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Whose Employee is He Anyway? Issues Surrounding Multiple Employer Relationships

Easy Ways to Avoid a Crisis With Your Multiple Employer Relationships

Author: Haley Paul 

The majority of employment relationships involve a single employer that directs and controls its own employees. However, there are many instances under which multiple employers share responsibility for the same employees—for example, employee leasing and temporary staffing arrangements. It is important that businesses understand the circumstances that give rise to multiple-employer relationships, along with the potential ramifications of sharing employees.

Recognizing a Multiple-employer Relationship

Questions concerning multiple-employer relationships typically arise in situations where an employee alleges that he or she is employed by multiple entities for purposes of obtaining the thresholds required for coverage under a particular employment-related law (for example, for the Family Medical Leave Act to apply, a business must employ 50 or more employees), to increase a statutory damages cap (Title VII, for instance, limits damage awards based on the number of employees the employer had during the current or preceding calendar year, so the greater the number of employees, the higher the potential damage award), or to get to a company with deeper pockets.

Multiple-employer relationships can occur where one employer borrows an employee from another employer. This happens frequently in the oil and gas and construction industries, when one company needs additional workers for a project and another company loans its employees to the first company until completion of the project. They can also arise when two entities are so interrelated that they could be considered a single enterprise (like a parent and subsidiary that are jointly managed). Multiple-employer relationships also occur where two unaffiliated businesses act as joint employers, each controlling different aspects of the employee’s rights and duties—whether through temporary staffing arrangements, staff leasing services, or joint ventures.

The factors and tests used to determine who is and isn’t an employer vary greatly depending on the law at issue.  However, in general, the question of who is liable to and for the acts of any given employee typically comes down to who has the right of control over the employee. In some instances, only one entity has the right to and exercises control over the employee. In others, both entities have the right to and exercise control over the employee. Thus, it is important to carefully analyze your business relationships and clearly delineate who controls whom, both in written contract and in actual day-to-day operations.

Implications of a Multiple-employer Relationship

It probably goes without saying that there are significant legal ramifications of being an employer. Employers are vicariously liable for the tortious acts of their employees to outside parties. Employers can also be liable to their employees under various state and federal laws.

If your business loans employees out for a project and one of them negligently causes millions of dollars of property damage, do you know whether you could be held responsible? If you use a staff-leasing company to administer your employee-benefit plans, could you be liable if they make a mistake or otherwise fail to comply with ERISA—a federal law that imposes hefty, in some instances daily, penalties for certain simple violations? Unfortunately, the answer to both questions is “maybe.” Determining the potential for and extent of exposure in any given scenario requires a careful case-by-case analysis. Even seemingly insignificant details may tip the scales in one direction or the other.

If you have any potential multiple-employer relationships and are unsure about the extent of your possible liability, please contact one of our labor and employment attorneys. Surprise employer relationships are one of those hidden dangers that you never see coming but could end up costing your business everything.