DOL Takes the Joint Employer Theory to the Next Step

We have reported on government attempts to expand the definition of who is an employer of temporary or contract workers supplied by temporary staffing companies. The U.S. Department of Labor has taken the next step in this campaign. On January 20, 2016, the DOL issued an administrator’s interpretation to establish a single, uniform list of “economic reality factors” the Department suggests courts should consider when determining if two or more companies utilizing the services of, or employing, the same worker may be simultaneously liable for federal Fair Labor Standards Act violations.

If you use temporary or contract workers supplied by a staffing company, you may think that the company responsible for alleged FLSA violations is not you but the actual employer of the worker – the staffing company. However, under the new standard, the DOL suggests courts use an “economic realities” test with factors such as who directs the work, who has the power to hire and fire the worker, and whether such workers do tasks typically performed by full time employees to rule that the staffing company and the company using the services of staffing company employees are both liable under the FLSA.480px-US-DeptOfLabor-Seal.svg_

A dealer who uses temp agency worker must now be more careful. Under the new interpretation, the DOL is trying to make the company using the temporary workers as liable for wage and hour violations as the staffing agency.

So what should you do if you use workers from a staffing company?

  • Carefully check out the staffing company. Make sure it is a solid company that will stand behind its obligations to its employees and to you.
  • Have a contract with the staffing company. Require it by contract to abide by all federal, state, and local laws.
  • Include in the contract indemnification for any liability resulting from failure of the staffing company to abide by all laws that leads to worker claims or lawsuits.
  • Make sure that the contract with the staffing company does not contain provisions we warn about in other supplier contracts such as artificially short statutes of limitations, artificial limitations on liability, requirements for lawsuits in inconvenient venues, or improper one-way indemnification provisions that require the dealer to indemnify the staffing agency.