The issue of “joint employment” arises in a few different contexts. It has gotten a lot of attention of late in the national context, especially in the franchise/franchisor world. Every time there is an administration change, the National Labor Relations Administration (NLRA) changes its stance on the relationship between franchisors and franchisees. Those of you who operate in this arena may keep track of the decisions that impact this universe.
However, the joint employment laws govern so many more contexts, especially here in California, where the case law and statutes have been definitive now for years.
First is the area of staffing companies or PEOs. The entire concept of employee “staffing” companies first arose back in the 1990s in response to the worker’s compensation crisis, when employers faced skyrocketing costs and claims. Offloading staff onto another company with a lower “ex-modification” was often a way suffering employers could keep costs down. Soon, these staffing companies were emerging everywhere, claiming they were the salvation to the out-of-control workers’ compensation nightmares. And admittedly, well run staffing companies can serve a very legitimate purpose is some employment contexts, especially with seasonal or cyclical workforce issues.
But California made it clear from the start – if an employer used a leasing company to staff its workforce, that relationship created a JOINT EMPLOYMENT work situation. Those employees were employees of BOTH the staffing company AND the employer. The staffing or leasing company was the GENERAL employer, and the employer was the SPECIAL employer. This is true even if the employee is a TEMPORARY employee.
You can have an agreement with the staffing company that the staffing company will be responsible for the workers’ compensation insurance for those employees. But that is a contractual agreement. By law, that employee can still sue either or both of you. And by law, both you and the staffing company are liable for any other employment action, such as harassment, discrimination, or wage and hour violations, and we often see both employers named in lawsuits, regardless of the language of your contract.
Who indemnifies who is determined by that contract. Have you read yours lately? If you have not, I suggest you do. Better yet, let us. But even so, your indemnity agreements are only as good as the financial foundation of that staffing company and their ability to defend and indemnify you. Companies that provide cheaper pricing may be cutting corners, and that is a red flag.
Staffing or leased employees are ALWAYS your employees, and you should have employee handbooks signed by all these workers, even if your staffing companies provide a handbook. I have yet to see a staffing company handbook I prefer. The handbooks we write are drafted to include staffing employees. Please, please, get them signed by ALL your employees, even your temps. Otherwise, your temps could be your next class action reps. They only have to work for you for a few days to represent ALL of your employees in a class action. Ask me how I know.
Next joint employment situation – different (related) entities operating under the same management company. We see this most commonly in hospitality, but also in property management and retail, sometimes manufacturing. Usually, these are related entities that are separately owned LLC or LLPs, usually with some common ownership, operating under the same management umbrella. The management company is responsible for accounting services, insurance services, legal, and human resources. Sometimes management personnel from the different entities are even employed by this management company. Most often, the management company issues the employee handbook to all the different operating entities who employ the rank-and-file employees, other than the “corporate employees”, who work for the management company.
When you have a situation like this, for most purposes, California law will assume that all these separate entities are joint employers with each other, and all the employees are jointly employed. Their ownership structure does not matter. Because you have one management company making decisions for all these entities, there is joint management. It does not matter that there are individual general managers at each location, for example.
When and why does this become an issue? For one, if you have an employee working at two locations within the same group. That employee will be considered to be working for the same employer, even if there are different employer EINs and you have different personnel files. If they are joint employers, all those worked hours should be counted together. If that employee works more than 40 in a workweek or over eight in a day, there is overtime. If there is travel between locations, there is travel time. It does not matter that if this employee were working somewhere else, it would not be overtime. They are working for you. It is overtime. This is how the law sees it.
It also means that a plaintiff’s attorney can bring all these different entities and employees under the same umbrella in a Private Attorney’s General Act (PAGA) lawsuit, and they do. Even if these are different concepts operating different kinds of operations. PAGA allows claims to cover “all aggrieved employees” of the employer, even if they are not performing the same kinds of work.
If you have questions, reach out. It’s a jungle out there.
