Employer and Employee going over severance agreement

What is the Joint Employer Rule?

Employees in New Jersey are protected by a number of employment laws at both the state and federal levels. These are laws that guard against adverse actions wrongfully taken by employers such as discrimination and failure to pay minimum wage. For these laws and protections to apply, however, there must be an existing employment relationship between the employee and the business. Can a worker have an employee-employer relationship with more than one entity? Absolutely! In fact, this is where the joint employer rule comes into play.

What is the Joint Employer Rule?

In the event that multiple entities exercise authority over a worker, the joint employer rule dictates that each entity could subsequently be held liable for employment law violations, including wage and hour claims. This means that a worker can have more than one employer for purposes of employment law protections. Should a joint employer relationship exist, both employers can be separately held responsible for providing adequate legal protections for the worker.

For an employer-employee relationship to exist, each joint employer must have the authority to exercise control over the terms of the worker’s job. This means that each entity can alter the worker’s duties and hours, among other things. Pursuant to the Fair Labor Standards Act (FLSA), the U.S. Department of Labor (DOL) established a rule that deems a joint employment relationship to have been established when one of three conditions has been met. First, the employers must have agreed to share the services of the employee. Second, an employer is either directly or indirectly acting in the interest of another employer in regard to the employee. Third, the employers are under common control or one employer is in control of the other employer.

Either a horizontal joint employment or vertical joint employment relationship may exist. Under a vertical joint employment relationship, more than one employer received the benefits of the employee’s labor and the worker is economically dependent on the employment relationship. A horizontal joint employment situation commonly arises when one entity employs a worker for certain specified hours in the workweek while another business employs that same worker for other specified hours of the workweek. In the event of a horizontal joint employment relationship, should the two businesses jointly employ the worker, the hours the worker put in for both employers must be added together for the workweek for purposes of FLSA protections.

In recent years, the joint employer rule has undergone some changes, but the changes did not end up sticking. Back in 2020, the DOL changed the joint employer rule. It was modified so that vertical joint employment situations were limited to cases where multiple employers had substantial authority over an employee, including the power to hire and fire the employee as well as managing employment records. The 2020 change to the joint employer rule, however, did not last long. In July of 2021, the DOL published a new rule that rescinded the 2020 changes and reverted the rule back to its state prior to the 2020 change.

New Jersey Employment Law Attorneys

For all of your employment law questions and concerns, the knowledgeable team of employment law attorneys at Castronovo & McKinney is here to help. Contact us today.