The Fair Labor Standards Act (FLSA) is a federal law that governs wage and hour issues for employees across the country. The FLSA has specific requirements when it comes to overtime pay and minimum wage, and all employers must abide by the FLSA when paying employees. Specifically, the FLSA requires all non-exempt employees to be paid one and one-half times his or her hourly wage for any hours worked beyond the 40-hour workweek, and to be paid at least the minimum wage of $7.25 per hour in Texas. Generally speaking, an employer must comply with the FLSA to ensure that the employee is paid the minimum wage and is paid appropriate overtime. When an employee has joint employers, who is responsible for FLSA compliance?
This question should raise an important issue for employers in Texas: What legal risks are presented with joint employers?
What is a Joint Employer?
In order to understand the legal risks associated with employee situations involving joint employers, it is critical to understand how joint employers are defined under federal law. According to the U.S. Department of Labor (DOL), “under the FLSA, an employee may have—in addition to his or her employer—one or more joint employers.” The DOL defines a joint employer as any additional person or entity “who is jointly and severally liable with the employer for the employee’s wages.”
How does an employee end up in a situation with joint employers? As the DOL explains, there are two potential types of scenarios in which an employee may have joint employers:
- “Employee has employer who suffers, permits, or otherwise employs the employee to work, but another individual or entity simultaneously benefits from that work”; or
- “One employer employs an employee for one set of hours in a workweek, and another employer employs the same employee for a separate set of hours in the same workweek.”
Determining Whether There are Joint Employers
Just because you have an employee who also works for another employer does not mean that you are involved in a joint employer situation. Generally speaking, the DOL clarifies that an employer will only be considered a joint employer based on the outcome of a four-factor balancing test. Those factors include the following, according to the DOL:
- Whether the potential joint employer hires or fires the employee;
- Whether the potential joint employer supervises or controls the employee’s work schedule, or supervises or controls a substantial degree of the employee’s work;
- Whether the potential joint employer determines how the employee will be paid and at what rate; and
- Whether the potential joint employer maintains the employee’s employment records.
Risks for Joint Employers
Now that you have more information about scenarios in which two employers may be considered joint employers, what are the legal risks?
First, and most immediately, you could be at risk of non-compliance with the FLSA and could be targeted in a federal wage and hour law claim if your employee is not paid overtime or the minimum wage based on the joint employer’s payment schedule or rate. In other words, you could be liable for hour and wage violations under the FLSA resulting from the other joint employer’s error.
In addition, under the National Labor Relations Act (NLRA), both joint employers need to bargain with any union that represents a jointly employed worker. If the other employer engages in any unfair labor practices, as a joint employer, you could be liable for those unfair labor practices, as well.
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