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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How Employees Are Finding Loopholes to Paid Sick Leave Law

Implemented two years ago, the Paid Sick Leave (PSL) law went into effect and employees benefited from new rights. Many employers thought they were compliant by simply knowing and abiding by the new law, however what many failed to understand is that without a defined written policy, mandatory sick leave can more than double and even roll over year to year.

Under California’s mandatory PSL law, employers can limit the amount of PSL to three days or 24 hours per year, ONLY if the PSL limitation is communicated in writing. If employees are not provided with a written communication, companies are subject to the statutory mandated accrual rate of one hour of sick pay for every 30 hours worked and being carried over each year. That means that a full time employee can gain over 69 hours of PSL or nine days per year and are allowed to carry that over next year.

Here are some things to consider to ensure you can uphold your PSL policy without defaulting to the state policy:

1. What companies are required to participate in PSL?
The PSL law covers all types of employers regardless of employee size.

2. What employees are covered under PSL?
Employees include seasonal, part-time, hourly, seasonal, exempt and nonexempt employees. Any employee who has worked in California for the same company for at least 30-days is included in the PSL law. The only exclusion is for employees covered by a collective bargaining agreement that provides paid sick days or a paid time off policy that permits the use of sick days, in-home support service workers, airline flight deck and cabin crew, and certain public sector workers. However please be aware that this can vary by city with the city where the employee works trumping the California PSL law.

3. If companies have a generous sick leave policy, do they need to revise it?
YES! There are variations of the new law that might not be written into your policy including how and why the employee may use their sick leave. Limiting how the employees use sick leave can easily void the written policy and default to the state policy. Also, older sick leave policies might not include part-time employees whereas the new law does. Making sure the pre-existing policy meets the requirements of the new PSL law is important.

4. Can companies use different methods for different groups of employees?
YES! There are two options available where employees can be grouped into accrual options (one hour of PSL for every 30 hours worked) or three days/24-hours at the beginning of each year of employment.

5. Are there different laws depending on where the employee works?
YES! Knowing the laws where the employee works is very important as these laws trump the California state PSL law. Currently San Francisco, Oakland, Emeryville, Los Angeles, San Diego and Santa Monica have different variation of the PSL law.

Unfortunately this is just the beginning of the various loopholes an employee can use to default to the California PSL law. Understanding recordkeeping obligations, calculating sick leave time, reporting requirements, communication policies, and understanding local ordinances are a must when revising and preparing a PSL policy within your company. Simply forgetting to report an accrual on a paystub can leave you defaulting to the state PSL law without your knowledge.


For a review of where you are with your PSL compliance please call Malcolm or Scott today at 800-451-1136.

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