Expanded Liability in Staffing and Franchise Relationships
Remote Work as a Reasonable Accommodation
July 18, 2025
More companies today rely on staffing agencies and franchise partnerships to operate. These relationships offer flexibility, reduce overhead, and allow rapid scaling. However, when something goes wrong—such as unpaid overtime, wage delays, or harassment—it can be difficult to determine who is legally responsible.
Workers may assume the company where they clock in each day is their employer. This isn’t always true. Similarly, companies may believe that staffing agencies or franchisees handle all employment matters. Later, they discover they are legally liable.
About the Author
Ty Hyderally is a highly regarded employment law attorney and the owner of Hyderally & Associates, P.C., a firm with offices in Montclair, New Jersey, and New York City.
Recognized among the Top Ten Leaders of Employment Law in Northern New Jersey, Hyderally brings decades of experience litigating employment discrimination, whistleblower, retaliation, wage and hour, and contract-related claims.
His firm aggressively represents employees and provides proactive counsel to businesses on compliance, policy drafting, and workplace training.
A former president of the National Employment Lawyers Association (NJ), Hyderally is also a frequent lecturer and has served in national leadership roles within the American Bar Association’s Labor and Employment Litigation Section.
Why Employer Identity Matters
Knowing who the employer is in these situations isn’t just a formality. Instead, it determines who owes back wages, who must respond to complaints, and who can be held accountable in court.
As an employment attorney practicing in New York and New Jersey, I, Ty Hyderally, often help clients navigate these gray areas. Whether you’re an employer trying to limit liability or a worker seeking fair treatment, understanding joint employment is essential.
Recent changes in federal guidance have expanded the potential for liability. If you’re part of a staffing or franchise arrangement, the rules may affect you directly.
What Is a Joint Employer?
The Fair Labor Standards Act (FLSA) uses broad language to define who qualifies as an employer. Under Section 3(g), to “employ” means to “suffer or permit to work.” That phrase may sound vague, but it’s designed to capture a wide range of employment relationships.
A joint employer exists when two or more entities share some level of control over the same employee’s work. In these situations, all joint employers are equally responsible for complying with wage and hour laws. If one fails to pay minimum wage or overtime, the other can be held liable too.
Two Types of Joint Employment
Courts and agencies recognize two main types of joint employment:
- Horizontal joint employment: This occurs when a worker is employed by multiple entities that are closely associated. For example, two restaurants owned by the same parent company that share staff between them.
- Vertical joint employment: This is more common in staffing and franchise settings. A worker is employed by one entity—like a staffing agency—but performs work under the supervision of another company.
In vertical arrangements, the second company may not issue paychecks or handle HR. Yet if it controls schedules, work conditions, or supervision, it can still be deemed a joint employer.
Understanding these distinctions helps clarify who bears legal responsibility in complex workplace setups. Next, we’ll explore how federal rules have shifted over time—and what that means today.
The 2020 Rule and Its Undoing
In January 2020, the U.S. Department of Labor (DOL) issued a rule to clarify when multiple employers could be held jointly responsible under the FLSA. This rule significantly narrowed the definition of a joint employer, especially in vertical employment situations involving staffing agencies or franchises.
The Four-Factor Test
The 2020 rule focused on four specific factors:
- Whether the potential joint employer could hire or fire the employee
- Whether it supervised and controlled the employee’s work schedule or conditions
- Whether it determined the employee’s rate and method of payment
- Whether it maintained employment records
This test emphasized direct control. It rejected broader concepts like “economic dependence,” which had previously helped courts decide joint employer status. The rule also excluded key FLSA definitions, limiting how the employment relationship could be interpreted.
As a result, many businesses in staffing or franchise arrangements believed they were less likely to be considered joint employers. For workers, this often meant fewer avenues to hold parent companies accountable when violations occurred.
The Rule Gets Overturned
This approach didn’t last long. Later in 2020, a federal court in New York struck down most of the rule. The court found that the Department of Labor’s interpretation was too restrictive and inconsistent with the FLSA’s protective purpose.
The court also called the rule “arbitrary and capricious” and vacated the portion dealing with vertical employment.
In 2021, the DOL formally rescinded the 2020 rule. This brought back the broader, pre-2020 approach, which considers the totality of circumstances. Under this standard, courts weigh both direct and indirect control, as well as whether a worker is economically dependent on the alleged joint employer.
Today, companies must once again consider a wide range of factors—not just hiring power or payroll access—when assessing their liability.
What This Means for Staffing Agencies and Clients
If your business uses workers supplied by a staffing agency, you may be more legally exposed than you think. Even if your company doesn’t sign the paychecks, joint employment rules could still apply—especially under the broader post-rescission standard.
How Staffing Relationships Work
Staffing relationships typically work like this: the agency recruits, hires, and pays the worker. Meanwhile, the host company—the one where the work is performed—often controls the schedule, assigns tasks, and oversees performance. This overlap in control can lead to joint employer liability.
Key Risk Factors
Key factors that may indicate joint employment include:
- Direct supervision by your staff over agency workers
- Setting or influencing work hours, duties, or performance standards
- Providing training, tools, or access to company systems
- Relying on these workers to perform essential business functions
If your company is found to be a joint employer, it becomes fully responsible for complying with wage and hour laws. That includes minimum wage, overtime, meal and rest breaks, and recordkeeping requirements.
Practical Steps for Employers
As Ty Hyderally, I advise employers in New York and New Jersey to take proactive steps. First, review your agreements with staffing firms. Make sure responsibilities for compliance are clearly defined.
However, understand that contracts alone won’t shield you. Courts look at actual workplace practices. If your team exerts day-to-day control over non-payrolled workers, that control may create a joint employment relationship.
To reduce risk, train your managers to limit oversight of outside workers. Additionally, maintain boundaries between internal employees and those from third-party agencies whenever possible.
What Workers Need to Understand
If you work for a staffing agency or in a franchise setting, you may not know who your legal employer is. You might clock in at one company but get paid by another. This confusion can make it difficult to understand your rights and who is responsible when those rights are violated.
The joint employer framework exists to protect workers in exactly these situations. If two entities share control over your job—even indirectly—both can be held accountable under the law.
Warning Signs to Watch For
Warning signs of joint employment include:
- Receiving direction from supervisors at more than one company
- Using tools, software, or uniforms provided by a business that doesn’t issue your paycheck
- Following rules or policies created by another company in the chain
- Reporting misconduct to one entity but being told to “talk to the other one”
If you’re unsure who’s ultimately responsible for things like your wages, breaks, or working conditions, you may have more than one employer.
Document Everything
Employment attorney Ty Hyderally recommends that workers in New York and New Jersey keep careful records. Track who gives you assignments, who monitors your performance, and where company policies originate.
If you believe your rights have been violated, this documentation can help determine who bears legal responsibility. Furthermore, that’s the first step toward asserting your rights under federal and state labor laws.
For more serious concerns, such as harassment or discrimination, you may also want to consider when to hire an employment discrimination attorney.
Why It Matters in NY and NJ
New York and New Jersey are known for strong worker protections and active enforcement of labor laws. Courts in both states often interpret employment relationships broadly, especially when it comes to joint employer liability.
With the federal rollback of the 2020 rule, state-level interpretations now carry even more weight. Employers operating in these states must be aware that indirect control, economic dependence, and shared supervision can all lead to joint employment findings.
New York’s Approach
In New York, state labor laws often mirror or go beyond the protections offered by the FLSA. Courts may examine whether a company benefits from the work, not just whether it directly manages the employee. This approach expands the scope of liability for businesses that rely on outside labor.
This is part of a broader trend of increased scrutiny on employer practices, including non-compete agreements.
New Jersey’s Standards
In New Jersey, the judiciary has likewise emphasized the importance of the “economic realities” test. This includes factors like who provides the tools for the job, who sets the hours, and whether the work is integral to the business.
Recent civil rights and technology initiatives also signal how state enforcement continues to evolve.
Attorney Ty Hyderally regularly counsels businesses across both states on how to navigate these evolving standards. Failing to recognize a joint employer relationship can lead to unpaid wage claims, penalties, and costly litigation.
If you’re a business owner, franchisor, or staffing client in NY or NJ, now is the time to evaluate your practices. Clear documentation and carefully structured relationships can help limit exposure. Meanwhile, if you’re a worker in one of these arrangements, understanding state-specific rules could be critical to asserting your rights.
What Employers Should Do Now
If your business works with staffing agencies, subcontractors, or franchisees, you need to evaluate your potential exposure to joint employment liability. The old assumption—that outsourcing labor reduces legal responsibility—is no longer reliable under current standards.
Review Your Agreements
Start by reviewing your agreements. Contracts should clearly outline which entity handles hiring, wages, scheduling, and supervision. However, remember that legal language alone is not enough. What happens in practice matters more than what’s written on paper.
Examine Daily Operations
Next, look at how your staff interacts with outsourced workers. Do your managers assign daily tasks or conduct performance reviews? Are those workers using your tools, email systems, or software platforms? These are all signals that your company may be a joint employer.
Train Your Team
To reduce risk, employment attorney Ty Hyderally recommends training supervisors on the limits of their role when interacting with third-party personnel. Make sure responsibilities are consistent with what’s in your agreements.
Conduct Regular Audits
Also consider conducting regular audits. Track who oversees which tasks and ensure compliance with recordkeeping requirements. Joint liability often arises when there’s confusion about who is responsible for key employment obligations.
Clear roles, consistent practices, and proper oversight can help protect your business from unexpected claims. In a joint employment environment, prevention is always more effective than defense.
What Workers Should Do If Something Feels Wrong
If you’re working under a staffing agency or franchise setup and something doesn’t seem right—like missing wages, denied breaks, or inconsistent treatment—it’s important to take action. You may have more than one employer, and both may share responsibility for your rights at work.
Document Your Situation
Start by observing who gives you directions. Are you being supervised by staff from the host company? Do you follow policies that come from a corporate office or franchisor? These details help clarify who might be accountable under the law.
Keep a written record of your hours, pay stubs, and communications with supervisors. If you’re told to refer questions to another company or if your responsibilities shift without explanation, document those changes.
Know Your Rights
If you feel unsafe or underpaid, don’t assume you have no recourse. Many workers in joint employment situations wrongly believe they’re limited to dealing with their direct employer. Under current federal and state rules, other entities involved in your daily work may also bear legal responsibility.
Seek Legal Help
Ty Hyderally, an experienced employment lawyer in New York and New Jersey, encourages workers to seek legal advice early. Understanding the nature of your employment relationship is key to protecting your rights and securing what you’re owed.
A short consultation can often clarify whether you’re in a joint employment situation—and what steps to take next.
Clarifying Employer Responsibilities in Modern Workplaces
Joint employment is no longer a niche legal issue. It affects businesses and workers across staffing, franchise, and subcontracting arrangements.
Efforts to expand workplace diversity can also intersect with joint employer dynamics, particularly in corporate oversight of franchise or partner entities.
Understanding how joint employment interacts with reasonable accommodation policies, such as remote work, is also increasingly relevant in today’s legal landscape.
If you’re unsure where your company stands, or if you’re a worker facing uncertainty about your rights, it’s important to get informed. Legal guidance can help clarify responsibilities and prevent future problems.
I’m Ty Hyderally, and I’ve helped clients across New York and New Jersey navigate these complex relationships. Whether you’re an employer looking to stay compliant or an employee seeking fair treatment, understanding joint employment is a key part of protecting your future.
