Joint Employer

What Is a Joint Employer?

A joint employer relationship exists when two or more businesses share control over the same worker's employment. When this relationship is established, ALL joint employers share legal responsibility for wage and hour compliance, including minimum wage, overtime, meal breaks, and rest breaks.

Joint employment is increasingly important in California as businesses use staffing agencies, franchises, contractors, and other arrangements that create complex employment relationships. Understanding joint employer liability helps businesses assess their true legal exposure.

When Joint Employment Exists

Joint employment can arise in several contexts:

Common Joint Employment Arrangements

Arrangement	Description	Joint Employer Risk
Staffing agencies	Workers placed at client locations	High - client often controls work
Franchises	Franchisor sets policies for franchisee workers	Medium to High
Contractors/Subcontractors	General contractor uses subcontractors	Medium to High
Management companies	Third party manages operations	High
Labor providers	Outsourced workforce	High
Parent/Subsidiary	Parent controls subsidiary's employment	Medium

California's Joint Employer Test

California uses an expansive test based on whether the business:

1. Suffers or permits the worker to work
2. Engages the worker to perform work
3. Exercises control over wages, hours, or working conditions
4. Has the power to control employment aspects (even if not exercised)

Unlike some federal tests that focus primarily on direct control, California's approach captures businesses that have indirect influence over employment.

Factors Determining Joint Employment

Control Over Employment Conditions

Control Factor	Joint Employer Indicator
Hiring	Has input on who is hired
Firing	Can require worker removal
Pay rates	Sets or influences wages
Scheduling	Controls when workers work
Supervision	Directs daily activities
Work methods	Dictates how work is performed
Discipline	Can impose or require discipline
Training	Provides training requirements

Economic Dependence

Factor	Joint Employer Indicator
Business integration	Worker essential to operations
Capital investment	Business owns facilities/equipment used
Profit control	Controls worker's opportunity to profit
Permanence	Ongoing, indefinite relationship
Skill level	Work requires little specialized skill

Structural Control

Factor	Joint Employer Indicator
Contract terms	Mandates employment conditions
Pricing	Sets prices that determine wages
Brand standards	Requires specific operating practices
Operational control	Controls business operations

Joint Employment Scenarios

Scenario 1: Staffing Agency Placement

Situation: ABC Staffing places workers at XYZ Manufacturing. Workers wear XYZ badges, use XYZ equipment, follow XYZ supervisors, and work XYZ schedules. ABC issues paychecks.

Analysis:

Factor	ABC Staffing	XYZ Manufacturing
Issues paycheck	Yes	No
Controls schedule	No	Yes
Supervises work	No	Yes
Provides equipment	No	Yes
Can terminate	Yes (formally)	Yes (effectively)
Sets pay rate	No	Often

Result: Both ABC Staffing AND XYZ Manufacturing are joint employers. Both are liable for wage and hour violations.

Practical Impact: If XYZ requires workers to skip meal breaks, BOTH companies face liability for break violations—even though ABC issues the paychecks.

Scenario 2: Franchisor-Franchisee

Situation: FastFood Corp franchises restaurants. The franchisor dictates menu, pricing, uniforms, operating hours, quality standards, and provides scheduling software. Individual franchisees hire workers and issue paychecks.

Analysis:

Factor	Franchisor	Franchisee
Hires workers	No	Yes
Issues paycheck	No	Yes
Sets operating hours	Yes	No
Determines pricing	Yes	No
Provides systems	Yes	No
Controls brand standards	Yes	Follows

Result: Depending on the level of control, the franchisor may be a joint employer. Cases like Patterson v. Domino's Pizza examine whether franchisor control extends to employment conditions.

Key factors for franchisors:

• Mandatory scheduling systems that affect wages
• Required staffing levels
• Wage recommendations or caps
• Training requirements for franchisee employees

Scenario 3: General Contractor - Subcontractor

Situation: General Construction Corp hires PlumbPro as a subcontractor. PlumbPro brings its own employees, but General Construction sets the schedule, provides some equipment, and the site supervisor directs daily activities.

Analysis:

Factor	General Contractor	Subcontractor
Employs workers	No	Yes
Controls schedule	Yes	Limited
Supervises work	Yes	Also yes
Provides equipment	Some	Most
Quality control	Yes	Also yes

Result: Joint employment likely exists. General Construction's control over work schedule and supervision creates shared liability.

Scenario 4: Client-Vendor Relationship

Situation: TechCorp contracts with CleanCo for janitorial services. CleanCo employs the janitors, sets their pay, and supervises them. TechCorp only specifies what areas need cleaning and when.

Analysis:

Factor	TechCorp	CleanCo
Employs workers	No	Yes
Sets pay	No	Yes
Supervises	No	Yes
Hires/fires	No	Yes
Controls methods	No	Yes

Result: Likely NOT joint employment. TechCorp is simply a customer specifying desired outcomes, not controlling employment conditions.

Liability of Joint Employers

When joint employment exists, ALL joint employers are:

Jointly and Severally Liable

Obligation	Effect
Wage violations	Any joint employer can be sued for full amount
Overtime	Both responsible for tracking hours across all work
Break violations	Both liable if breaks not provided
Penalties	Both subject to penalties
Collections	Employee can collect from either/both

Example: Worker is owed $10,000 in unpaid overtime. They can collect the full $10,000 from the staffing agency, the client company, or split between them.

Specific Joint Employer Obligations

Area	Obligation
Minimum wage	Ensure worker receives at least minimum wage
Overtime	Track total hours across all joint employers
Meal breaks	Provide compliant meal breaks
Rest breaks	Authorize and permit rest breaks
Wage statements	Accurate itemized statements
Record keeping	Maintain time and pay records
Workers' compensation	Coverage for workplace injuries
Anti-discrimination	Prevent workplace discrimination

Combined Hours for Overtime

When a worker has joint employers, hours are combined for overtime purposes:

Example: Combined Hours Calculation

Worker employed by both Staffing Agency and directly by Client Company in same workweek:

Employer	Hours
Staffing Agency	30 hours
Client Company	15 hours
Total	45 hours

Overtime calculation: 5 hours of overtime are owed (45 - 40 = 5)

Who pays? Both joint employers share responsibility. Typically allocated proportionally:

• Staffing Agency: 30/45 = 67% of overtime
• Client Company: 15/45 = 33% of overtime

Practical challenge: This requires communication between joint employers about total hours worked.

Protecting Your Business

For Companies Using Staffing Agencies

1. Contractual protections: Require agency to indemnify for wage violations
2. Compliance verification: Audit agency's wage and hour practices
3. Monitor actual practices: Ensure breaks are being provided at your site
4. Clear responsibilities: Define which employer handles what
5. Insurance: Ensure adequate coverage for employment claims

Contractual Element	Purpose
Indemnification clause	Agency covers costs of their violations
Compliance warranties	Agency certifies legal compliance
Audit rights	Ability to verify agency practices
Insurance requirements	Minimum coverage levels
Records access	Obtain time and pay records

Warning: Contractual protections don't eliminate liability to workers—they only provide a right to seek reimbursement from the other employer.

For Staffing Agencies

1. Know your clients: Understand worksite conditions
2. Monitor hours: Track total hours including client work
3. Break policies: Ensure clients permit required breaks
4. Training: Train clients on California requirements
5. Documentation: Maintain thorough records

For Franchisors

1. Limit employment control: Avoid dictating specific employment practices
2. Advisory vs. mandatory: Make employment guidance optional
3. Systems separation: Don't provide mandatory scheduling/payroll systems
4. Training scope: Focus on product/service, not employment
5. Legal review: Have franchise agreements reviewed for joint employer exposure

For General Contractors

1. Subcontractor qualification: Verify subcontractor compliance history
2. Contract requirements: Require wage and hour compliance
3. Separate supervision: Let subcontractors supervise their workers
4. Avoid control: Don't dictate how subcontractors manage employees
5. Insurance certificates: Require adequate coverage

California-Specific Considerations

Labor Code Section 2810.3

California's "Labor Contractor" law specifically addresses joint employment:

Provision	Requirement
Client employer liability	Clients share liability with labor contractors
Specific industries	Construction, agriculture, hospitality focus
Documentation	Written contracts required
Compliance verification	Clients must verify contractor compliance

Wage Theft Liability

Under Labor Code Section 2810, businesses contracting for labor cannot avoid liability by using labor contractors if they know or should know of violations.

AB5 Intersection

The ABC test interacts with joint employment:

• If a worker is an employee (not independent contractor), joint employer analysis applies
• Multiple businesses in the chain may all be employers

Responding to Joint Employer Claims

If your business faces a joint employer claim:

Immediate Steps

1. Preserve records: Do not destroy any relevant documents
2. Legal counsel: Engage employment law attorney
3. Investigation: Determine extent of control exercised
4. Coordination: Communicate with other potential joint employer
5. Insurance: Notify EPLI carrier

Defense Strategies

Argument	Basis
No control	Did not control employment conditions
Contractual allocation	Agreement specifies other party responsible
Arm's length	Truly independent business relationship
Good faith	Relied on other employer's compliance

Settlement Considerations

• Joint employers often settle together
• Contribution claims between joint employers
• Insurance coverage allocation
• Future relationship considerations

Practical Compliance Checklist

For Businesses Using Third-Party Labor

• Written contract defining responsibilities
• Indemnification and insurance requirements
• Regular compliance audits of partner
• Monitoring of actual worksite conditions
• Communication system for hours tracking
• Break policy enforcement at your location
• Record retention from all parties

For Businesses Providing Labor to Others

• Clear employment policies followed
• Time tracking across all client sites
• Break compliance verification
• Wage statement accuracy
• Records of all client assignments
• Training on client site requirements
• Communication with clients on total hours