The Department of Labor (DOL) recently announced that that they have withdrawn two administrator’s interpretations (AIs) of the terms “joint employer” and “independent contractor.” AI No. 2015-1 offered a narrow interpretation of the term “independent contractor,” while AI No. 2016-1 defined “joint employer” rather broadly.
To understand how this decision affects employees, it’s important to first learn about how joint employers were defined under AI No. 2016-1. There are two types of joint employers: vertical and horizontal employers. Let’s look at an example of each of these employer relationships. Let’s say a doctor owns multiple practices within the same city that each has their own unique corporate identity. If a nurse works part-time at both of these practices, this is considered a horizontal joint employer relationship because two related businesses are sharing an employee.
However, the concept of vertical joint employers is a bit more complicated. An example of vertical joint employers is the relationship that exists between staffing agencies and other companies. For example, if an employee uses a temporary staffing company (Company A) to find employment with Company B, then Companies A and B may be considered joint employers. This is because the employee is technically employed by both companies, and financially dependent on at least one of the companies.
Any employer that is in either a horizontal or vertical joint employer relationship can be liable for the other company’s wrongdoing. For instance, if Company A is not paying employees minimum wage, both Company A and B may be penalized for this violation.
Because the definition of joint employer was so broadly defined in AI No. 2016-1, the DOL was concerned that businesses would be held liable for illegal activities that were well out of their control. The DOL stated that now that the definition of joint employer has been withdrawn, it will not be used in order to determine if a company is liable for another employer’s illegal activities. The decision to withdraw the definition of joint employer is seen as a win for the business community, who do not have to worry about being penalized for their association with another employer.
Employment and labor laws are complex, especially because the laws frequently change. Let an experienced attorney from Armstrong & Vaught, P.L.C. help you navigate through the complexities of this field of law. Call us today at 918-582-2500, or toll free at (800) 722-8880, or contact us online for a free consultation.