Who’s Employees Are They Anyway?

We are in the midst of the Uberfication of the workforce. More and more companies are relying on free lancers, contractors and contingent workers. And to be clear, many who fall into those groups (me for one) like it that way.

While none of these types of relationships are new, the magnitude and impact are, and the U.S. Department of Labor has evidently decided to take a hard look at how this space should be regulated. We’ve previously noted that the feds are teaming up with state agencies (including the Vermont DOL) to look at the misclassification of contractors. Now they have issued new guidance regarding joint employment.

The new guidance considers two types of joint employment: Vertical and Horizontal.

Briefly, a typical scenario for vertical joint employment would be if you hire new employees through a temp agency for a period of time before converting them to “regular” employees. While they are working as temps, these employees are directed and supervised as if they are your employees. The primary day-to-day difference is that their payroll is processed through the agency. Why would this be a problem? Well, if the employee gets injured on the job and the agency failed to get Worker’s Comp insurance, your company is on the hook. In fact, you are paying twice: once to the agency for insurance they didn’t buy, and once to the employee to cover the injury.

A Horizontal joint employment example might be a company that owns two stores that are each set up as separate legal entities, but share the same management, and employees are scheduled for shifts at both stores. A potential issue in this case would be an employee who works 20 hours at one store and 25 at the other. Even though each legal entity is paying the employee for less than 40 hours, the “joint employment” total is 45 hours, so overtime may apply.

SHRM has a nice write up summarizing the guidance in more detail.