A recent Administrator’s Interpretation issued by the Wage and Hour Division of the Labor Department has redefined the rules when it comes to how we’ve previous looked at joint employer status. And smaller employers may be even more at risk for exposure than larger companies.
“The growing variety and number of business models and labor arrangements have made joint employment more common,” writes Administrator David Weil. The document goes on to describe the application of a joint employer relationship.
It identified two different scenarios where an employee might be considered jointly employed, wherein both employers might be subject to regulations. One is “horizontal” where, for instance, someone is employed by sister businesses who coordinate his or her schedule, supervision, and payroll.
The other is “vertical” such as where a person is technically employed by a subcontractor, but economically dependent on the general contractor who’s directing the project. You can read this full article on TLNT for a more detailed analysis of the Interpretation and its implications for employers.
However, what’s most important to note is its far reaching consequences for small business owners who aren’t otherwise subject to regulations such as the Fair Labor Standards Act (FLSA), Family and Medical Leave Act (FMLA), and the Affordable Care Act (ACA).
This is of particular concern since so many staffing firms, prior to implementation of the ACA, touted the hiring of temporary employees as a way for small businesses to get the help they needed while circumventing the ACA requirements or complying with the FMLA. Now, as a result of the recent broadening of the definition of joint employer, even smaller employers may be responsible for providing these benefits (and consequently subject to penalties if they don’t).
The Interpretation has yet to be tested. However, it’s important to note how they might affect smaller employers. You can find the full text of the Interpretation by clicking here.