DOL Issues Expanded Definition of Joint Employer

On Wednesday, January 20th, the Department of Labor’s Wage & Hour division (WHD) published an Administrator’s Interpretation (AI) explaining its expanded definition of “joint employment”.

If an individual has two or more “joint” employers, the hours worked during the workweek by that specific employee are aggregated and considered as one employment. This would also apply for purposes of calculating whether or not overtime pay is due.

The Administrator’s Interpretation is not law; rather it serves as an enforcement guide for the Wage & Hour division. The AI breaks down “joint employment” into two types: “vertical” and “horizontal”. Either or both types can apply to a single employer.

Horizontal joint employment occurs when “the employee has employment relationships with two or more employers and the employers are sufficiently associated or related with respect to the employee such that they jointly employ the employee.” Simply put, this type of joint employment focuses on the relationship of the relevant employers to each other.

An example of this might be an employee who performs work for two government contractors that are owned by the same corporate parent.

Vertical joint employment occurs when “the employee has an employment relationship with one employer (typically a staffing agency, subcontractor, labor provider, or other intermediary employer) and the economic realities show that he or she is economically dependent on, and thus employed by, another entity involved in the work.” This type of joint employment takes into account the relationship between employee and employer.

An example of this might be an employee of a subcontractor that performs work for a prime contractor.  Even though the subcontractor hired the employee, the prime might be considered a “joint employer” if it exercised sufficient control and direction over the subcontractor’s employee.

The WHD issued this guidance “to achieve statutory coverage, financial recovery, and future compliance, and to hold all responsible parties accountable for their legal obligations.”