Are you at risk for Joint Employer Liability?

As a business owner, the liabilities faced are endless. You are liable for making sure employees have the proper pay documentation, sick days, harassment and discrimination policies, proper wages and W-2 submitted on time. You are even liable for data breaches and workplace injuries. If we added an entire list of liabilities to this article, the page would go on for at least a few scrolls of your mouse.

Being a business owner sometimes requires you to obtain a high level of legal knowledge to handle these situations. With precious hours spent researching these liabilities, many businesses are surprised to learn that they also have a similar list of liabilities for someone else’s employees. Determining your level of liability relies heavily on your business relationship and operations with other companies.

Companies have seen lawyers and the government back employees to ensure the wrongs or alleged wrongs the employee has suffered were made right. Due to the diligence of the lawyers and government working together, they have created what is known as joint employer liability. Media outlets such as Forbes have published articles in this area with its growing popularity and fear from employers becoming more at risk.

What is joint employer liability?

According to the article, Joint Employer Liability – Are you At Risk? by Joel Greenwald, “The factors that are considered in making this determination are whether the company that is receiving the benefit of the employees’ work (even if those employees are technically on another company’s payroll) (i) hires or otherwise selects the workers, or has input into the selection process; (ii) pays the workers or determines their compensation; (iii) directs the workers’ day to day activities, sets schedules or supervises performance; or (iv) has the authority to discipline the workers, enforce workplace rules or terminate the workers’ employment.” To paraphrase, if two or more companies control some of the work or working conditions of an employee, all the companies involved are considered to be “joint employers” under these laws. Of course, this are always subject to interpretation.

What are some examples of joint employers?

Some examples of joint employers include:

A communications firm uses a staffing agency to provide department administrators.
A franchisor of a restaurant might train its franchisees’ wait staff.
A laundry service might outsource its deliveries to another company.
These are examples of “joint employers” where, even though a company might not be directly employing the staff, they still become liable for legal issues such as pay, benefits, harassment and provision of employee leave.

How does a company avoid joint employer liability?

Since the law is constantly changing and due to the fact that we are not lawyers, there are no 100% bullet proof answers to this question. However, here are some suggestions of steps that companies can follow to protect themselves:

1. Require contacts!

Make sure contracts with staffing agencies, outsourced companies, and franchisees explicitly state that the client company is not the employer of the other company’s employees and does not control the employment (terms and conditions).

2. Avoid control!

Create procedures and policies which directly avoid actual and alleged control over another company’s employees. The companies you work with should also make that clear to their employees as well as the public.

3. Do your research!

Research the companies you plan on working with and make sure they have good standing with their employment practices and can be relied on.

4. Limit liability!

Require companies that you share employees for to indemnify you in the event of joint employer liability.

Due diligence in the front end will save you a lot of work and effort if you are ever faced with joint employer liability. Make sure you are staying up-to-date with the latest practices and are working with companies that share similar understanding and employer practices that you do.


Author: Scott Evers, VP of Sales at HR Ledger, Inc.
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