Joint Employer Concerns and Liability

A joint employer relationship is when one company, known as the primary, is so connected to another company, or the secondary, that employees of the secondary may also be considered employees of the primary. One example of joint employers may be found in the relationship between contractor and subcontractor. Another joint employer relationship may be found between contractors and temporary staffing agencies.

A joint employment relationship presents a problem when the primary employer is held liable, or responsible, for the secondary employer’s labor liabilities.

Let’s consider a staffing agency that supplies companies with employees during hectic times of the year, such as during the holidays or seasonal highs. While the staffing agency does not hire these workers directly, it is a question whether the agency may be held liable in the event one of the workers gets injured on the job or submits a complaint about not getting paid. In this situation, should the staffing agency be concerned?

The answer to this question is that there are a minimum of two joint employer concepts in California that might place responsibility on the companies that contract with labor contractors or staffing agencies. According to Section 2810.3 of the Labor Code, some employers might be considered jointly legally responsible for labor breaches that contractors like staffing agencies may commit. In general, a company with twenty-five or more workers that partners with such an agency will have shared civil liability and legal responsibility for all workers that the staffing agency provides. This liability is for the following:

• Inability to ensure employees’ compensation coverage
• The payment of wages

That said, according to this law, joint liability is not relevant for the following:

• A bona fide apprenticeship program, hiring hall, or labor organization run by a union agreement
• A bona fide community-based nonprofit organization that provides services to workers
• In some situations, a third party that participates in an employee leasing agreement
• A motion picture payroll services company
• Workers who are independent contractors
• A homeowner who sponsors services at their home or the owner of a business based at home
• Certain household movers, motor carriers, motor clubs, and cable operators

According to Section 2810.3 of the Labor Code, an aggrieved worker must provide the company that works with the hiring agency a minimum of thirty days’ warning before submitting a civil suit against the company for breaking this law.

When a company exhibits indirect or direct control over an employee provided by a staffing agency or intermediary entity, joint liability for wage and hour claims can come up. In the case Medina v. Equilon Enterprises (Sept. 2021), the court ruled that there is joint employment when the company has enough power over the intermediary to dictate, if indirectly, the hours, working conditions, and wages of the worker. In this situation, Shell Oil formed a contract with a Multi-Site Operator (MSO) so that the latter would operate its gas station. Mr. Medina worked for the MSO. The multi-site operator was in charge of firing, hiring, disciplining, training, and maintaining payroll. Shell offered in-depth instructions on how to comply with employment laws. The MSO was not permitted to alter employees’ tasks, these employees including Mr. Medina. Accordingly, the court decided that the MSO and Shell were joint employers who were therefore responsible for the unpaid wages of Mr. Medina. This is because Shell had enough power over the MSO to indirectly control Mr. Medina’s hours, working conditions, and wages.

A California company that makes use of an intermediary company to provide employees should be cognizant of the risks of joint employment. Specifically, the company should review issues related to being in compliance with the state’s workers compensation laws, labor laws, as well as indemnity in the parties’ written agreement regarding services.

What are the co-employment risks?

The main risks associated with co-employment relationships involve the primary employer accepting the secondary employer’s employment liabilities. The following are examples of co-employment risks:

1. Employment harassment and discrimination. According to a number of state and federal anti-discrimination laws, a primary company may be found responsible if the secondary employer harasses or unlawfully fires one of its workers based on a protected class (age, sex, race, disability, religion, etc.)
   
   
2. Labor violations. According to the Fair Labor Standards Act, a primary employer can be held responsible for the secondary employer’s failure to pay employees wages or overtime.
   
   
3. Collective bargaining and union obligations. According to the National Labor Relations Act, a joint employer can lead to a primary being found liable for the secondary’s unfair labor practices. It may also result in the primary being forced to comply with any collective bargaining agreement of the secondary. If a secondary’s workers are involved in an employment dispute, a joint employer can give up the primary’s right to avoid boycotting and pickets.
   
   
4. Medical leave obligations. A primary employer may not have enough employees to support FMLA obligations, but joint employers may both have FMLA obligations if their joint workforce is big enough. Also, if a secondary does not comply with existing FMLA obligations, a primary may be held liable.