Being an employer isn't a label a company picks for itself. It's a legal status conferred by federal, state, and sometimes local law based on the actual relationship with workers. And because employer status triggers tax obligations, benefits liability, and anti-discrimination duties, government agencies have a strong interest in applying the definition broadly. Staffing agencies, franchisors, parent companies, and platforms all find themselves pulled into employer status in ways they didn't expect. This page covers what it means to be an employer, what the status obligates you to do, and the joint employment issues that have driven the most enforcement activity in recent years.
What Makes a Company an Employer
The common law test looks at whether the company has the right to control the manner and means of the worker's performance. Who sets the schedule? Who provides tools? Who has hire/fire authority? Who sets pay? Who evaluates performance? More "yes" answers make the company more likely to be the employer.
The test varies by statute. The FLSA uses an economic realities test that's broader than common law. Title VII uses its own test. The NLRA uses yet another. A single worker can have different legal relationships with different parties depending on which federal law is at issue. The DOL FLSA page walks through these tests in detail.
The Legal Obligations That Come With Employer Status
Employer status triggers a long list of responsibilities. On the tax side: withhold federal income tax, Social Security, and Medicare from wages; pay the employer share of FICA; pay federal unemployment (FUTA) and state unemployment taxes; deposit and report all of it on time. The payroll process operationalizes these obligations.
On the workplace side: comply with the Fair Labor Standards Act (minimum wage, overtime, child labor); provide a workplace free from harassment and discrimination ; reasonably accommodate disabilities and religion; honor FMLA leave rights for qualifying events; maintain OSHA-compliant safety standards; and carry workers' compensation insurance where required. The EEOC employer portal has the federal anti-discrimination overview.
Who Counts as an Employer of Remote Workers?
For a worker in a different state, your company is the employer for federal purposes (IRS, EEOC, NLRB). For state purposes, you're usually also an employer in the worker's state, which triggers state tax registration, unemployment insurance, and compliance with that state's wage, leave, and anti-discrimination laws. Multi-state remote workforces create real administrative load that small HR teams often underestimate.
Joint Employment: When Multiple Companies Are Employers
Joint employment arises when two or more companies share legal responsibility for a worker. Common scenarios: temp agency workers placed at client sites, franchise workers whose pay and conditions are partly set by the franchisor, and contractors who function like employees of the client company. Joint employers can be jointly and severally liable for wage violations, which means one party can owe back wages the other actually caused.
The DOL and NLRB have shifted the joint employment standard multiple times over the last decade. Under current federal law, the analysis focuses on whether both companies exercise substantial direct and immediate control over essential terms and conditions of employment. State laws, especially California's, often apply broader standards.
Staying on the Right Side of Your Employer Obligations
The highest-leverage step is a clean employment classification system. Document the status of every worker (full-time, part-time, temp, contractor) and audit the list at least annually. Track multi-state workers separately and confirm you're registered, withholding, and remitting correctly in every state where you have a worker.
For HR teams, keep the workplace-side obligations visible too. Document your harassment reporting channels, retaliation policy, and accommodation process in the employee handbook . Train managers annually on wage and hour basics and non-discrimination requirements. Being an employer is a continuous compliance obligation, not a one-time setup.
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