The Fourth Circuit Court of Appeals recently issued two opinions, Salinas v. Commercial Interiors, Inc. and Hall v. DirecTV, LLC, in which it set forth a new rule for determining whether two or more entities are jointly and severally liable for the failure to pay workers overtime compensation or minimum wages. The “joint employer doctrine,” which is derived from the Department of Labor (“DOL”) regulations, has long been used to hold more than one “employer” liable when employees are not paid overtime compensation or a minimum wage. In addition, hours worked by an employee for either joint employer are aggregated to determine the employee’s eligibility for overtime and the amount thereof. Courts and the DOL have applied the doctrine in circumstances where workers provide a benefit to two or more businesses, such as when a business contracts with an employment agency to supply workers, and the employment agency fails to pay the workers overtime compensation when they work more than forty hours in a workweek. The issue in both Salinas and DirecTV was whether a general contractor was liable as a joint employer for workers who were hired and provided by a subcontractor, and the court found the general contractor liable as a joint employer in both cases.
The Fourth Circuit began its analysis with the DOL’s regulations, which distinguish between “separate” employment—when two persons or entities are “entirely independent” with respect to a worker’s employment—and “joint” employment—when the two persons or entities are “not completely disassociated.” Based on this language, the court held that “joint employment exists when both (1) two or more persons or 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’ within the meaning of the FLSA.” The court identified six factors that lower courts should consider in determining whether joint employment exists:
- 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 worker’s 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 employer controls, is controlled by, or is under common control with the other putative joint employer;
- Whether the work is performed on a premises owned or controlled by one of 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.
The court “emphasized that these six factors do not constitute an exhaustive list of all potentially relevant considerations.” Id.
Until the Fourth Circuit’s recent rulings, which will apply to businesses and workers in Maryland, Virginia, West Virginia, North Carolina and South Carolina, courts established tests that focused on the relationship between the worker and the person or business sought to be held liable as a joint employer. The court noted that these tests were inconsistent with the regulations, which specifically focus on the relationship between the putative employers sought to be held as joint employers.