Until recently, there has been inconsistency as to what constitutes a “joint employer” under the Fair Labor Standards Act (FLSA). Under the FLSA, “joint employment” exists when “employment by one employer is not completely disassociated from employment by another employer.” 29 C.F.R. § 791.2(a). The Fourth Circuit Court of Appeals clarified the legal standard for when two or more entities constitute joint employers in Hall v. Directv, — F.3d –, 2017 wl 361065 (4th Cir. 2017).
In Hall, two groups of satellite television technicians brought an action against DIRECTV and DirectSat (Defendants) alleging that as joint employers Defendants failed to provide overtime pay in violation of the FLSA. DIRECTV directly engaged and indirectly controlled several satellite television technicians through a Provider Network of intermediary entities, including DirectSat. The United States District Court for the District of Maryland dismissed the action for failure to sufficiently allege that the Defendants were joint employers. The Fourth Circuit reversed the decision on appeal, applying a new legal standard for “joint employers” for purposes of the FLSA.
The new legal standard for determining whether entities are “joint employers” under the FLSA requires a two-step analysis. First, it must be determined whether the two or more entities are not completely disassociated with respect to a worker such that the entities shared, agreed to allocate responsibility for, or otherwise codetermined the key terms and conditions of the worker’s employment. If the answer is yes, then the two entities are joint employers.
An entity does not need primary authority over all or even most aspects of a worker’s employment to be a joint employer. The joint employment determination depends on all facts of a particular case. However, the following six non-exhaustive factors offer guidance through the step one joint employment inquiry: the entities jointly determine, share, or allocate the ability to direct, control, or supervise the worker; control hiring, firing, or modifying the terms and conditions of employment; who is responsible for the tasks ordinarily carried out by an employer; the length and permanent nature of the relationship between the entities; one entity’s control over the other; and who controls the location where work is performed.
The second inquiry under the two-step analysis is largely dependent upon the first. If it is determined that the entities are joint employers, then it must be considered whether the entities combined influence over the terms and conditions of the worker’s employment make the worker an employee rather than an independent contractor. The court must determine the influence over key terms and conditions of employment by all of the entities when determining the worker’s status if the entities are determined to be joint employers. If on the other hand, the court determines that the entities are not joint employers, the court must consider whether the worker is an employee or independent contractor with regard to each supposed employer separately.
The Fourth Circuit noted that district court incorrectly began its analysis with consideration of the Plaintiff’s status as employees or independent contractor. The initial focus must be on the relationship among the supposed joint employers themselves rather than the relationship between the worker and supposed joint employer because such determination dictates the course of the employee analysis in step two. This classification is imperative because only employees are awarded protection under the FLSA.
In Hall, the Fourth Circuit found that the pleadings forecasted enough evidence to show that DIRECTV and DirectSat were not completely disassociated, that they jointly determined the key terms and conditions of the Plaintiffs’ employment, and thus were joint employers. Notably, the Court considered that DIRECTV provider agreements allowed it to control nearly every aspect of the technicians work. At the second step, it was determined that based on the aggregate of their work for Defendants, the technicians were economically dependent upon the joint employer, and thus, employees protected under the FLSA.
Going forward, the Fourth Circuit’s joint employer legal standard will hopefully clear up murky legal waters on when two entities are considered “one employer” and when certain workers are protected as employees under the FLSA.