The United States Court of Appeals for the Fourth Circuit recently issued a decision which clarifies and expands the circumstances under which entities may be held liable as a joint employer under the Fair Labor Standards Act (FLSA). The Court emphasized that the proper focus should be on the relationship between the alleged joint employers and not on an analysis of the economic dependency between the worker and the entities. The Court concluded that “joint employment exists when the facts establish that employment by one employer is not completely disassociated from employment by the other employer.” See Salinas v. J.I. General Contractors (4th Cir. January 25, 2017).
The Fourth Circuit rejected the array of multi-factor joint employer tests that other courts have deployed (i.e., the six-factor “economic reality” test and the eight-factor “economic dependence test”), because according to the court, they all focus on the wrong relationship: the relationship between the employer and the individual, instead of the relationship between the two employers. As the court pointed out, the fact that an individual may be employed by an employer does not necessarily answer the question of whether a joint employment relationship exists between two employers.
In focusing on the relationship between the two employers, the court referenced the Department of Labor’s regulations, which distinguishes “separate” employment – when two persons or entities are “entirely independent” with respect to a worker’s employment—and “joint” employment—when two persons or entities are “not completely disassociated.”
Joint Employer Association Elements
To determine whether any association exists, the Fourth Circuit, for the first time, set forth a list of six factors for lower courts to consider. The six factors are:
- 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 joint 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 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.