The Fourth Circuit Provides a New Test for Joint Employment under the FLSA

The Fourth Circuit recently provided clarity to extant joint employer liability under the Fair Labor Standards Act (“FLSA”).  Salinas v. Commercial Interiors, Inc., 848 F.3d 125, 141–42 (4th Cir. 2017).

The plaintiffs in the matter, former drywall employees for a subcontractor, brought FLSA, Maryland Wage and Hour, Maryland Wage Payment, and Collection claims against the subcontractor, its owners, and the general contractor.  In determining whether the plaintiffs were jointly employed by the subcontractor, its owners, and the general contractor, the District Court for the District of Maryland applied a “novel multifactor test.”  Ultimately, the test focused the court’s analysis on the legitimacy of the contract relationship between the putative joint employers and whether the relationship was intended to skirt federal and state wage requirements.

The Fourth Circuit rejected the district court’s test and, instead, set forth a new test that better embraced the FLSA’s broad definition of employee and inclusiveness.  The test in large part follows the Department of Labor’s regulations regarding joint employment by focusing the analysis on relationship between the putative joint employers.  As a result, the Fourth Circuit believes that these factors should prevent courts from blending the analysis of whether an employee is jointly employed and whether he or she is an independent contractor.

Under the new test, courts should consider six factors when determining whether an employee is jointly employed under the FLSA.  Those 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.

The Fourth Circuit emphasized that these factors are not exhaustive and the final determination must consider the facts of a particular case in their entirety.  In summation, the court held that “joint employment exists when 1) two or more persons or entities share, agree to allocate responsibility for, or otherwise codetermine—formally or informally, directly or indirectly—the essential terms and conditions of a worker’s employment and (2) the two or more persons’ or entities’ combined influence over the terms and conditions of the worker’s employment render the worker an employee as opposed to an independent contractor.”