Flexible work schedules and fluctuating staffing needs mean more people and companies than ever are discovering the benefits of working with a staffing agency. Today, more than three million temporary and contract workers find employment with American staffing companies in an average week. During an average year, this adds up to nearly 17 million temporary and contract workers, according to Staffing Industry Analysts.
Figuring out the rules
When companies hire contract workers through a staffing agency the companies can be considered a joint employer. Joint employers share the control and supervision of an employee’s activity among two or more business entities. Another example of this is engaging with an outside organization to handle benefits administration and/or payroll.
With this form of vertical employment, the question often arises regarding which employer is liable for the worker’s pay and hours under the Fair Labor Standards Act (FLSA). Because of the rising number of businesses using staffing agencies and contract workers, the Department of Labor (DOL) was asked to clarity the responsibilities of joint employment.
Determining the joint employment of employees shared by more than one employer must meet a 4-Factor Test. DOL shared the initial proposal in April 2019 before issuing a final rule in January 2020.
- Power to hire/fire the employee
- Supervise and control the employee’s work schedules or conditions of employment to a substantial degree
- Determine the employee’s rate and method of employment
- Maintain the employee’s employment records
*Department of Labor
Because there is no single definition of joint employment in U.S. law, the 4-Factor test is an important first step in clarifying the responsibilities of joint employer arrangements. The rule also offers clarifications of additional factors relevant to determining FLSA joint employer status. This includes identifying business models, contractual agreements with the employer and business practices that could make joint employer status more or less likely.