Joint Employment Under the FLSA: How to Identify It and Why It Matters

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Imagine this situation: you work in a job that pays by the hour. Your typical workweek is 40 hours, with overtime pay for any time worked above 40 hours. Despite officially having one job, you’re often required to work for two companies. On occasion, you get really busy and work 30 hours in a week with one company and 30 hours the same week with the other company.

With a 60-hour workweek, you’d think you’d be entitled to 20 hours of overtime pay. But when you receive your paycheck, you see you were paid all 60 hours at your normal pay rate. When you ask why you weren’t paid overtime, both companies tell you that you only worked 30 hours for them and therefore weren’t entitled to overtime pay.

This doesn’t seem fair, but is there anything you can do about it? Possibly—especially if the two companies are considered joint employers under the Fair Labor Standards Act of 1938.

The Fair Labor Standards Act

The Fair Labor Standards Act of 1938 (FLSA) brought many changes to the workplace. It established the 40-hour workweek, minimum wage, and minimum overtime pay guidelines. However, the FLSA’s requirements and worker protections only apply to employees, not to independent contractors. Basically, the more control an employer exerts over a worker, the more likely that worker will be considered an employee.

Another important aspect of the FLSA is the recognition that many employees have two or more joint employers. Joint employment is pretty much what you think it is—two or more entities jointly controlling, overseeing, and administering an employee’s job. The tricky part is precisely defining what constitutes joint employment under the FLSA.

For more information about the FLSA and its wage requirements, take a look at the “Fair Labor Standards Act (FLSA) of 1938” resources page on the Society for Human Resource Management’s website.

Why Should I Care About Joint Employment?

Within the context of the FLSA, there are at least two major reasons why it’s important to determine whether an employee is working for joint employers.

First, with joint employment, an employee can consider the working relationship with both employers combined to figure out whether an FLSA violation has occurred.

For example, let’s assume an employee has a standard 40-hour workweek. That employee works 30 hours per week for Employer A and another 30 hours per week for Employer B. If those aren’t joint employers, the employee isn’t entitled to overtime pay under the FLSA. As far as the FLSA is concerned, both workweeks were under 40 hours.

But let’s say Employers A and B are considered joint employers under the FLSA. Even though Employers A and B are completely different business entities, the employee would still be entitled to receive 20 hours of overtime pay. From the FLSA’s point of view, the employee worked 60 hours for one employer in a week.

Second, joint employment can also create joint and several liability among the multiple employers. Joint and several liability means that an injured plaintiff can recover all damages from a single defendant, even if multiple defendants each bear a certain percentage of fault.

This is important to the plaintiff because it allows recovery of the full judgment from any single defendant, even if both defendants are liable. This helps when defendants can’t be found, money vanishes, or companies go bankrupt.

Recent Court Cases Provide Guidance

Recently, the United States Court of Appeals for the Fourth Circuit decided two cases where the primary issue was whether multiple employers should be considered joint employers under the FLSA. These cases help establish the rules for how to determine joint employment under the FLSA.

In Salinas v. Commercial Interiors, Inc., the plaintiffs were drywall installers directly employed by a construction subcontractor. The subcontractor worked almost exclusively for one general contractor.

The plaintiffs eventually sued both the general contractor and its subcontractors, alleging that they did not pay overtime wages as required by the FLSA and applicable state laws. The plaintiffs also claimed that both the general contractor and subcontractors should be liable for any damages since they were joint employers under the FLSA.

In Hall v. DirecTV, the plaintiffs were television satellite technicians who worked for DirecTV through a network of various “middle-manager” companies. The technicians were required to install and repair DirecTV’s equipment.

These plaintiffs claimed that even though they were technically employed by a middle-manager company, DirecTV was also their employer. Therefore, when the plaintiffs filed a lawsuit alleging violations of the FLSA for failure to pay overtime, they claimed that DirecTV and the middle-manager companies were joint employers.

The Legal Test for Determining Joint Employment Under the FLSA

In the Salinas and Hall cases, the court established a two-step legal test for deciding whether a joint employment relationship existed.

In the first step, the court examined whether the two or more employers shared responsibility concerning how the workers would do their jobs. The focus there would not be on whether the two or more employers were completely dependent on or independent of each other. Rather, the focus would be on whether there was any association among the joint employers. As long as there was at least some association among the joint employers, the court was likely to conclude that a joint employment relationship under the FLSA existed.

The court examined the following six factors to identify any association between the joint employers:

  1. whether the joint employers jointly controlled how the worker did his or her job,
  2. whether the joint employers shared power over hiring and firing decisions concerning the worker,
  3. how long the joint employers had been working with each other,
  4. whether one joint employer exercised control over the other,
  5. whether the work was done at a location controlled by one or more of the joint employers, and
  6. whether the joint employers shared responsibility regarding tasks typically handled by an employer, such as payroll.

The court weighed all of these factors, emphasizing that there was no requirement that a certain number of factors be satisfied to find joint employment.

In the second step, the court looked at whether the worker was an employee or an independent contractor. Recall that the FLSA does not apply to independent contractors.

Again, the court used a six-factor test that courts have used widely in other cases. To determine whether a worker is an employee, the courts consider:

  1. how much control the employer had over how the worker was to accomplish job tasks;
  2. whether the worker is able to make money based on his or her own managerial skill;
  3. how much the worker had invested in tools, materials, and his or her own employees;
  4. how much skill the worker needed to complete the job duties;
  5. how long the employer-worker relationship lasted; and
  6. how important and integral the worker was to the employer’s business.

While all six factors are supposed to receive equal consideration, in practice, the first factor is usually the most important.

How Salinas and Hall Were Decided

In Salinas, the court held that the following facts supported finding a joint relationship between the subcontractor and general contractor:

  • Even though the plaintiffs were hired by the subcontractor, almost all the work they did was for the general contractor.
  • While working on the general contractor’s job sites, the plaintiffs and the subcontractor’s employees were required to wear equipment bearing the general contractor’s logo.
  • While the subcontractor had official power in hiring and firing the plaintiffs, the general contractor threatened at least one plaintiff with termination for allegedly substandard drywall work.
  • Both the subcontractor’s and general contractor’s employees supervised the plaintiffs at job sites.
  • The plaintiffs filled out timesheets that were provided and stored by the general contractor.
  • The plaintiffs received most of their paychecks from the subcontractor, although a few of their checks came from the general contractor.
  • The general contractor had the final say in whether the plaintiffs’ work was done in a satisfactory manner.
  • The general contractor often decided whether and when the plaintiffs would work.
  • Officially, the subcontractor was supposed to provide tools and materials to the plaintiffs, but in reality, the general contractor supplied almost all the tools and materials.

In Hall, the court found joint employment between DIRECTV and the middle-manager companies based on the following facts:

  • DirecTV created the hiring criteria for technicians and relied on the middle-manager companies to implement it.
  • The middle-manager companies maintained personnel files on each technician that were subject to audit by DirecTV.
  • The technicians were required by the middle-manager companies to wear DirecTV uniforms and drive DirecTV-branded vehicles.
  • The technicians had to use DirecTV equipment and attend DirecTV training sessions.
  • The middle-manager companies relayed work schedules determined by DirecTV.
  • Almost all the technicians’ work came from DirecTV.
  • DirecTV controlled which technicians got work, enabling it to effectively fire a technician by refusing to provide work.
  • Work schedules were organized using DirecTV’s scheduling system.
  • Repairs and installation of DirecTV equipment had to follow DirecTV’s policies and procedures.

Summing It Up

  • The FLSA established the standard 40-hour workweek, minimum wage, and a minimum overtime wage amount.
  • The FLSA’s requirements do not apply to independent contractors; they only apply to employees.
  • To protect employees’ rights, the FLSA will sometimes consider two separate businesses to be joint employers.
  • Joint employment under the FLSA also establishes joint and several liability, which increases the chance that plaintiffs will recover their full damages.
  • In two recent court cases, the Court of Appeals for the Fourth Circuit established a two-step test for determining joint employment under the FLSA.
  • In Step 1, the court evaluates six factors to determine whether two or more employers share responsibility in how workers do their jobs.
  • In Step 2, the court evaluates six different factors to determine whether the workers are indeed employees under the FLSA or are contractors exempt from the FLSA.

 

Are you missing out on overtime pay because your employer considers you to be working for two different companies? Feel free to contact our office so we can help you understand your rights and decide how to proceed.