New Joint Employer Test Impacts Businesses Using Subcontractors and Independent Contractors

Maryland and Virginia businesses that use subcontractors or independent contractors need to pay particular attention to a new broader test for joint employment under the Fair Labor Standards Act (FLSA).

Last week, in Salinas v. J.I. General Contractors, Inc., the U.S. Court of Appeals for the Fourth Circuit adopted the new joint employer test and subsequently found a prime contractor offering interior finishing services was the joint employer under the FLSA of the direct employees of a drywall installation subcontractor.

The new test for determining if a joint employment relationship exists is based on whether two or more persons or entities are “not completely disassociated” with respect to a worker such that the persons or entities share, agree to allocate responsibility for, or otherwise co-determine — formally or informally, directly or indirectly — the essential terms and conditions of the worker’s employment. In answering this question courts will now consider six 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.
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.

Under this new expansive joint employer test, there is a real risk that seemingly separate employers will be found jointly liable for wage and hour violations. Employers should proactively review how they use subcontractors and independent contractors to avoid being held liable for the actions of others.

Michael Neary is a litigator and employment attorney who focuses on counseling employers on compliance with federal employment statutes and regulations, such as Title VII, the Fair Labor Standards Act, the Family and Medical Leave Act, the Americans with Disabilities Act, and their state and local counterparts. For more information on joint employment under FLSA, contact Michael at (301) 657-0740 or [email protected].