Joint Employer Liability Expanded

July 3, 2017, 2:05 PM

Earlier this year, the U.S. Court of Appeals for the Fourth Circuit (which has jurisdiction over Virginia) announced a new test for determining when two entities are joint employers under the Fair Labor Standards Act (FLSA). This test significantly expanded potential liability for joint employers for wage and hour violations. Under the new test, joint employment exists if: (1) two or more entities share, agree to allocate responsibility for, or otherwise codetermine the essential terms and conditions of a workers employment; and (2) the worker is an employee, not an independent contractor. The Court held that the fundamental question in assessing joint employment is whether two or more entities are not completely disassociated with respect to a worker, such that they should both be deemed the workers employer. In answering this inquiry, the Court directed that the following six factors be considered:

  • Whether the entities jointly determine, share, or allocate the direction, control, and supervision of the worker;
  • Whether the entities jointly determine, share, or allocate the power to hire and fire or the power to modify the terms of employment;
  • The permanency or duration of the relationship between the entities;
  • Whether one of the entities through ownership or otherwise has control over the other entity;
  • Whether the premises on which the worker performs his/her duties is owned or controlled by one entity independently or together; and
  • Whether the entities jointly determine, share, or allocate the functions ordinarily carried out by an employer, such as payroll, workers compensation insurance, taxes, and the provision of tools and equipment.

Applying this test for the first time in Salinas v. Commercial Interiors, Inc., the Court had no problems finding joint employment between a general contractor and its drywall installation subcontractor. In reaching this conclusion, the Court noted that the general contractor and subcontractor had a long relationship; almost all of the subcontractors work was performed on jobs for the general contractor; the general contractor controlled the subcontractors staffing of its jobs, actively oversaw and directed the day-to-day activities of the subcontractors workers, required the subcontractors workers to attend meetings and abide by safety protocols, and required the workers to sign in and out with the general contractors supervisors; and the general contractor provided the tools and equipment necessary for the jobs. Accordingly, both the general contractor and the subcontractor were responsible for FLSA violations alleged by the workers.

PRACTICAL POINTER

Joint employment is a hot issue for employers whether under the FLSA or federal employment discrimination laws. And, even though this case involved the FLSA, the decision may signal the Courts willingness to consider a broader definition of joint employment under other laws. Therefore, employers need to be mindful of the expanded potential for joint employer liability when considering and implementing subcontracting relationships, joint ventures, independent contractor agreements or hiring temporary employees.