Virtually anyone who employs anyone else is usually a covered employer. The Fair Labor Standards Act (FLSA) broadly defines “employer” as anyone directly or indirectly acting in the interest of an employer in relation to an employee. The FLSA applies to:
- employers with annual gross sales or business volume of $500,000 or more
- institutions for residential care of the physically or mentally ill, disabled or aged
- elementary and secondary schools
- institutions of higher education (whether for profit or non-for-profit)
- governmental entities regardless of size
- employers of domestic service workers: maids, chauffeurs, cooks or full-time babysitters.
However, employees of the few employers that are not covered by the FLSA (such as employers whose annual gross sales or business volume is less than $500,000) may still be covered by minimum wage, overtime, and child labor provisions if they are individually involved in the production of goods for interstate commerce or work on jobs that are governed by federal contracts. Employers should contact an attorney or their local Wage and Hour District Office before concluding their employees are not covered. In addition, these employees could be covered under state wage and hour laws.
In certain circumstances, two or more employers can constitute “joint employers” for purposes of the FLSA if there is sufficient connection between them. Where a joint employer relationship exists, both employers are responsible for complying with the FLSA with respect to the employee and they have joint and several liabilities for the other employer’s violations.
Additionally, joint employers must count all jointly employed employees in determining employer coverage and employee eligibility. "Joint employment" is not defined in the FLSA.
Joint employment often occurs where two employers are corporate affiliates and in leased employee situations or where a temporary placement agency supplies employees to a second employer.
While the standard for determining whether an employer is a joint employer for purposes of the FLSA and state wage and hours laws varies by jurisdiction, employers generally may be considered “joint employers” where any of the following criteria are met:
- There it an arrangement between the employers to share the employee's services, as, for example, to interchange employees.
- One employer is acting directly or indirectly in the interest of the other employer (or employers) in relation to the employee.
- The employers are not completely disassociated with respect to the employment of a particular employee and may be deemed to share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by or is under common control with the other employer.
Domestic service workers
In the home care context, there are many situations where joint employment may exist. For example, where a parent or guardian hires a home health care service provider to provide a home health aide to care for a disabled adult child, the parent/guardian and the service provider would likely be considered to be joint employers.
Domestic service employees, other than trained personnel such as nurses, who provide companionship services for those who are unable to care for themselves because of age or infirmity may be exempt from the FLSA's overtime and minimum wage requirements. While an individual, family or household employing a domestic services worker can claim the companionship exemption (providing the conditions for the exemption are otherwise satisfied), a third-party employer/agency, even one in a joint employment relationship with the individual/family/household of the person receiving services, may not claim the exemption.
Generally, franchisors and franchisees are not considered joint employers for purposes of FLSA liability – rather, the franchisee is considered to be the employer. However, the existence of a franchise agreement does not preclude the possibility that a court could find that a franchisor is a joint employer for purposes of FLSA liability based on the facts and circumstances of the relationship. Recently, courts have been increasingly willing to look beyond franchise agreements to determine whether a franchisor is a joint employer for purposes of FLSA liability. However, the DOL's new final rule provides additional guidance and clarity for fanchisees and franchisors.
Franchisors should work with counsel to evaluate their role in the franchised business and their relationships with franchised employees in order to minimize exposure to joint employer claims from franchised employees.
The definition of employer broadly includes anyone “acting directly or indirectly in the interest of an employer,” and courts have interpreted this to impose potential liability on individuals. Generally, individuals who are a corporate officer or owner and exercise supervisory or operational control of the employee’s hours worked, recordkeeping or compensation can face individual liability under the FLSA.