NSBA Letter on Joint Employer Rule

March 30, 2016

pic-employees-smOn Tuesday, March 29, NSBA submitted a comment letter to the Wage and Hour Division (WHD) of the U.S. Department of Labor regarding a recent Administrator’s Interpretation (AI) on joint employment under the Fair Labor Standards Act (FLSA) and Migrant and Seasonal Agricultural Worker Protection Act (MSPA). Under the new interpretation, thousands of businesses will now be found responsible for the working conditions of employees of other firms they do business with and will be liable for breaches.

In short, the AI would, for example, make a business that hires a security company responsible for the security company’s policies and vice-versa. In its letter, NSBA stated that, “We believe this interpretation is a significant regulatory action that is covered by the Regulatory Flexibility Act and the Paperwork Reduction Act,” and thereby requires a more detailed regulatory process in order to make such a significant change.

If joint employment is found, both entities may be held responsible for compliance with all applicable laws, including wage and hour and other employment protection laws.  All hours an employee works each week for each joint employer will be aggregated “and considered as one employment, including for purposes of calculating whether overtime pay is due.”

Additionally, each joint employer is jointly and severally liable for unpaid overtime and full compliance with the FLSA by all joint employers. Thus, if one joint employer fails to pay overtime compensation, any of the other joint employers can be held responsible for the unpaid overtime and any penalties.

Under this interpretation, joint employment also applies for determining eligibility and coverage under the Family and Medical Leave Act (FMLA). This is critical as smaller employers with less than 50 employees may think they are free of any FMLA obligations, only to find that they meet the coverage threshold if they are deemed to be a joint employer with another entity, such as a staffing agency that provides them with additional workers, or a custodial company. Similarly, joint employer status could affect compliance under the Affordable Care Act.

NSBA’s letter focused on the broad array of potential new worker-related liability that many firms sought to eliminate by outsourcing certain functions, and urges the WHD to rework the many problems in the AI.

Please click here to view the letter in full.