There are three primary types of employer relationships. Below is an overview of the types of employer relationships and how each can impact the employee count for an employer, as well as the eligibility of leave offerings for employees and the application of policy.
There are three main types of employer relationships:
To fall under the joint employer rule, a business must possess and exercise substantial direct and immediate control over one or more essential terms and conditions of employment of another business’ employees.
Furthermore, joint employers are jointly held responsible for each other’s employment practices (including fair and unfair labor practices), and/or have joint responsibility to collectively bargain with a union.
Below are the factors that help determine whether entities are joint employers:
When an employee is employed by two employers in a joint employer relationship, there is one employee that will be the primary employer and the other will be the secondary employer. To determine the primary and secondary employer, there are some facts to consider:
Employees who are jointly employed by two employers must be counted by both employers in determining employer coverage and employee eligibility under the FMLA, regardless of whether the employee is maintained on one or both employers’ payrolls.
Employees jointly employed by more than one employer must be counted by each employer, whether or not they are on the employer’s payroll for determining each employer’s leave obligation under the NYSPSL law.
Separate entities may be considered an integrated employer (or a single employer) depending on the entire relationship of the entities.
Factors to consider when determining if two or more entities are an integrated employer are as follows:
Please note, common ownership is the least significant factor of the test that courts look at. Courts deem the most important parts of the test to be centralization of functions and interrelation between operations.
Because integrated employers are considered a single employer, all employees at all locations, and under all entities are counted for FMLA coverage purposes.
When employers are considered a single entity or single employer, all employees at all locations and/or entities are counted for PSL coverage purposes.
Multiple entities may have enough common ownership to be considered a single entity for tax purposes and under the Affordable Care Act. Common ownership is when five (5) or fewer people own 80% or more of each company, otherwise know as a “controlled group.”
Under the IRS rules, if a business has one of the following relationships, a controlled group exists:
Because Common Ownership employers are considered a single entity, all employees at all locations are counted for FMLA coverage purposes.
When employers are considered a single entity or single employer, all employees at all locations and/or entities are counted for PSL coverage purposes.
The three primary types of employer relationships are joint employers, integrated (single) employers, and employers with common ownership. Each relationship can impact employee counts, leave eligibility, and the application of employment laws and policies.
A joint employer relationship exists when two businesses share significant control over the essential terms and conditions of an employee’s work, such as hiring, scheduling, compensation, or employment records.
Factors that may indicate a joint employer relationship include authority over hiring and firing, control of work schedules and conditions, determining pay rates, and maintaining employment records.
Employees who are jointly employed must be counted by both employers when determining employer coverage and employee eligibility under the Family and Medical Leave Act (FMLA), regardless of which employer maintains the employee on payroll.
An integrated employer exists when separate entities operate so closely together that they are considered a single employer for certain employment law purposes.
Factors include common management, shared operations, centralized control of labor relations, shared employees, and common ownership or financial control. Courts generally place the greatest emphasis on centralized functions and operational interdependence.
When businesses are considered an integrated employer, all employees across all entities and locations are counted together for FMLA coverage.
Common ownership generally exists when five or fewer individuals, trusts, or estates own at least 80% of multiple businesses, creating what is often referred to as a controlled group.
When businesses are considered a single entity because of common ownership, all employees across all locations and entities are counted together for FMLA coverage purposes.
Businesses that are struggling to track eligibility for FMLA, sick leave, and other compliance requirements may want to reach out to an HR Services Company.
Contact us today to learn more about our HR Compliance Services.