Co-employment and joint employment are not the same, largely because of workforce management. In a co-employment arrangement, only one party makes labor-related decisions, but in joint employment, both parties have input on wages, hours, new hires, terminations, etc. Here are the definitions of each which should help clarify the distinction between these two similar-sounding conditions. Understanding the difference can help an organization avoid running afoul of the laws and regulations governing both types of labor arrangements.
What is Co-Employment?
Contingent laborers provided to an employer via a staffing arrangement (like a PEO, or staffing company) are technically employed by two entities at the same time. The hiring authority (typically a business) that directs the workers’ day-to-day activities, and the staffing company or PEO that manages the compensation, benefits and other HR/administrative portion of things. In a co-employment arrangement, both the hiring authority and the sourcing company maintain responsibility for compliance with all applicable laws and regulations governing labor as workers are technically employed both by the business and the co-employer.
Co-employment commonly exists in the contingent workforce arena when staffing agencies engage independent contractors on their clients’ behalf. So, the staffing supplier is responsible for HR functions such as recruiting, hiring, and payroll, while the hiring company manages the work agreement. Because both the staffing supplier and the hiring company have obligations to the contractor, both may be legally considered as an employer.
What is joint employment?
Joint employment exists when an employee is employed by two (or more) employers such that the employers are responsible, both individually and jointly, for compliance with a statute. Both the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA) provide for joint employment.
While there might be joint employment exposure in all industries, some have a higher likelihood of running up against joint employment scenarios. For example, home health care agencies typically share staff and common management. Construction is another one due to the common practice of having laborers work for a sub-contractor or a general contractor. The agriculture industry typically employs farmworkers who work for a farm labor contractor or possibly a grower. Warehousing and logistics, hospitality and our own staffing industry round out the list of industries most likely to be exposed to joint employment dynamics due to the common practice of shared labor.
So, how can an operation like yours thread the needle and operate with clear understanding of the difference between co employment and joint employment? Contingent Workforce Strategies points to two recent court cases that provide guidance. CWS says,
“The overlap between tests to determine employment status and joint employer status can be confusing. But two recent court cases — one from California and the other from Massachusetts — drew clear lines distinguishing between joint employer versus independent contractor classification analysis, and contingent workforce program managers will want to take note.”
Or, you can reach out to your nextSource representative to help make sense of the distinction as it relates to your contingent workforce management program.