What is joint employment?

Joint employment is a situation where an employee is simultaneously employed by two or more employers, sharing control over the employee's work conditions and responsibilities. This arrangement often requires both employers to comply with various labor laws and regulations.

How is joint employment determined?

Determining joint employer status can be difficult. It’s typically based less on the definition of joint employment, and more on the relationship and level of control both employers have over the employee's work. Key factors include:

• Control over work conditions: If both employers share control over the employee’s schedule, working conditions, and duties.
• Direct supervision: If both employers have direct supervisory authority over the employee.
• Shared responsibilities: If both employers share responsibilities such as hiring, firing, and payroll.

Examples of the kinds of decisions and responsibilities that both employers would share include:

• Wages and compensation structure: Employers should collaborate on how much to pay their employees and how compensation structures are established.
• Work hours and scheduling: Employers should work together to decide their employees’ hours of work and jointly decide on work schedules that meet both of their business needs.
• Hiring: Employers should collaborate on hiring processes, working together to recruit, interview, hire, and onboard new employees.
• Terminations: Similarly, employers should make collective decisions when letting employees go, whether due to job performance or layoffs.
• Work assignments and tasks: Employers should both be able to assign work and responsibilities to their employees.
• Benefits: Employers should both have a say in the benefits they offer, including creating policies for how certain benefits (like leave policies) are used.
• Labor law compliance: It’s up to both employers to ensure they comply with all labor laws that apply to their business and their employees.
• Workplace safety and training: Both employers are responsible for providing training and making sure any worksites they oversee are safe for all employees.
• Grievances and conflicts: Both employers can receive and resolve complaints, grievances, and conflicts from their employees.
• Workplace policies and codes of conduct: Both employers are equally responsible for maintaining and enforcing established policies and codes of conduct.

Example of joint employment

A common example of joint employment could be a scenario where a staffing agency provides workers to a client company. The staffing agency might handle HR functions, payroll, and benefits, while the client company supervises the day-to-day activities and work conditions of the employees. Both the staffing agency and the client company have control over different aspects of the employment relationship, thus establishing a joint employment relationship.

Joint employment vs co-employment

Co-employment typically involves a relationship between a client company and a Professional Employer Organization (PEO). The client manages day-to-day operations, while the PEO handles HR functions, payroll, and compliance. Both share employer responsibilities, but the PEO does not control the work conditions directly.

Joint employment vs employee leasing

Employee leasing involves a leasing company providing employees to a client business. The leasing company acts as the legal employer, handling HR functions and payroll, while the client manages the employee’s daily work activities.

Joint employment vs Employer of Record (EOR)

An EOR is a way for companies expanding globally to hire in new jurisdictions without setting up their own legal entities. The EOR acts as the legal employer for payroll and tax purposes, while the client company manages the day-to-day work. The EOR assumes responsibility for compliance with labor laws, helping the client company scale quickly with less complexity and risk.

Joint employment laws and employer liability

In recent years, there have been significant changes to the standards for determining joint-employer status under both the Fair Labor Standards Act (FLSA) and the National Labor Relations Act (NLRA). These changes have been influenced by the Department of Labor (DOL) and the National Labor Relations Board (NLRB).

Joint employment under Department of Labor rules and the FLSA

The DOL issued a new final rule regarding joint employer status under the Fair Labor Standards Act (FLSA), which became effective on January 16, 2020. This new rule clarified the standards for determining when two entities are considered joint employers of a worker.

The new rule established a four-factor joint employer test, focusing on whether the potential joint employer exercises substantial control over the conditions of employment, such as:

1. Whether the entity hires or fires the employee.
2. Whether the entity supervises and controls the employee’s work schedule or conditions of employment.
3. Whether the entity determines the employee’s rate and method of payment.
4. Whether the entity maintains the employee’s employment records.

The new rule emphasized "immediate control" rather than "indirect control" over the employees’ essential terms and conditions of employment. This marked a shift from previous interpretations that considered indirect control as a significant factor.

However, parts of the new joint employer rule were struck down by a federal district court decision in 2020, which found that the rule was inconsistent with the FLSA and the common law principles of joint employment. Its effective date is now on hold pending further legal review, including a potential court of appeals review.

Joint employment under the FMLA

The Family and Medical Leave Act (FMLA) provides eligible employees with unpaid, job-protected leave for specified family and medical reasons. Under the FMLA, both joint employers are responsible for ensuring that employees receive their entitled leave. This includes maintaining job protection and health benefits during the leave period. 

In joint employment cases, the FMLA defines primary and secondary employers. To determine primary or secondary employer status, consider:

• Which employer can make decisions about hiring, firing, or work assignments?
• Which employer decides when and how much the employee is paid?
• Which employer provides benefits, like leave or unemployment insurance?

The employer in charge of the decisions listed above is likely the primary employer. Unless the employee has worked at the secondary employer’s worksite for at least a year, the primary employer is generally responsible for providing FMLA entitlements. However, if one employer in a joint employment relationship fails to provide FMLA benefits, the other employer may be liable, regardless of primary or secondary status.

Frequently asked questions about joint employment

How does joint employment affect independent contractors and subcontractors?

Joint employment typically pertains to employees rather than independent contractors and subcontractors. However, if the relationship and level of control between the employers and the contractors resemble that of an employment relationship, joint employer considerations might arise under certain legal frameworks.

What is the joint employer standard?

The joint employer standard determines when two or more entities are considered joint employers of the same employee. This standard, set by the NLRB, is based on factors such as the level of control each entity has over the supervision of the performance of duties, work rules, and tenure of employment.

How can joint employment lead to unfair labor practices?

In a joint employment situation, both employers are responsible for complying with labor laws. If either employer engages in unfair labor practices, such as interfering with collective bargaining rights or violating work rules, both can be held liable.

Can joint employers codetermine work rules and policies?

Yes, in a joint employment relationship, both employers can work together to set work rules and policies. This includes setting standards for behavior, performance, and other conditions of employment. Both parties must collaborate to ensure consistency and compliance with legal standards.