Free Enterprise - The FindLaw Small Business Law Blog

Avoid Joint Employment Lawsuits

On the one hand, small businesses are trying to take advantage of temporary, seasonal, and contract workers. On the other hand, more and more people are working multiple jobs. All this against a backdrop of startups and Internet businesses with employees that wear a number of hats.

The point is, joint employment is becoming more common. And, according to this warning from the American Bar Association, litigation based on joint employment could be on the rise as well. But that doesn't need to be the case for your small business. Here's how you can avoid joint employment lawsuits.

A Lot of Employment in This Joint

The Department of Labor's Wage and Hour Division just released some new guidance on how joint employment is handled under the Fair Labor Standards Act. Joint employment, specifically, is when an employee has two or more employers for the work that he or she is performing. This means that multiple employers "are sufficiently associated or related with respect to the employee such that they jointly employ the employee."

This is especially important if a small business uses a staffing agency, subcontractor, labor provider, or other intermediary employer for its employees. Even if an employee has an employment relationship with one entity, if "economic realities show that he or she is economically dependent on, and thus employed by, another entity involved in the work" that will result in a determination of joint employment.

And Lots of Liability

If you are a joint employer, all of the employee's hours worked for the joint employers are aggregated for purposes of calculating hours and whether you owe overtime pay. Additionally, you will be jointly and severally liable for compliance with the FLSA, along with the other joint employers. Therefore you can still be on the hook for wage and hour law violations, even if your name isn't on the paycheck.

You already knew you need to follow wage and hour requirements for your full-time employees. And while many businesses have been using temporary workers and independent contractors as a means around some legal requirements, the Labor Department has been continuously tightening those loopholes. With additional liability, employers will have to wonder whether outsourcing staff and risking joint employment is worth the savings.

If you need guidance on your joint employees, or advice on other wage and hour issues, you can contact an experienced employment attorney in your area.

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