Ditchmen • NUCA of Florida Ditchmen - September 2020 | Page 33

this scenario may play out in the context of a business that contracts with a staffing agency for manpower . Whether a business is considered a “ joint employer ” for the purposes of the FLSA has significant consequences in terms of a business ’ s FLSA compliance obligations and potential liability for federal wage and hour law violations .
Obama-Era Guidance
In 2016 , the DOL departed from the traditional test , announcing a new , significantly broader standard for evaluating joint employer status under the FLSA . In its Administrator ’ s Interpretation No . 2016- 1 , subtitled “ Joint employment under the Fair Labor Standards Act and Migrant and Seasonal Agricultural Worker Protection Act ,” (“ AI 2016-1 ”) the agency outlined an analytical framework that would make it far more difficult for employers to avoid joint employment liability . Under this framework , employment arrangements are categorized as either “ horizontal ” or “ vertical ” joint employment .
“ Horizontal joint employment ” involves two companies that are related in some way , but are distinct economic units . In this scenario , the following factors are relevant to the “ joint employer ” analysis : common ownership ; overlapping officers , directors , executives , or managers ; common control over operations ; centralized administrative functions ; supervision of one employer by the other ; shared supervisory authority over employee ; shared clients ; agreements between employers .
“ Vertical joint employment ” involves two unrelated employers who agree that an employee of one company will perform services that benefit another company .
The factors considered in the context of “ vertical joint employment ” are focused on the “ economic realities ” of the relationship . Employers were particularly troubled by the test ’ s potential to reach employment agreements that would not likely have been considered joint employment under former guidance . The factors considered include : direction , control , or supervision of the employee ’ s work beyond reasonable oversight ; an employer ’ s influence over the other employer ’ s employment decisions ; length of the relationship between employers ; whether the nature of the employee ’ s work was rote , repetitive , and unskilled ; whether the employee ’ s work was integral to the putative joint employer ’ s business ; whether the employee works on premises owned by the putative joint employer ; whether the putative joint employer provides tools or materials to the employees .
Although the AI 2016-1 does not carry the same legal weight in the courts as a regulation that had been the subject of full public vetting via notice-and-comment rulemaking , it signaled a significant , and alarming , departure in the DOL joint employment enforcement policy .
DOL ’ s New Rule
To employers ’ relief , AI 2016-1 was upended earlier this year when the DOL enacted its long awaited new “ joint employer ” rule . The DOL ’ s new rule set forth a fourfactor balancing test for determining “ joint employer ” status under the FLSA , which addresses whether the putative joint employer : ( 1 ) hires or fires the employee ; ( 2 ) supervises and controls the employee ’ s work schedule or conditions of employment to a substantial degree ; ( 3 ) determines the employee ’ s rate and method of
SEPTEMBER 2020 • DITCHMEN 31