Christopher A. Abel, Esquire Willcox & Savage, P.C.
True story. A staffing company in Hampton Roads that thought it was paying its workers properly found itself on the wrong end of a class-action lawsuit in federal court claiming it systematically had been shortchanging a number of workers assigned to a local customer. As it turned out, the workers were right. The customer had under-reported the time they were working for it. And that meant that both the customer and the staffing company faced hundreds of thousands of dollars in back-pay liability to those workers. To add insult to injury, although the workers had been underpaid because of the customer’s own actions, the customer advised the staffing company that it didn’t have the money to make things right. That left the staffing company holding the bag for its customer’s erroneous recordkeeping and the hefty legal liability that created.
Welcome to the world of joint employment in the early 21st Century.
Every employer knows it has a broad range of legal obligations to the people it employs. What many employers may not appreciate is that they can find themselves having to answer—legally and financially—for the misdeeds of someone else because the law views them as joint employers. And under the law, each of those joint employers is responsible for making things right for employees who have been wronged by either one of them. Indeed, a joint employee is entitled to collect all of the damages to which they are entitled from either one of his or her joint employers . . . and leave it up to those two companies to sort things out between themselves later.
So how does an employer avoid finding itself legally bound to another company in a joint employment status? The answer is not always clear. When it comes to union organizing and worker protections under federal labor laws, the current standard is that two or more entities can become joint employers if, among other things, they both have the power to determine such matters as hiring, firing, discipline, supervision, direction, the number of workers needed, scheduling, seniority, overtime, and work assignments, even if one of them only has indirect control of those working conditions, and even if it does not actually exercise that control.
Here in the Fourth Circuit where Hampton Roads is located, that federal appellate court has listed a number of factors to be considered when deciding whether a joint employment situation exists for purposes of federal anti-discrimination or harassment law. They include: the authority to hire and fire; day-to-day supervision and discipline; furnishing equipment used and the place of work; maintaining employment records; the length of time the worker has been there; training provided; whether the worker’s duties are like those of regular employees; exclusivity of the assignment; and what the two companies intended. None of those factors outweighs the others. According to the Court, “the common-law element of control remains the ‘principal guidepost’ in the analysis.”
The Fourth Circuit has adopted a different set of standards for determining joint employment when looking at minimum-wage and overtime obligations under the federal Fair Labor Standards Act. They include: (1) who has the power to direct, control, or supervise the worker, directly or indirectly; (2) who has the power—directly or indirectly—to hire or fire the worker or to modify the terms or conditions of employment; (3) the permanency of the relationship between the two companies; (4) whether one company controls or is under common control with the other one; (5) who controls the premises where the work is done; and (6) who handles payroll, workers compensation, taxes, or provides the facilities, equipment, tools, or materials necessary to complete the work. The Court cautions that it must consider “the circumstances of the whole activity”
One way government contractors can avoid running into trouble in this area is to ensure that those working on federal contract jobs are being paid the full $10.60/hour required by Executive Order 13658 (it was $10.35/hour in 2018, but bumped up to the new figure on January 1st of this year). Merely paying someone the regular federal minimum wage of $7.25/hour falls well short of that standard. And, because of the way joint employment works, contractors, subs, staffing companies, and their customers each could find themselves saddled with an unexpected—and whopping—back-pay tab if they don’t keep a sharp eye on this potential workplace liability.
Joint employment. It’s a thing. It can cost employers real money. And any employer who has its workers assigned to work with another company or alongside someone else’s employees ignores the potential for this kind of liability very much at its own peril. Don’t be that employer!
About The Author:
Chris Abel is a partner at Willcox & Savage, PC, where he leads the firm’s Maritime Practice Group. Chris teaches Employment Law at the Law School at William and Mary and is the Chair of the VSRA’s Human Resources Committee.
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