Joint Employment Under the Fair Labor Standards Act
A List of Do’s and Do Not’s for North Carolina General Contractors in a post-Salinas Era.
In Salinas v. Commercial Interiors, Inc., 848 F.3d 125 (4th Cir. 2017), the 4th Circuit Court of Appeals laid out a new test for determining when two or more individuals or corporate entities should be considered “joint employers” of an employee under the Fair Labor Standards Act. The 4th Circuit’s new test is intentionally very broad and will likely make more general contractors responsible for damages to which subcontractors’ employees are entitled when a subcontractor violates the FLSA.
The plaintiffs in Salinas were direct employees of a framing and drywall installation subcontractor from 2009 to 2012. While the subcontractor did occasional work for other companies, from 2009 to 2012 it overwhelmingly handled projects for the defendant in Salinas, which was a general contractor that provided interior finishing services, including drywall installations, carpentry, framing, and hardware installation. The plaintiffs filed suit in Salinas arguing the subcontractor and general contractor should be considered “joint employers” of the plaintiffs and the hours the plaintiffs worked for the two companies should be aggregated to assess compliance with the FLSA and a Maryland equivalent state statute. The plaintiffs also asked for the general contractor and subcontractor to be held jointly and severally liable for violations of the aforementioned laws.
In arguing the subcontractor and general contractor should be deemed “joint employers,” the plaintiffs noted the general contractor assigned foremen to the jobsites at which the plaintiff worked who would oversee and critique the plaintiffs’ work. When the work was not to the satisfaction of the foremen, the foremen would, on occasion, directly instruct the plaintiffs on how to correct the work. There was also at least one occurrence where a foreman told a plaintiff he would fire him for his subpar work. The general contractor also 1) forced the plaintiffs to wear clothes with the general contractor’s logo while working; 2) attend meetings every morning run by the general contractor; 3) set the hours the plaintiffs worked, including forcing them to work weekends on occasion; 4) forced plaintiffs to sign-in and sign-out on timesheets supplied and retained by the general contractor; 5) provided the majority of tools used on the projects, despite the contract between the general and subcontractor stating the subcontractor was responsible for providing the tools, 6) told the plaintiffs to tell outsiders that they worked for the general contractor if anyone asked, etc.
The plaintiffs brought suit in a Federal District Court in Maryland, which granted summary judgement for the general contractor, finding no joint employer relationship existed. The plaintiffs appealed that decision to the 4th Circuit Court of Appeals, which reversed the District Court and found the general contractor should be joint and severally liable for violations of the FLSA. In so holding, the 4th Circuit provided a new test for determining whether two entities should be considered joint employers of an employee under the FLSA.
The 4th Circuit held a joint employment relationship exists when “two or more persons or entities are ‘not completely disassociated’ with respect to a worker such that the persons or entities share, agree to allocate responsibility for, or otherwise codetermine – formally or informally, directly or indirectly – the essential terms and conditions of the worker’s employment.” Salinas at 141. In deciding whether two entities are joint employers under the aforementioned standard, courts should consider the following six factors:
- Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to direct, control, or supervise the worker, whether by direct or indirect means;
- Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to – directly or indirectly – hire or fire the worker or modify the terms or conditions of the workers’ employment;
- The degree of permanency and duration of the relationship between the putative joint employers;
- Whether, through shared management or a direct or indirect ownership interest, one putative joint employer controls, is controlled by, or is under common control with the other putative joint employer;
- Whether the work is performed on premises owned or controlled by one or more of the putative joint employers, independently or in connection with one another; 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.
RISK HANDLING HINT: The 4th Circuit ultimately noted that courts have the discretion to weigh the above factors in deciding whether a joint employer relationship exists. No single factor from the above list is determinative, nor does a majority or minority of factors being satisfied definitively result in a specific outcome. Broadly speaking, if the general contractor demonstrates a large amount of control over the day to day operations of the subcontractor and its employees, the general contractor will be at greater risk of being deemed a joint employer of the subcontractor’s employees. To avoid liability, general contractors should properly vet companies with whom they subcontract and ensure those companies are strictly abiding by the FLSA. Doing so mitigates the risk of being sued. If you are a general contractor who is concerned about being deemed a joint employer under the FLSA, you should consult with an attorney to navigate these issues.