New standards were released in late January 2016 by the Department of Labor’s Wage & Hour Division (WHD) regarding joint employment relationships under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). These standards could have a significant impact on nonprofit organizations due to varying types of employment structures found within the industry. If you share employees, use a professional employer organization (PEO), or use a management company (just to name a few), you need to review the Administrator’s Interpretation on these standards.
WHD applies a horizontal test and a vertical test to determine if joint employment exists. The horizontal joint employment test reviews relationships where the employee works for two or more employers with economic ties. The vertical joint employment test reviews relationships between the employee and the potential employer, and the economic realities of that relationship. If you are found to be a joint employer, you may be held liable for wage violations of the other employer, for example the PEO or management company violations.
The Department of Labor is seeing a decrease in the traditional employment relationship, and as a result, believes enforcement of employees’ rights and employers’ obligations needs to evolve.