The Wage and Hour Division’s New Guidance Addressing Joint Employment

Published on: 02/17/16 by Farheen Ibrahim

On January 20, 2016, Dr. David Weil, the Administrator of the Wage and Hour Division of the Department of Labor (“WHD”), published the first Administrator’s Interpretation of the year (“Administrator’s Interpretation”). This Administrator’s Interpretation specifically addressed joint employment under the Fair Labor Standards Act (“FLSA”) and Migrant and Seasonal Agricultural Worker Protect Act (“MSPA”), in an effort to offer additional guidance for the treatment of joint employment under these two statutes.[1] The FLSA and MSPA are both worker protection acts. The FMLA requires employers to provide employees with unpaid, job-protected leave for qualified medical and family reasons. The Migrant and Seasonal Agricultural Worker Protect Act (“MSPA”) “protects migrant and seasonal workers by establishing employment standards related to wages, housing, transportation, disclosures and recordkeeping,” and requires farm labor contractors to register with the DOL.[2] Both statutes are under the purview of the WHD.

In the Administrator’s Interpretation, Dr. Weil advocates for a loser application of traditional employment concepts. He argues that the “concepts of employment and joint employment under the FLSA and MSPA are notably broader than the common law concepts of employment and joint employment, which look to the amount of control that an employer exercises over an employee. Unlike the common law control test, which analyzes whether a worker is an employee based on the employer’s control over the worker and not the broader economic realities of the working relationship, the ‘suffer or permit’ standard broadens the scope of employment relationships covered by the FLSA.”[3] He draws a parallel between the “suffer and permit” phrasing used by the FLA with similar phrasing used in state laws regulating child labor, which were “designed to reach businesses that used middlemen to illegally hire and supervise children.”[4] Summarily, he argued that the expansive definition of “‘employ’ as including ‘to suffer or permit to work’ rejected the common law control standard and ensures that the scope of employment relationships and joint employment under the FLSA and MSPA is as broad as possible.”[5]

To determine whether an entity would qualify as a joint employer of a worker, Dr. Weil offered two analyses: horizontal and vertical joint employment.[6] Horizontal joint employment analyzes the relationship and association between two or more entities that are technically separate but are related or overlapping employers, focusing on the relationship of the employers to each other. In the event that a joint employment relationship is established between the two entities, then the employee’s work for the two employers during the workweek is considered as “one employment” and the employers are jointly and severally liable for compliance of the FLSA, including complying with overtime compensation for all hours worked in excess of 40 hours.[7]

Alternatively, the vertical joint employment analysis looks at whether the employee of an intermediary employer is also employed by a secondary entity, the potential joint employer.[8] This inquiry applies to situations whether one employer has contracted a worker out to another entity to provide the entity with labor and/or perform some of its core functions, such as hiring and payroll.[9] In the vertical joint employment analyses, the focus is on the worker’s relationship with the potential joint employer and whether the employer jointly employs the worker, as opposed to the relationship between the two employers as in the horizontal employment analyses.[10] The MSPA regulations contain these seven economic realities factors in the context of a farm labor contractor acting as an intermediary employer for a grower, which the courts have utilized in their vertical joint employment scenarios in FLSA cases: “1) directing, controlling, or supervising the work performed; 2) controlling employment conditions; 3) permanency and duration of the relationship; 4) repetitive and rote nature of work; 5) integral to business; 6) work performed on premises; and 7) performing administrative functions commonly performed by employers.”[11]

While the Administrator’s Interpretation offers guidance as to the appropriate analyses for joint employer liability, each federal circuit has utilized its own test to determine joint employer liability. In fact, Administrator’s Interpretation specifically calls out court analyses that examine primarily the potential joint employer’s control (power to hire and fire, supervision and control of conditions or work schedules, determination of rate and method of pay, and maintenance of employment records) as inconsistent with the FLSA.[12] Therefore, while it is not yet apparent how the Administrator’s Interpretation will play out, it is important to keep it in mind while encountering potentially inconsistent precedent found in the various circuits:

a.              First and Ninth Circuits

The First Circuit[13] has adopted the Bonnette Test,[14] which considers “whether the alleged employer:

While not intended to be a rigid test, the court explained that it is a “useful framework.”[16] In addition to Bonnette, the Ninth Circuit has incorporated other factors into its joint employer analyses from the pre-1997 version of the MSPA joint employment regulation, and the eight economic realities factors set forth in Torres-Lopez, 111 F.3d 633, 640-41 (9th Cir. 1997).[17] The Administrator’s Interpretation, more or less, approves of these and other formulations of the economic realities factors to determine the employee’s economic dependence on a potential joint employer.[18]

b.              Second Circuit

The Second Circuit has reasoned that the Bonnette test was not sufficient because it did not account for “functional control,” as referred to in Rutherford. Therefore, the Zheng court considered six factors beyond those elucidated in Bonnette:

c.              Third Circuit

The Third Circuit utilizes the joint employer test employed in N.L.R.B. v. Browning-Ferris Indus. of PA., 691 F.2d 1117, 1123 (3d Cir. 1982) (“NLRB test”).[20] Under this analysis, “where two or more employers exert significant control over the same employees—whether from the evidence it can be shown that they share or co-determine those matters governing essential terms and conditions of employment—they constitute joint employers under the FLSA.”[21] In In re. Enter., the Third Circuit recognized the use of the Bonnette test, opining that this test ultimately evaluated whether the potential joint employer exerts significant control over the employees at issue, which is “quite similar” to the NLRB test.[22] However, the Administrator’s Interpretation disagrees with this analysis, arguing that “this approach is not consistent with the breadth of employment under the FLSA” because “addressing only the potential employer’s control is unduly narrow and cannot be reconciled with the ‘suffer and permit’ language in the FMLA, which necessarily reached beyond traditional agency law.”[23]

d.              Fourth and Eleventh Circuit

While it has not explicitly determined that test would be used, the Fourth Circuit appears to have adopted a hybrid of the Bonnette test and the Zheng factors.[24] The Eleventh Circuit has adopted the seven-part hybrid test that mirrors the Bonnette test and the Zheng factors, which are:

e.              Fifth Circuit

The Fifth Circuit relies on the economic realities test to determine whether an entity is a joint employer by evaluating whether the alleged employer:

f.               Sixth, Seventh, Eight, Tenth, and DC Circuits

These circuits have either not adopted a specific analysis for joint employer liability or have not yet meaningfully examined this issue under the FLSA.


 

[1] Administrator’s Interpretation No. 2016-1, SUBJECT: Joint employment under the Fair Labor Standards Act and Migrant and Seasonal Agricultural Worker Protection Act, United States Department of Labor, Wage and Hour Division (Revised June 2014), accessed at http://www.dol.gov/whd/flsa/Joint_Employment_AI.htm (hereinafter “Administrator’s Interpretation No. 2016-1”).

[2] Migrant and Seasonal Agricultural Worker Protection Act (MSPA), United States Department of Labor – Wage and Hour Division, http://www.dol.gov/whd/mspa (last accessed February 2, 2016).

[3] Id.

[4] Id. (citing Antenor v. D & S Farms, 88 F.3d 925, 929 n. 5 (11th Cir. 1996).

[5] Id.

[6] Id.

[7] Id. (citing 29 C.F.R. 791.2(a)).

[8] Id.

[9] Id.

[10] Id.

[11] Id.

[12] See Administrator’s Interpretation No. 2016-1.

[13] See Cavallaro v. UMass Mem. Health Care, Inc., 971 F. Supp. 2d 139, 142 (D. Mass. 2013) (citing Baystate Alt. Staffing, Inc. v. Herman, 163, F.3d 668, 675 (1st Cir. 1998).

[14] Bonnette v. California Health and Welfare Agency, 704 F.2d 1465, 1470 (9th Cir. 1983).

[15] Id. at 1470.

[16] Id.

[17] See Perez v. Lantern Light Corp., 2015 WL 3451268, at *17 (W.D. Wash. May 29, 2015).

[18] See Administrator’s Interpretation No. 2016-1.

[19] Zheng, 355 F.3d at 70.

[20] In re Enter. Rent-A-Car Wage & Hour Empl. Practices Litig., 683 F.3d 462, 468 (3d Cir. Pa. 2012).

[21] Id. at 468 (internal citations omitted).

[22] Id.

[23] Administrator’s Interpretation No. 2016-1 (internal quotations omitted).

[24] See, e.g., Jennings v. Rapid Response Delivery, Inc., 2011 U.S. Dist. LEXIS 65862, at *3 (D. Md. June 15, 2011); Jacobson v. Comcast Corp., 740 F. Supp. 2d 683 (Md. 2010).

[25] See Phillips v. M.I. Quality Lawn Maint., Inc., 2011 WL 666145 at *4 (S.D. Fla. 2011).

[26] Orozco v. Plackis, 757 F.3d 445, 453 (5th Cir. 2014).