“What is Joint Employer Liability?” Many Workers Have Two Employers, But Don’t Know It

“I got a job working for a hostage negotiator.
One day I tried to call in sick, but my boss talked me out of it.”

– Anonymous


ACTUAL “CASE HISTORY: Thomas was an experienced software coder. He was registered with an employment agency that regularly placed him on coding projects with its customers– usually for three to six months at a time. He was considered an “independent contractor” and earned $35 per hour for his efforts, without benefits. The employment agency handled all of the details of his assignments, collected the fees from the customer, and then paid Thomas for the hours he worked. It was part of a significant trend that many people refer to as “outsourcing” or “employee leasing.”

As is quite common in these “outsourcing,” “agency,” “contracted” or “leased employee” arrangements, Thomas worked at the offices of the employment agency’s clients, on the projects they assigned to him, often alongside their own employees, told what time to arrive and leave, where to sit, and always under their supervision. Somehow, he was not considered their employee.

One assignment for a large financial institution was particularly demanding, with very complex objectives that needed to be completed within an unusually short period. After two of the team’s five coders quit, Thomas ended up working through many nights and over many weekends to meet the project’s demanding deadlines.

After his financial institution assignment was completed, Thomas asked his employment agency whether he was eligible for overtime pay for the extraordinary hours he had put in. He was told “No,” as overtime pay was given only to “employees” and that he was an “independent contractor.”

When Thomas contacted us for a telephone consultation, we disagreed with what he had been told. Not only was he entitled to all of the payments, benefits and legal rights of an “employee” – including overtime – but he could demand those payments, benefits and legal rights from both the employment agency and the large financial institution that had “leased his services.”

Because the employment agency feared that Thomas would request overtime from the large financial firm, or perhaps that Thomas might even tell other temporary coders he worked with that they were entitled to employment benefits, such as overtime, they quickly paid up all overtime due Thomas, which was a very tidy sum. This was a vivid illustration of the “joint employer liability” doctrine in action.

LESSON TO LEARN: If you are a “contract,” temporary, “contingent,” seasonal, “leased,” “outsource,” or “independent” worker, in the eyes of the law you may well be an employee and, what may seem odd to some people, of two companies. Thus, both your employment agency and the agency’s customer for whom you toil may be liable to you for payments, benefits and rights denied to you.

Example: Department stores are not hiring “seasonal employees” at year-end holiday time, as they always used to do, but instead are increasingly turning to “temp agencies” to hire them and then “lease them” back to the department stores.

Example: Law firms are hiring “contract lawyers” who sometimes work for them for years at a time, but are nonetheless not considered by them to be their “employees.” These “contract lawyers” have the same law licenses as other attorneys at the law firm, do the same work as other lawyers, are supervised by the same people who supervise other lawyers, and work in the same offices as other lawyers. But, somehow, they do not get unemployment insurance, Social Security benefits, or protected leaves of absence that all employees are entitled to under the federal Family Medical Leave Act.

Example: Nurses in hospitals are being hired through “placement agencies” to do the same work as “employed” Nurses. But these Nurses are being denied overtime, the right to file sexual harassment complaints, paid vacation, and at times workplace safety protections.

How does this save employers money? By “outsourcing” much of the work they need to get done, companies are avoiding the considerable costs of employee benefits, payments and protections the law requires employers provide employees, such as (a) overtime, (b) unemployment benefit contributions, (c) payment of Social Security contributions, (d) Workers Compensation coverage for on-the-job injuries, (e) unpaid medical leave, (f) occupational safety, (g) even protection from harassment and discrimination.

The law, though, is not blind. It recognizes that quite often this kind of “outsourcing” of work is a charade, a subterfuge, and a deception. After all, if it was so easy to use another company to avoid employer obligations, no company would be an employer. It would be the end of “employment” as we know it.

Temporary, “on call,” “leased,” seasonal, contract workers, and others should be aware that the law provides that many of them are employees of BOTH (1) their temp assignment agencies AND ( 2) the companies on whose behalf they toil – just like employees

Recently, “joint employer liability” (sometimes called “co-employer liability”) has been applied to companies with a “franchise” business model. For example, in the fast-food industry many large companies are “franchisors” who sell the right to use their corporate name to smaller local “franchisees.” The law is increasingly making such large “franchisor” corporations, such as McDonalds Corporation, Dunkin Donuts and Wendy’s liable for unpaid wages and denied benefits to those who toil for their many locally-based franchised store operators, even if they have been labeled “independent contractors” or the equivalent.

WHAT YOU CAN DO: If you believe you may be one of those many workers who is treated as a “second class employee,” and may be due payments, benefits and legal rights and protections from a “joint employer,” you would be well-advised to consider the following:

1. Are you a person being denied the same payments and benefits that the law requires must be given to “employees?” How can you determine how the law would view you?

Courts use what they call an “economic realities” test to determine whether such “leased” or “contracted” workers do, indeed, deserve to be treated as employees by BOTH the “referring agency” and the company for whom they toil. The factors looked at include:

    • i. Whether the worker was on the premises of the company for whom they toiled;


    • ii. The degree to which the worker engaged in activities that an employee would have engaged in;


    • iii. The degree to which the company supervised the worker; and


    • iv. Whether the worker worked primarily or exclusively for the company.


    v. Incidentally, claims that the employer acted in “good faith” or had a lack of legal knowledge are not defenses to joint employer liability.

To keep things simple, just compare the work you do, the supervision you receive, and your freedom to come and go as you wish, your ability to work where you wish, and your right to work for others simultaneously. Those are the simpler measures we all – including Courts – look to in making such determinations.

2. What if you seem to have signed away your rights and claims to be considered an employee? People can sign away many rights, but not certain rights, most especially the right to be protected by state and federal laws, such as those that provide, as examples, workplace safety to employees, overtime to employees, Social Security contributions on behalf of employees, and leaves of absence for medical reasons to employees. Think of it this way: could a person waive the Constitutional prohibition against slavery, and sell themselves into slavery? No. It just could not happen. And never will.

This is what is at the very heart of “joint employer” liability: there are certain limits on what rights employees can give up, even if and when they feel desperate for a job due to the absence of good jobs during difficult times in the employment marketplace. While many employers would like to end employee rights altogether, our legislatures, our Courts, and our society is not ready for such a thing. And, hopefully, never will be. Suffice it to say that agreements cannot give up fundamental legal rights.

If you want to be a Consultant, you would be wise to have your own “standard form” consultant agreement. We offer a simple Model Consultant’s Agreement to use as a basis upon which to begin your consulting work “on solid ground.” To obtain a copy, just [click here.] It shows you “What to Say, and How to Say It.”™ Delivered by Email – Instantly!

3. Make a list of the benefit(s), payment(s) and rights you believe you are being denied. As noted above, these are the more commonly denied payments and benefits: (a) overtime, (b) unemployment benefit contributions, (c) payment of Social Security contributions, (d) 401k and pension contributions, and (e) paid vacation and sick days.

These protections are also often denied workers denied the status of “employee”: (i) unpaid medical leave, (ii) occupational safety protections, (iii) Workers Compensation coverage for workplace injuries, and (iv) even protection from harassment and discrimination. One additional legal right that is provided to employees and not to independent contractors or contract workers is the right to organize collective representation, most commonly as a union.

4. Weigh the potential costs and benefits of obtaining a consultation with an experienced employment attorney to gain the perspective of a legal professional. There is just no substitute for experience. A “trained eye and analytical mind” can see things that others cannot, and can often analyze them and place them into proper perspective. One small detail can make a big difference in a legal analysis, just as one small detail can make a big difference in a medical diagnosis.

An experienced attorney can also help you assess what you might be able to gain by raising a claim to employee-related payments and benefits, and what process you should best go through to do so.

If you have been presented with a company’s “standard form” consulting agreement, we offer a sample “list of proposed amendments” containing The 23 Most Common Changes to Suggest to Consulting Agreements, with a Sample Transmittal Memo. To obtain a copy, just [click here.] It shows you “What to Say, and How to Say It.”™ Delivered by Email – Instantly!

5. If you make a request under “Joint Employer Liability,” do so in an email, and remind your recipient of the potential additional liabilities should this result in retaliation against you. In so many circumstances of workplace navigation and negotiation, we strongly suggest you prepare a respectful request for redress, transmitted by email, to ensure prompt and reliable delivery. We also suggest reminding the recipient of your email of the negative consequences that could result if you were to be retaliated against in any way for raising your concerns.

P.S.: If you would like to speak with me directly about this or other subjects, I am available for 30-minute, 60-minute, or 120-minute telephone consultations, just [click here.] Evenings and weekends can be accommodated.

SkloverWorkingWisdom™ emphasizes smart negotiating – and navigating – for yourself at work. Negotiation and navigation of work and career issues requires that you think “out of the box,” and build value and avoid risks at every point in your career. We strive to help you understand what is commonly before you – traps and pitfalls, included – and to avoid the likely bumps in the road. Wisely considering whether you are an employee and entitled to the payments, benefits and rights of an employee is one important part of the path to job and career success.

Always be proactive. Always be creative. Always be persistent. Always be vigilant. And always do what you can to achieve for yourself, your family, and your career. Take all available steps to increase and secure employment “rewards” and eliminate or reduce employment “risks.” That’s what SkloverWorkingWisdom™ is all about.

*A note about our Actual Case Histories: In order to preserve client confidences, and protect client identities, we alter certain facts, including the name, age, gender, position, date, geographical location, and industry of our clients. The essential facts, the point illustrated and the lesson to be learned, remain actual.

Please Note: This Email Newsletter is not legal advice, but only an effort to provide generalized information about important topics related to employment and the law. Legal advice can only be rendered after formal retention of counsel, and must take into account the facts and circumstances of a particular case. Those in need of legal advice, counsel or representation should retain competent legal counsel licensed to practice law in their locale.

Sklover Working Wisdom™ is a trademarked newsletter publication of Alan L. Sklover, of Sklover & Company, LLC, a law firm dedicated to the counsel and representation of employees in matters of their employment, compensation and severance. Nothing expressed in this material constitutes legal advice. Please note that Mr. Sklover is admitted to practice in the state of New York, only. When assisting clients in other jurisdictions, he retains the assistance of local counsel and/or obtains permission of local Courts to appear. Copying, use and/or reproduction of this material in any form or media without prior written permission is strictly prohibited. All rights reserved. For further information, contact Sklover & Company, LLC, 45 Rockefeller Plaza, Suite 2000, New York, New York 10111 (212) 757-5000.


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