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March 14, 2017
  Salinas v. Commercial Interiors Inc. -- Fourth Circuit
Who's the Boss? New Test to Determine Joint Employment under the Fair Labor Standards Act

Areas of Law: Employment Law

Issue Presented: Whether a worker is jointly employed for the purposes of determining liability under the employer's FLSA obligations.

Brief Summary: In a published opinion, the United States Court of Appeals for the Fourth Circuit reversed the district court's judgment granting the defendant's motion for summary judgment, and ruled that the defendants jointly employed the plaintiffs. Relying on a newly announced six-factor test that focuses on whether employers "share[d] or codetermined the essential terms and conditions of employment," the Fourth Circuit held that the defendants did jointly employee the plaintiffs for the purposes of determining liability under the employers FLSA obligations.

Extended Summary: The plaintiffs sued JI General Contractor Inc. ("JI") and Commercial Interior Inc. ("Commercial") for unpaid wages in violation of the Fair Labor Standards Act ("FLSA"), Maryland Wage and Hour Law, and the Maryland Wage Payment and Collection Law. The complaint alleged that Commercial and JI (1) jointly employed the plaintiffs, and (2) were jointly and severally liable.

The district court granted Commercial's motion for summary judgment and held that JI was the plaintiffs' sole employer because Commercial and JI entered into a legitimate contractor-subcontractor agreement. On appeal to the Fourth Circuit, the plaintiffs argued that the district court did not properly conform to the FLSA definition of "employ," "employee," and "employer;" and improperly limited joint employment. On appeal, the United States Court of Appeals for the Fourth Circuit reversed the district court's award of summary judgment.

In reversing the lower court, the Fourth Circuit reaffirmed that for the purposes of determining FLSA liability the business agreement is not important. For the purposes of determining joint employment and liability, the court first looks at whether two entities agree to allocate responsibility or codetermine the terms and conditions of the worker's employment. Next, the court must consider whether the two entities combined influence over the terms and conditions of the worker's employment makes the worker an employee.

The Fourth Circuit noted that while JI formally employed the plaintiffs, Commercial supervised the plaintiffs on the job site and maintained JI employee's time sheets. Additionally, before working, Commercial required JI employees to attend daily meetings where Commercial employees gave workers instructions while JI supervisors translated the instructions from English to Spanish. While working, JI employee used tools and materials owned and issued by Commercial bearing Commercial's logo while being directly supervised by Commercial employees. Finally, Commercial employees threatened to fire JI employees for substandard work, and during certain projects JI workers worked directly for Commercial and were issued pay checks from Commercial.

In determining whether a relationship between two corporate entities exists to determine FLSA obligations, the Fourth Circuit first looked to the Department of Labor regulations distinguishing "separate and distinct employment" from "joint employment." The regulations define separate employment as two or more employers that act entirely independently and may disregard all work performed by workers for another employee. The regulation defines joint employment as employment where the employment by one employer is not completely disassociated from employment by the other employer.

Relying on these regulations, the Fourth Circuit created a test to determine if employers "share or codetermine the essential terms and conditions" of employment, instead of relying on the test from other circuits that focuses on the economic relationship between the employers. To determine whether two entities constitutes joint employers for the purposes of FLSA, the Fourth Circuit held that courts should consider the following factors:

(1) 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; (2) 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; (3) The degree of permanency and duration of the relationship between the putative joint employers; (4) 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;(5) 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 (6) 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.

In announcing the new test the Fourth Circuit cautioned that the factors are not exhaustive and the ultimate determination of joint employment must be based on the circumstances of the whole activity.

Using the factors in the new test, the Fourth Circuit held that the plaintiffs were jointly employed by both JI and Commercial. In applying the first and second factors, the court found that Commercial and JI jointly supervised and controlled the plaintiffs. Under the third and fourth factors, the court recognized that while Commercial did not own JI, most of JI's work came directly from Commercial. When JI did take work from another general contractor it was because Commercial did not have work for JI. Finally, the court held that the final factor supported the fact that JI and Commercial jointly employed the plaintiffs because Commercial supplied JI works with the tools, materials, and equipment necessary to work.

To read the full opinion, click here.

Panel: Judges Wynn, Floyd, and Harris

Argument Date: 10/27/2016

Date of Issued Opinion: 01/25/2017

Docket Numbers: No. 15-1915

Decided: Reversed by published opinion

Case Alert Author: Fernando Kirkman, Univ. of Maryland Carey School of Law

Counsel: ARGUED: Sally Jean Dworak-Fisher, PUBLIC JUSTICE CENTER, Baltimore, Maryland, for Appellants. Michael J. Jack, LAW OFFICES OF MICHAEL J. JACK, Marriottsville, Maryland, for Appellee. Dean Romhilt, UNITED STATES DEPARTMENT OF LABOR, Washington, D.C., for Amicus Secretary of Labor. ON BRIEF: Darin M. Dalmat, Kathy L. Krieger, JAMES & HOFFMAN, P.C., Washington, D.C., for Appellants. M. Patricia Smith, Solicitor of Labor, Jennifer S. Brand, Associate Solicitor, Paul L. Frieden, Counsel for Appellate Litigation, Office of the Solicitor, UNITED STATES DEPARTMENT OF LABOR, Washington, D.C., for Amicus Secretary of Labor. Brian J. Petruska, LIUNA MID ATLANTIC REGIONAL ORGANIZING COALITION, Reston, Virginia; Catherine K. Ruckelshaus, NATIONAL EMPLOYMENT LAW PROJECT, INC., New York, New York, for Amici National Employment Law Project, Laborers' International Union of North America Mid-Atlantic Regional Organizing Coalition, and Centro De Los Derechos Del Migrantes.

Author of Opinion: Judge Wynn

Case Alert Supervisor: Professor Renée Hutchins

    Posted By: Renee Hutchins @ 03/14/2017 11:03 AM     4th Circuit  

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