Employers may think the concept of joint employer being pushed by the National Labor Relations Board (NLRB) is overly broad, but a recent decision by a federal appellate court in Richmond, Virginia adopts the most expansive definition yet. Last month the federal appellate court pronounced that two entities or individuals should be considered a joint employer of the same worker and therefore, both liable for wage violations under the federal Fair Labor Standards Act (FLSA), unless the two entities are “not completely disassociated” with respect to the terms and conditions of the worker’s employment.
The new test created by the Fourth Circuit Court of Appeals in Salinas v. Commercial Interiors focuses on whether the two employers share or agree to allocate responsibility, formally or informally, for the terms and conditions of that worker’s employment. Salinas involved a drywall contractor that employed drywall installers, who then worked almost exclusively for one of the contractor’s customers, a company that provided general contracting and interior finishing services, including drywall installation. The installers sued both the contractor and the customer for wage and hour violations.
In a 54-page opinion, the court rejected the many different multi-factor tests used by other federal circuit courts in determining joint employment – tests that use anywhere from four to 13 factors. Those tests, the court said, wrongly focus on the relationship between the employer and the employee rather than the relationship between the two putative employers. Further, the various multi-factor tests wrongly focus on whether the worker is “economically dependent” on the putative employer, which “reflects a failure to distinguish the joint employment inquiry from the separate, employee-independent contractor inquiry.”
Instead, the court said the joint employment inquiry should address the “relationship between the employer who uses and benefits from the services of workers and the party that hires or assigns the workers to that employer.” Noting that the FLSA regulations say that joint employment exists when employment by one employer is “not completely disassociated” from employment by the other employer, the court described “the fundamental threshold question” as “whether a purported joint employer shares or codetermines the essential terms and conditions of a worker’s employment.”
The court then set forth its own non-exhaustive list of factors to be considered, including whether the putative joint employers jointly determine, share, or allocate the power to direct, control, hire, fire, or modify the terms or conditions of the worker’s employment; the degree of permanency and duration of the relationship between the putative joint employers; whether one putative joint employer controls, is controlled by, or is under common control with the other; whether the work is performed on a premises owned or controlled by one or more of the putative joint employers; and whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate responsibility over functions ordinarily carried out by an employer, such as handling payroll, providing workers’ compensation insurance, paying payroll taxes, or providing the facilities, equipment, tools, or materials necessary to complete the work.
The Salinas court’s test is significantly broader than the joint employer standards currently used by the EEOC, the NLRB, the DOL, and other federal courts because it assumes that the two entities are joint employers unless they can show that they are “completely disassociated” from one another. This will be a difficult standard to meet especially in light of the court’s statement that one factor alone could support a finding of joint employer liability.
For now, even though the “completely disassociated” test only applies in Maryland, Virginia, North Carolina, and South Carolina, the decision in Salinas serves as a reminder that employers should be cognizant of the risk of joint employer liability.