Court drafts new joint employer test

On Jan. 25, a federal appeals court covering Maryland, Virginia, West Virginia, and North and South Carolina was the latest to craft a joint employer test, holding that a Maryland general contractor was the joint employer of its drywall subcontractor’s employees. As a result, the contractor was responsible for unpaid wages, including overtime, for the sub’s employees.

Faced with facts that were very unfavorable for the contractor, the court decided that a joint employment relationship between companies exists when they share or in some way “co-determine … the essential terms and conditions of a worker’s employment” and if the worker involved is an employee and not an independent contractor.

In doing so, the court relied on Fair Labor Standards Act regulations, which require examining whether the two potential employers are “entirely independent” and “completely disassociated” from each other with respect to a person’s employment. Unfortunately for the contractor, it appears that it did not have a snowball’s chance of proving that it was “entirely independent” or “completely disassociated” from the sub with respect to the workers involved.

The facts in this case were not particularly good for the general contractor. The subcontractor performed almost all of its work for the general contractor and had only one other client for whom it only worked when the general contractor had no jobs available. The general contractor provided the tools, equipment, and materials used by the sub’s employees; actively supervised and, in some ways, directed the sub’s workers; required them to attend meetings about work and safety protocols; required them to sign in and out each day on the general contractor’s timesheets; and, among other things, provided the workers with stickers, vests, and sweatshirts bearing the general contractor’s logo. Worse, the general contractor instructed the sub’s workers to tell anyone who asked that they worked for the general contractor, rather than the sub.

Based on this evidence, the court reviewed “joint employer” tests applied by other courts, reversed the lower court — which ruled in the general contractor’s — favor and established its own test, identifying a non-exclusive list of six factors to consider in evaluating the “joint employer” issue. The factors included:

· Whether and how the two companies, either formally or in practice, “direct, control, or supervise the worker …”
· Whether and how the two companies hire, fire, or modify the terms or conditions of employment
· “ … the degree of permanency and duration of the relationship” between the two companies
· Whether one of the companies controls the other
· Whether the work is performed on premises owned or controlled by one of the companies
· Whether and how the two companies control “functions ordinarily carried out by an employer” including payroll, providing facilities and equipment, providing workers’ comp insurance, etc.

Pretty broad list, right? In fact, the court emphasized that one of these factors alone, or any other facts showing that one company “shares or codetermines terms and conditions” of employment, can point the needle to “joint employer” status, even assuming that the two companies generally have a legitimate contractor/subcontractor/vendor relationship.

Other courts have applied different tests. And, as we have reported, a federal court in the District of Columbia is also considering a joint employer test in Browning Ferris v. NLRB in the context of a union election. While the outcome in cases like this recent one may be easy to predict, it is more difficult to evaluate if and when companies may cross the line to joint employer land when there is much less control exerted than in the case described here, or when that control is theoretically reserved, but not exercised. One thing seems certain in states where this decision applies — plaintiffs now have a broader, more employee-friendly test at their disposal.

This article originally appeared on the Foley & Lardner website. The information in this legal alert is for educational purposes only and should not be taken as specific legal advice.