The Fourth Circuit issued a recent opinion which provides important guidance for joint employment in overtime cases.\u00a0 In Hall v. DIRECTTV<\/i>, 846 F.3d 757 (4th Cir. 2017), the Fourth Circuit considered an appeal by plaintiffs in two consolidated cases.\u00a0 In each case, the plaintiffs were satellite television technicians who sued DIRECTTV and DirectSat, alleging that DIRECTTV and DirectSat were jointly and severally liable for unpaid overtime because they jointly employed the plaintiffs.\u00a0 Plaintiffs further alleged that they were misclassified by their employer or employers as an independent contractor and denied overtime pay under the FLSA and various state statutes.\u00a0 The district court had granted the defendants\u2019 motions to dismiss, holding that the plaintiffs failed to state a claim for joint employment.<\/p>\nTwo-Step Framework under FLSA Joint Employment Theory<\/h2>\n
The Fourth Circuit began its analysis by providing the standard two-step framework for determining whether a defendant is liable for an alleged FLSA violation under the joint employment theory:<\/p>\n
Under this framework, we first must determine whether the defendant and one or more additional entities shared, agreed to allocate responsibility for, or otherwise codetermined the key terms and conditions of the plaintiff’s work. The second step of the analysis \u2014 which asks whether a worker was an employee or independent contractor for purposes of the FLSA \u2014 depends in large part upon the answer to the first step. Namely, if we determine that the defendant and another entity codetermined the key terms and conditions of the worker\u2019s employment, then we must consider whether the two entities’ combined influence over the terms and conditions of the worker’s employment render the worker an employee as opposed to an independent contractor. By contrast, if the two entities are disassociated with regard to the key terms and conditions of the worker’s employment, we must consider whether the worker is an employee or independent contractor with regard to each putative employer separately.\u00a0 The appellate court held that the district court erred by considering the employee\/independent contractor issue without first determining whether a joint employment relationship existed between DIRECTTV and DirectSat.<\/p>\n
Turning to the joint employment issue, the court articulated six \u201cnonexhaustive\u201d factors which are to be considered when making this assessment:<\/p>\n
The court emphasized that none of these factors are determinative of the joint employment issue, going so far as to state that \u201cthe absence of a single factor–or even a majority of factors–is not determinative of whether joint employment does or does not exist.\u201d\u00a0 The Fourth Circuit held that the district court \u201cignored important elements of coordination between Defendants, as well as many of Defendant\u2019s shared levers of influence over Plaintiffs\u2019 work as DIRECTTV technicians.\u201d\u00a0 Importantly, the Fourth Circuit also stated that \u201cthe FLSA does not require that an entity have unchecked \u2014 or even primary \u2014 authority over all \u2014 or even most \u2014 aspects of a worker’s employment for the entity to qualify as a joint employer. Rather, the entity must only play a role <\/i><\/b>in establishing the key terms and conditions of the worker’s employment.\u201d\u00a0 (Id<\/i>. at 770) (emphasis added).\u00a0 The Court further found that bad faith (i.e. an intent to evade FLSA liability) –\u00a0 while strong evidence of FLSA liability – is not a required precondition to liability as a joint employer.\u00a0 The Court concluded that the plaintiffs had adequately alleged that DIRECTTV and DirectSat were their joint employers and that the district court had erred in dismissing the plaintiffs\u2019 claims for unpaid overtime.<\/p>\n
The Hall<\/i> case is important because of its emphasis on the nonexclusive nature of the factors used to consider joint employment.\u00a0 The Fourth Circuit has correctly recognized that a company may exert its influence over a worker or group of workers to such an extent that it controls the worker\u2019s conditions of employment without satisfying the remaining factors that are typically considered under the joint employment analysis.<\/p>\n
It is this author\u2019s experience that the arrangement described in the Hall case is being increasingly utilized by large companies in an effort to avoid FLSA liability – and other legal obligations.\u00a0 In such a scenario, the large company – call it \u201cCompany A\u201d – would enter into an exclusive or near-exclusive staffing arrangement with a smaller company – \u201cCompany B\u201d – which in turn would hire a number of \u201cindependent contractors.\u201d\u00a0 These \u201cindependent contractors\u201d would work exclusively or nearly exclusively for Company A – which would assign them work and tell them when, where and how to do their jobs.\u00a0 Company A would pay Company B a daily rate or some other agreed-upon flat fee for each worker, thus avoiding the overtime or minimum wage requirements of the FLSA or similar state laws (as well as other pesky expenses such as the employer\u2019s share of Social Security and Medicare taxes, employee benefits, unemployment compensation taxes and worker\u2019s compensation insurance).\u00a0 Company B would then pay the workers a day rate or flat hourly rate because they are classified as \u201cindependent contractors.\u201d\u00a0 In this scenario, Company A is typically one of only a few – if not the only – client of Company B, and thus Company B is highly dependent on Company A.\u00a0 Because Company B \u201chired\u201d the worker and handles the payroll and other administrative matters that are typically handled by a traditional employer, a court applying the six factors used in assessing joint employment might – if it merely looked at whether all or a majority of them were satisfied by Company A – conclude that Company A was not a joint employer of the workers.\u00a0 However, the Hall decision correctly recognizes that if Company A plays a key role in establishing the terms and conditions of the workers\u2019 employment, it should be considered to be a joint employer and share in FLSA liability.\u00a0 The critical lesson from Hall is that companies that disguise their control over workers through third parties cannot shield themselves from FLSA liability.<\/p>\n","protected":false},"excerpt":{"rendered":"
The Fourth Circuit issued a recent opinion which provides important guidance for joint employment in overtime cases.\u00a0 In Hall v. DIRECTTV, 846 F.3d 757 (4th Cir. 2017), the Fourth Circuit considered an appeal by plaintiffs in two consolidated cases.\u00a0 In each case, the plaintiffs were satellite television technicians who sued DIRECTTV and DirectSat, alleging that…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3886,3895,3896,3897],"tags":[],"_links":{"self":[{"href":"https:\/\/dfwcounsel.com\/wp-json\/wp\/v2\/posts\/1025"}],"collection":[{"href":"https:\/\/dfwcounsel.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dfwcounsel.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dfwcounsel.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dfwcounsel.com\/wp-json\/wp\/v2\/comments?post=1025"}],"version-history":[{"count":0,"href":"https:\/\/dfwcounsel.com\/wp-json\/wp\/v2\/posts\/1025\/revisions"}],"wp:attachment":[{"href":"https:\/\/dfwcounsel.com\/wp-json\/wp\/v2\/media?parent=1025"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dfwcounsel.com\/wp-json\/wp\/v2\/categories?post=1025"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dfwcounsel.com\/wp-json\/wp\/v2\/tags?post=1025"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}