In today’s challenging economy, many companies are adding to their work force through Leasing, Temp Agencies, Third Party Management Firms, sharing employees or using independent contractors. These arrangements result in a third party actually employing the worker, while the company, generally known as the Joint Employer, directs the worker on the work to be performed. In this arrangement, the Joint Employer is under the impression that they are able to avoid complying with employment and labor laws, and able to minimize the recruiting, screening and hiring processes. The third-party performs all these tasks.
However, over the past few years government agencies, such as the IRS and the Dept of Labor, are increasingly finding that both companies are employers – Joint Employers – and thus both are responsible for wage, labor and payroll tax regulation compliance.
A recent guidance by the Labor Dept.s’ Wage and Hour Division confirmed this trend. The guidance noted that the words “employ” or “suffer or permit to work” are so broadly defined by the FLSA that a wide range of companies could be considered Joint Employers. A number of factors are considered in the determination. Among some:
- Is the joint employment horizontal -employee has relationship both companies that also are related or associated in some way – or vertical – employee has relationship with one company but is paid by another? The focus is on the relationship between the employee and the 2 companies.
- Do the companies have overlapping officers or management?
- Who directs the work?
- Who controls the work conditions?
Not all factors must be met, but the more that are met, the more likely a finding of Joint Employment.
If Joint Employment is found, than legally both firms are liable for wage and hour and IRS compliance. Many employers may have agreements with staffing or leasing agencies that note that the agency is responsible for compliance. It should be noted, however, that such an agreement would need to be found enforceable, and Joint Employment would still exist. If the agency experienced financial hardship, the other entity would be liable.
As government agencies take a more expansive view on Joint Employment, companies need to be vigilant regarding wage and hour compliance. While employers may think they are off the hook because they use a third party agency, they may find out the hard way that they are not. The Dept of Labor has already noted they are taking a closer look at the construction, agricultural, janitorial, warehouse, logistics, staffing and hospitality industries.
About Time & Pay:
Time & Pay is a professional payroll service provider located in Johnson City, TN. We service businesses of all sizes and types throughout the United States. Founded in 1992, Time & Pay provides businesses with complete payroll services , guaranteed payroll tax compliance, automated time and attendance systems and services, pay-as-you-go worker’s comp, human resource management systems and services, and more. We provide our customers with the cost effective tools you need to better manage your payroll, your employees and your business. Time & Pay’s services guarantee you will save money, time and aggravation and we back them up with the customer service you expect and deserve. Contact Us today to learn why business owners throughout the country are saying:
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