on Joint-Employer Liability

By Amanda Jansen

On January 20, 2016, the Wage & Hour Division of the Department of Labor issued an Administrator’s Interpretation providing a roadmap to liability in “situations where more than one business is involved in the work being performed.”  A very common example of this is construction projects where work is being performed by laborers and tradesmen, and various businesses are “involved”—i.e., a general contractor and various subcontractors.  Even though all parties in such a situation probably consider the laborers to be employees of their respective subcontractors (and therefore, the subcontractors’ responsibility with respect to proper payment of overtime), the DOL now says it’s not so simple.

Instead, in considering which company is (or which companies are) responsible for paying workers overtime, we are supposed to “determine whether, as a matter of economic reality, the employee is economically dependent on the potential joint employer.”  How do we do that?  By applying another multi-factor test, of course!  The seven factors are below.  (This is not a “checklist” where each factor needs to be present.)

  1. Does the company control or supervise the worker “beyond a reasonable degree of contract performance oversight”?  This control/supervision can be direct or indirect through the other company (e.g., subcontractor).   
  2. Does the company have the power to hire or fire the worker, modify employment conditions, or determine the rate or method of pay (again, directly or indirectly)?
  3. Does the worker work on the company’s project(s) full time and/or on a long-term/ongoing basis?
  4. Is the nature of the work “repetitive and rote” and/or relatively unskilled (e.g., painting)?
  5. Is the worker’s work “an integral part” of the company’s business?
  6. Does the company control (own or lease) the premises where the work is being performed? 
  7. Does the company do things for the workers that would normally be handled by an employer—e.g., providing necessary facilities and safety equipment, tools and materials for the work, training, transportation, etc.?

The DOL provides an example to illustrate how joint employment might exist in a construction setting:

Example: A laborer is employed by ABC Drywall Company, which is an independent subcontractor on a construction project. ABC Drywall was engaged by the General Contractor to provide drywall labor for the project. ABC Drywall hired and pays the laborer. The General Contractor provides all of the training for the project. The General Contractor also provides the necessary equipment and materials, provides workers’ compensation insurance, and is responsible for the health and safety of the laborer (and all of the workers on the project). The General Contractor reserves the right to remove the laborer from the project, controls the laborer’s schedule, and provides assignments on site, and both ABC Drywall and the General Contractor supervise the laborer. The laborer has been continuously working on the General Contractor’s construction projects, whether through ABC Drywall or another intermediary. These facts are indicative of joint employment of the laborer by the General Contractor.
So what happens if you think you may be a joint employer of another company’s employees? You are responsible (along with the other company) for ensuring those workers get paid at least minimum wage and time-and-half for all time worked over 40 hours in a workweek.  And if that other company drops the ball and doesn’t pay overtime?  The DOL and/or the workers can (and will) come to you with their hands out looking to collect that unpaid overtime, as well as liquidated damages and attorney fees.  So don’t let yourself become a joint employer of someone else’s workers!  And if you do, make sure the FLSA is being followed to a T.

For more information about joint employer liability, contact a BrownWinick attorney.  It should be noted that joint employment can exist in all industries; this piece just focuses on construction because it’s the easiest example to understand and illustrate.  

You can also read the full Administrator’s Interpretation, and other guidance from the DOL, on the website:

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