Joint Employment: Understanding Liability

Joint employment can be simply defined as the sharing of control or supervision of an employee by two organizations. While this seems relatively simple, joint employment can quickly become more complicated. In most instances, there is a primary employer and a secondary employer. The primary employer is responsible for hiring, scheduling, paying, and providing benefits for the employee. The secondary employer does not hire nor directly pay the employee but benefits from the employee’s services and often oversees a portion, if not all, of their work. Some examples of a joint employee are a temporary employee hired through a staffing agency or an employee that is contracted through a subcontractor.

Joint employment can provide exceptional benefit to the secondary company including. These allowing the company to outsource interviewing and hiring, attaining expertise on specific small projects without hiring additional employees long term, and bridging the gap when employees are out on leave. That said, joint employment can be complicated. While both parties benefit from the employee’s work, the primary employer is, in most cases, held responsible for ensuring the employee is paid adequately, that overtime benefits are tracked, that benefits are distributed, etc. But in the case of lawsuits, both employers are considered equally liable for ensuring the employee is compensated for their work in line with their contract. In other words, if the primary employer fails to pay or provide agreed-upon benefits to the employee, the secondary employer can become legally liable.

Liability is not the only complicated issue surrounding joint employment. As the use of contract workers and staffing agencies grows, laws surrounding joint employment have become murkier. As with all employment issues, understanding local, state, and federal laws governing the issue are key to creating a successful relationship for all parties. To help clarify legal expectations of each party participating in a joint employment agreement, the Department of Labor (DOL) proposed changes to the Fair Labor Standard Act (FLSA) in April 2019. The proposal would bring the FLSA more in line with the standards set by the National Labor Relations Act (NLRA), simplifying things for many employers.

Under the proposed changes to the FLSA, a four-factor test would be used to determine liability, potentially freeing the secondary employer from the dangers of being held liable if the primary employer does not hold up their end of the deal. The four-factor test would assess whether a joint employer (1) hires or fires the employee; (2) supervises and controls the employee’s schedule or working conditions; (3) determines the pay rate and method for the employee; and (4) maintains the employment records. In a legal battle, liability would fall to the employer or employers responsible for these four factors. This would allow a clear definition of how a secondary employer could negate liability in a joint employment agreement.

While changes to the FLSA would provide clarification, it is important to understand any agreement you make with another organization in order to protect yourself and your organization. Some experts suggest distancing yourself from the employee as much as possible when entering into a joint employment contract, but this is not always practical, such in the case of temporary workers. No matter the situation, a carefully written contract can make all the difference. Clearly and concisely outline the responsibilities for each company, create procedure for ensuring the employee is compensated and procedure for what should happen if one party does not fulfill their responsibilities. While it can make the initial process more intensive, in the long run it will save your organization and the employee frustration.

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