Co-Employment & Joint Employment

Joint employment and co-employment are often used synonymously. In both situations, two separate organizations share legal oversight and responsibility for an employee or group of employees. However, the two concepts have one crucial difference — the level of input each has on the employees’ day-to-day environment. EOs offer a co-employment business model that allocates responsibilities between the PEO, as statutory employer, and its clients, the worksite employer. According to the National Association of Professional Employer Organizations (NAPEO), companies that partner with a PEO in a co-employment model have access to more benefits options, risk-sharing in certain employer liability matters, and oversight of 401(k) plans. With co-employment, neither party is “the” employer, rather both are “an” employer.

Joint employment, on the other hand, is when two or more companies exercise some control over the work and working conditions of an employee. As an example, in this model, one company might be fully liable if the other company fails to perform a task such as pay wages. Legal determination that companies are joint employers is very complicated.

Several different tests can apply depending on the situation. The determining factors of joint employment differ under the Fair Labor Standards Act (FLSA), the National Labor Relations Act (NLRA), and employee benefits law. There can even be a different standard applied by state laws. Usual factors that are considered in the analysis, however, including whether the company receiving the benefit of the employees’ labor: (i) has hiring authority or input; (ii) pays the workers or determines compensation; (iii) directs employees’ day-to-day work; or (iv) can discipline and fire employees.

EOs offer a co-employment business model that allocates responsibilities between the PEO, as statutory employer, and its clients, the worksite employer. According to the NAPEO, companies that partner with a PEO in a co-employment model have access to more benefits options, risk-sharing in certain employer liability matters, and oversight of 401(k) plans. With co-employment, neither party is “the” employer, rather both are “an” employer.

Joint employment is when two or more companies exercise some control over the work and working conditions of an employee. As an example, if company “A” does not pay a shared employee, company “B” is responsible for compensation. The legal determination that companies are joint employers is very complicated.

Several different tests can apply depending on the situation. In fact, determining factors of joint employment differ under the Fair Labor Standards Act (FLSA), the National Labor Relations Act (NLRA), and employee benefits law. There can even be a different standard applied by state laws. Usual factors that are considered in the analysis, however, including whether the company receiving the benefit of the employees’ labor: (i) has hiring authority or input; (ii) pays the workers or determines compensation; (iii) directs employees’ day-to-day work; or (iv) can discipline and fire employees.