What is a "Joint Employer?" The U.S. Department of Labor Clarifies

Being designated as a joint employer can have far-reaching ramifications per the FLSA.

If you are the owner of a business or franchise that:

  • has multiple locations
  • utilizes contract labor
  • shares employees with another related employer

This matters to you, namely, multiple employers can be liable for one employee under the Fair Labor Standards Act (FLSA). The Department of Labor will use this new interpretation to determine whether violations of the FLSA have occurred and whether legal actions should be commenced.

The interpretation highlights a concept that has been the law for quite some time, but was never emphasized or utilized as much as it is by the current Department of Labor.  Namely, that multiple employers can be liable to one employee under the FLSA.

That was not a misprint. Under the FLSA an employee can have more than one employer; the concept is settled law. The scope of the joint employment concept is the subject of the interpretation, which notes that “the concepts of employment and joint employment under the FLSA … is notably broader than the common law concepts of employment and joint employment, which look to the amount of control that an employer exercises over an employee.”

In determining whether an employee has more than one employer, the interpretation provides that the Department of Labor will look to see if the employment relationship fits into one or two employment relationships – Horizontal Joint Employment and/or Vertical Joint Employment.  In a horizontal joint employment situation, the relationship between the two employers is relevant; whereas, in a vertical joint employment situation the economic realities of the relationships between the employee and the employers, and how dependent the employee is on each employer, is analyzed.

Horizontal Joint Employment

Horizontal joint employment exists when two (or more) employers each separately employ an employee and are sufficiently associated with or related to each other with respect to the employee.  Examples of horizontal joint employment may include “separate restaurants that share economic ties and have the same managers controlling both restaurants, or home health care providers that share staff and have common management.”

Factors that are relevant in determining whether there is horizontal joint employment are:

  • Who owns the joint employers (i.e., is there common ownership);
  • Do the potential joint employers have any overlapping management;
  • Do the potential joint employers share control over operations;
  • Are the potential joint employers’ operations inter-mingled
  • Do the potential joint employers treat the employees as a pool of employees;
  • Do the potential joint employers share clients or customers; and
  • Are there any agreements between the joint employers

The interpretation’s examples of horizontal joint employment are focused on the restaurant industry.  For instance, if a waitress or cook works at two different restaurant locations, with both restaurants being owned by the same company, the waitress’ or cook’s time likely needs to be aggregated for purposes of overtime.  For instance, if the cook worked 25 hours at restaurant 1 and 20 hours at restaurant 2, the effect of horizontal joint employment would be the aggregation of these hours and the payment of 5 hours of overtime to the cook.

Vertical Joint Employment

Vertical joint employment exists when an employee of one employer is economically dependent on another employer.  An example might be a construction worker that works for a subcontractor, also is jointly employed by the general contractor, or a hotel that contracts for housekeeping services.

According to the interpretation, the threshold question is whether the intermediary employer (who may simply be an individual responsible for providing labor) is actually an employee of the potential joint employer.  In that case, all employees of the intermediary employer are employees of the potential joint employer.

If the intermediary employer is not an employee of the potential joint employer, then an analysis of the economic realities of the employee and potential joint employer is performed.  The economic realities are analyzed primarily via seven factors:

  • Does the potential joint employer direct, control or supervise the work performed beyond a reasonable degree of contract performance oversight;
  • Does the potential joint employer control employment conditions, e.g., can it hire, fire, discipline the employee or control the employee’s pay;
  • Does the employee have a indefinite, permanent or full-time relationship with the potential joint employer;
  • Is the work performed repetitive, unskilled or require little training;
  • Is the employee’s work an integral part of the potential joint employer;
  • Is the employee’s work performed on the potential joint employer’s premises;
  • Does the potential joint employer perform administrative functions for the employee, e.g., payroll, insurance, providing safety equipment, housing or transportation.

The interpretation provides examples of vertical joint employer in the construction and farm labor industries.


Employers can expect that the Department of Labor will continue to expand its enforcement reach over at least the coming year.  This latest interpretation regarding joint employer follows the National Labor Relations Board’s decision regarding joint employer last fall.  Whether it continues beyond January of 2017, depends upon what happens in the Presidential election this November.  Until we know for sure, however, employers need to take note of this new interpretation and self-audit their operations.

For employers with common ownership that operate multiple locations (including franchisees), if you share employees between those locations, you are likely a horizontal joint employer under this interpretation.  As a result, you must aggregate the hours that an employee works among all of your locations for overtime purposes.

For employers that utilize staffing agencies, labor providers or other intermediary employers, you are possibly a vertical joint employer.  As a result, you need to review and analyze your relationship with the staffing agency, labor provider and the employees to ensure that you are not a joint employer, who is jointly and severally responsible for minimum wage and overtime liabilities.

Also, there is something that bears monitoring beyond horizontal and vertical joint employment.  Several times in the interpretation, the Department of Labor references the “suffer or permit work” standard that is set forth in the FLSA (and child labor laws) to “prevent employers from using ‘middlemen’ to evade the laws’ requirements.”  The repeated reference to this phrase might be used in the future to justify further expansion of joint employer or other wage and hour provisions.

Franchisors who might have been expecting clarity from this interpretation did not get it, as the interpretation does not specifically address franchising.  Franchisors and franchisees must continue to monitor the actions of the Department of Labor in its application of joint employer related to the FLSA, NLRA, Title VII and OSHA.

For more information, feel free to contact James B. Shrimp via email jshrimp@highswartz.com

The information above is general: we recommend that you consult an attorney regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation.

Contractor Laws | What is HICPA?

Are you a home improvement contractor? Have you agreed to perform home improvement work? Are you certain that the agreement you have made with your customer is valid and enforceable?

What is HICPA?

HICPA, or Home Improvement Consumer Protection Act imposes requirements on home improvement contractors. Such requirements include contractors’ registering with Pennsylvania’s Office of Attorney General, obtaining a registration number, and paying the necessary registration fees. Additionally, HICPA sets forth what terms must be included in an agreement between home improvement contractor and the homeowner to ensure that agreement is valid and enforceable.

Contracts to conduct home improvement work must comply with HICPA. Pennsylvania passed this act to provide consumers with guaranteed protections against fraudulent contractors. If your agreements and ensuing home improvement work fail to comply with HICPA standards, then you may be exposed to civil and even criminal liability.

Should a homeowner initiate litigation against a home improvement contractor for failing to meet HICPA’s requirements, HICPA also details the possible penalties that can be levied on the contractor.

Does HICPA apply to me?

If you’re a contractor engaged in an agreement to perform home improvement work, then HICPA almost certainly applies to you. HICPA lists very broad definitions for what constitutes both a “contractor” and “home improvement work.” Specifically, under HICPA, a contractor not only means any person who owns or operates a home improvement business, but also includes any person who simply undertakes or agrees to perform home improvement work.

Virtually any job that can be performed on your home equates to home improvement work. HICPA considers any repair, replacement, remodeling, demolition, removal, renovation installation alteration conversion, modernization improvement, rehabilitation, or sandblasting to apply under the statute.

These tasks extend beyond a consumer’s primary residence, as HICPA also applies to work involving driveways, swimming pools, pool houses, porches, garages, roofs siding, insulation. Solar energy systems security systems, flooring, patios, fences gazebos, sheds, cabanas, painting, work on doors and windows, and waterproofing.

Are there any instances when HICPA would not apply to a home improvement job?

There are some narrow exceptions when HICPA does not apply to a home improvement contract. Despite the broad definition of a contractor under the statute, HICPA does not cover a contractor who failed to earn $5000.00 worth of home improvements the previous taxable year.

And, remember, HICPA applies to home improvements, and therefore does not apply to new construction of a home, or to the conversion of a commercial structure into residential or non-commercial structures. Also, HICPA explicitly excludes transactions regarding the sale of appliances.

OK, so HICPA applies to me. What am I required to do?

In addition to registering your contracting business with the Pennsylvania Office of the Attorney General as mentioned above, you must include several mandatory terms in every home improvement contract. In order for the home improvement contract to be valid and enforceable, the contract must include:

  • Your registration number;
  • Signatures of the homeowner his agent, or other contracted party;
  • Your signature or the signature of a salesperson on your behalf;
  • Attachments of copies of all required notices;
  • Your name, address, and telephone number (no Post Office boxes!);
  • Approximate starting date;
  • Approximate end date;
  • Description of work to be performed, the materials used, and a set of specifications that cannot be changed without a written change order signed by both you and the homeowner;
  • Total sales price, or a relevant time and materials provision;
  • Amount of any down payment;
  • Names, addresses, and telephone numbers of all subcontractors known on the date of signing the agreement; and
  • Notification that the homeowner can rescind the contract, without penalty, within three days after signing.

This list is not meant to be exhaustive, and you should contact a Contractor Lawyer for a more comprehensive review of your home improvement contracts.

Is there any language I should avoid including in my home improvement contract?

Yes! Certain clauses will void an entire home improvement contract even if the remainder of the agreement is enforceable. These voidable clauses include:

  • Hold harmless clause;
  • Waiver of federal, state, or local health, life, safety or building code requirements;
  • Confessions of judgment;
  • Waiver of any right to a jury trial in any action brought by or against owner;
  • A provision by which the owner agrees not to assert any claim or defense arising out of the contract;
  • A provision that the contractor shall be awarded attorneys’ fees and costs;
  • A clause that relieves the contractor from liability based on acts committed by the contractor or its agents;
  • Waiver of any other rights guaranteed elsewhere in HICPA; and
  • A provision providing or the automatic or recurring renewal of any provisions of the home improvement contract, save for some very narrow exceptions.

Again, the above list is not exhaustive, and you should contact a legal professional to better ensure that your home improvement contract is HICPA compliant.

Besides including the proper language in a home improvement contract, what other concerns should I have?

HICPA also details conduct that constitutes consumer fraud. Fraudulent conduct, such as providing misleading statements to induce a homeowner to enter into a contract or pay more than a previously agreed upon price is specifically prohibited. HICPA further bars the damaging of a homeowner’s property as a means of engaging in further home improvement work, and similarly forbids a contractor from purposefully concealing his or her name, as well as the name of any salespersons, the contractor’s business, or other identifying information. If a contractor changes any identifying information after signing a home improvement contract, including changing insurance information, the contractor must provide notice of the change to the homeowner within 10 days after making the change.

HICPA also explicitly disallows a contractor from accepting advance payment for services and then failing to perform the work specified in the agreement in the absence of some extreme circumstances or failure to mutually agree to extend the time frame of the agreement In fact, HICPA bars a contractor from demanding any payment before the home improvement contract is signed.

A contractor cannot abandon or otherwise fail to perform a home improvement contract he or she has undertaken without justification. If a contractor fails to start a home improvement job for any reason, then the homeowner can demand full repayment of any amounts paid when 45 days from the contractual start date has passed.

Any deviation from the specifications in a home improvement contract without a written change order signed and dated by both parties is also prohibited. HICPA requires such a change order to include the price changes for each variation.

What are the consequences of HICPA violations?

Violating many of HICPA’s provisions amounts to a third degree felony if the amount involved exceeds $2000.00. If the victim is 60 years or older, HICPA requires advanced criminal grading. Subsequent HICPA violations will be a second degree felony regardless of the amount involved. Further, HICPA’s sentencing guidelines also allow a court to revoke a contractor’s certificate of registration.

How do I remedy what may be a HICPA violation?

Typically, you will need to identify what, exactly, is missing in a home improvement contract, and then address the noncompliance with the homeowner. A written change order, signed and dated by both you and the homeowner, may be the most efficient means of curing defects. However, change orders are not always the answer. There is no one-size-fits-all solution to HICPA violations, and you should contact a lawyer to obtain the safest and most complete outcome.

PA Pipeline Construction FAQs

When many Pennsylvania landowners look out onto their backyards, they are unaware of the pipeline system that currently resides under their lawns. Many more are unaware of the bottleneck within the system that transports gas from a record-setting natural gas reserve in the Marcellus Shale region of Pennsylvania. That bottleneck is keeping over 1,000 of the 8,000 Pennsylvania wells dry, and preventing energy resources from reaching market, both local and abroad.

This expensive problem has led several energy companies to plan to invest billions of dollars in natural gas infrastructure projects and pipeline construction in Pennsylvania over the next ten years to transport shale gas resources. It’s expected that parts of Berks County, Chester County, Delaware County and other areas north and west of these counties will be impacted by construction and landowner disputes.  As these companies plan to dig up backyards across the Commonwealth to replace and add to current infrastructure with newer, bigger pipes, it’s important that impacted landowners understand their rights.

Here are four important questions impacted landowners should know to ask:

How long will pipeline construction take?

Landowners can and should inquire about how long the construction will take from day one through full restoration of each property. They should also know the extent of "earth disturbance" and the impact that disturbance will have on current and future use of the land, including farming and recreational uses.  This is known as the Temporary Construction Easement phase.  They should also know that the timeframe is often negotiable, and always compensable.  Landowners should push strongly for the shortest possible timeframe. The current prediction is up to 3 years, but landowners should be pushing for a 6 month to 1 year time frame.

What permanent land use limitations will this cause to properties?

The Permanent Easement sets the specific location of the pipeline or pipelines.   Landowners should understand precisely where the pipelines will be placed on their property, including the exact location, depth, width and length.  The Permanent Easement becomes part of the title for the property and will be binding not only on the landowner but all successors and assigns.  They also need to fully understand how the pipeline will impact their land.  While the pipes are located underground, the reality is they will impact future use of the land since as a general rule no buildings or structures may be placed atop the easement area.  The extent to which the easement will limit or prevent future subdivisions and construction should be clearly known.  The greater the impact, the greater the potential compensation.

How will properties be restored?

Landowners must inquire as to how their property will be restored once the project is complete. The energy companies should be held responsible up front to restore all properties to their current condition, or better.  There are many critical factors to consider, including restoration of natural resources such as streams and creeks, soil type and compaction standards, and landscaping.

Will the pipeline construction impact property and land value?

It is imperative for landowners to speak to a real estate agent and/or an appraiser early in the negotiation process to understand how the permanent easement will impact property value.   Real estate agents are predicting that property and land values can be affected by tens of thousands of dollars since the new pipelines are different and much larger than the current pipes which have been in place since the 1930s.  Before signing, make an informed decision on value.

These are just a few considerations for landowners to understand and address when asked to grant easement rights by a pipeline company in Pennsylvania.  Other considerations, such as indemnities for environmental liabilities and accidents, size of the pipeline and the pressure it will operate  under, limitations on future expansion and accessory facilities, inspection rights, and access to the easement area also should be specifically addressed.

If the landowner and pipeline company are unable to amicably negotiate the terms of the Temporary Construction Easement and Permanent Easement, and the compensation associated with each, the pipeline company may be able to obtain the easements through an eminent domain proceeding.  In Pennsylvania, pipeline companies that qualify as “public utilities” may initiate eminent domain proceedings to obtain the required easements.  In those situations, the landowner is compensated for the fair market value of the easements by a board of view or court, after the presentation of evidence by expert appraisers.   In the vast majority of cases, it is better for both the landowner and the pipeline company to amicably negotiate the terms of the easements, and a compensation package, than to resort to an eminent domain proceeding.

For more information regarding real estate and eminent domain law as it relates to the Pennsylvania pipeline projects, please contact David Brooman at 610-275-0700, or by email at dbrooman@highswartz.com.

Note:  The information above is general; we recommend that you consult with an attorney regarding your specific circumstances.  The content contained herein is not meant to be considered as legal advice or as a substitute for legal representation.

Original article was written in May, 2015.