Is your business a joint employer?

This sounds like a straightforward question. Unfortunately, it’s not. The test for whether a business is a joint employer varies depending on which law is being considered and where the business is located.

Let’s focus on that last part, because it is pretty ridiculous. The federal law covering overtime and minimum wage requirements is the Fair Labor Standards Act (FLSA).  The FLSA is a federal law, so it should mean the same thing all around the country, right? Right. It should. But it doesn’t.

As we saw in this map, the test for joint employment under the FLSA varies depending on what state your business is located in.

Earlier this month, the U.S. Supreme Court had a chance to clean up this mess and tell businesses around the country what the test should be – for everyone. But the Court punted, declining to decide.

This decision (indecision) leaves us with a mess.

Here is the crux of the problem:

The Fourth Circuit – which covers the states of MD, NC, SC, VA, and WV —  follows a very different test than the rest of the country.  In 45 states, the test for joint employment starts with answering the question of whether a worker is an employee or an independent contractor of the primary business that is paying that worker.

Then, if the person is an employee of the primary business, the court would then look at whether the employee is also jointly employed by secondary business. That second step of the test looks at whether the secondary business (the one benefitting from the worker’s services) has the power to hire and fire, supervise work, control schedules, control pay rate, and maintain personnel records.

The Fourth Circuit, though, takes a different view. In these five states, the courts must start by looking at whether the two businesses have some association with each other.  The test is whether they are, or are not, “completely disassociated” from each other. Well, of course two businesses doing business with each other are “not completely disassociated” from each other. They are doing business together. The secondary business retained the first business to supply workers. I hear you: That is how contracting works!

The test for joint employment in the Fourth Circuit, in other words, does not start by looking at whether the worker is an employee at all. It just looks to whether the two businesses are “not completely disassociated” from each other. Under Fourth Circuit test, there are going to be a lot more joint employment relationships than in the rest of the country – even where the facts are identical. (Read more here.)

And we’re just talking about the FLSA here. For the latest info on the test for joint employment now being used for federal labor law, click here. Different laws, different tests. See, it’s fun being a lawyer!

So what’s the bottom line here? It’s hard to know whether you are a joint employer. The answer depends on what law you were looking at and where your business is located. The Supreme Court had a chance to fix that last problem but declined to weigh in. For now, the joint employment tests remain a mess.

For more information on independent contractor issues and other labor and employment developments to watch in 2018, join me in New York on Jan. 30, Los Angeles on Feb. 27, or Cincinnati on March 28 for the 2018 BakerHostetler Master Class on Labor Relations and Employment Law: A Time for Change. Attendance is complimentary, but advance registration is required. Please email me if you plan to attend, tlebowitz@bakerlaw.com, and list my name in your RSVP so I can be sure to look for you.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.