Joint Employer Status Muddied Further 2020-01-15T12:20:53-07:00

Posted on January 15, 2020

On January 12, 2020, the Department of Labor, Wage and Hour Division (“DOL”) announced its revisions to the federal regulation interpreting joint employer status under the Fair Labor Standards Act (“FLSA” or “Act’). The new rule is set to take effect on March 16, 2020.

For decades, federal regulations have recognized two situations in which an employee may have two or more employers. In the first scenario, the employee works two jobs, each for different employers (i.e. a day job and a night job). Here, the employers are not associated with one another and may ignore the employee’s work performed in the other job.

In the second scenario, the employee has one job and two or more employers. In these cases, employment by one employer is “not completely disassociated” from the employment by the other employer. With this newly promulgated rule, the DOL tries to clarify when an employee has two or more employers for the same job.

The DOL adopted a four-factor test fashioned after Bonnette v. California, 704 F.2d 1465 (9^th Cir. 1983). The test considers whether a potential joint employer may:

Hire or fire the employee;
Supervise and control to a substantial degree, the employee’s work schedule or employment conditions;
Determine the employee’s rate and method of payment; and
Maintain the employee’s records.

No single factor is dispositive, and the weight given each factor will vary depending on the circumstances. However, the maintenance of employee records alone will not sufficiently demonstrate employer status. Additionally an employer’s reservation of the right to control the worker’s schedule or conditions alone, will not establish employer status; the employer must actually exert control over the worker. Additional factors may be considered if they indicate whether the employer exercises control over the terms and conditions of the employee’s work.

To round things out, the DOL has specified several factors that are NOT relevant to joint employer status under the FLSA, including:

Whether the organization operates under a certain business model, such as a franchise;
Whether the organization adheres to certain business practices, such as allowing the operation of a store on one’s premises;
Provision of handbooks or other forms;
Offering association health or retirement plans;
Whether the organization entered into contractual agreements, such as requiring a party to institute sexual harassment policies, or requiring quality control standards; and
Whether the employee is economically dependent upon the potential joint employer.

The Final Rule is long. There are many changes and clarifications not detailed above. Moreover, the DOL is clear that this is the rule for the FLSA. A different rule might apply for the National Labor Relations Act or for liability under various federal employment statutes. The situation is as clear as mud.

FLSA Applies to Employers in the Marijuana Industry 2019-10-01T09:55:54-06:00

Posted on October 1, 2019

By Lindsay H. S. Hesketh

A company providing services to the Colorado marijuana industry recently moved to dismiss an employee’s claims under the Fair Labor Standards Act. The company argued that the court lacked jurisdiction over the claim because marijuana is an unlawful substance under the Controlled Substances Act (“CSA”). The district court rejected the argument and denied the motion to dismiss. The Tenth Circuit affirmed.

The company argued that applying the FLSA to employees working in an industry deemed unlawful by other federal law, i.e. the CSA, would render the laws mutually inconsistent. The company claimed that courts would be forced to find that “Congress intended to both forbid (under the CSA) and reward (under the FLSA) the same conduct: drug trafficking.” The Tenth Circuit disagreed, relying on the broad purpose of the FLSA to benefit all workers, the lack of any marijuana exclusion under the FLSA, and the potential windfall employers engaged in the marijuana business could obtain if they did not have to comply with the FLSA. Notably, the Court stressed that case law “has repeatedly confirmed that employers are not excused from complying with federal laws just because their business practices are federally prohibited.”

Although this case was decided in the context of the marijuana industry, the Court’s decision pointed out that other courts have reached similar conclusions involving businesses engaged in other illegal operations. Accordingly, companies falling under the FLSA’s definition of “employer” should ensure their compliance with its requirements (period).

Kenney v. Helix TCS, Inc., Case No. 18-1105 (10th Cir. Sept. 20, 2019).

Supremes Overturn Ninth Circuit: Rule that Auto Service Advisers Exempt from Overtime Pay 2018-04-03T16:36:15-06:00

Posted on April 3, 2018

By Chance Hill

Today, the U.S. Supreme Court held that auto service advisers are not covered by the overtime pay requirement of the Fair Labor Standards Act (FLSA). In a 5-4 decision, the high court reversed a Ninth Circuit decision in which the lower court held that the service advisers—employees at car dealerships who advise customers about repair work—could pursue an overtime collective action against their employer Encino Motorcars LLC because they are eligible for overtime pay. The case began in 2012 when service advisers sued Encino for allegedly violating the FLSA by paying them only commissions even if they worked longer than the standard 40-hour workweek.

The Supreme Court, however, found that these employees fall under a FLSA exemption that excludes “any salesman, partsman or mechanic primarily engaged in selling or servicing automobiles” from overtime pay. Importantly, the majority specifically rejected the Ninth Circuit’s position that FLSA exemptions should be construed narrowly. Instead, the Court concluded that FLSA exemptions should not be given “anything other than a fair (rather than a ‘narrow’) interpretation.” This is welcome news to employers as they try to navigate the oft-times confusing patchwork of FLSA exemptions.

Truth Seekers Are Exempt 2013-03-26T19:10:02-06:00

Posted on March 26, 2013

By Andy Volin

The administrative exemption is one of the major “white collar” exemptions from overtime pay under the Fair Labor Standards Act (“FLSA”). Recently, the Sixth Circuit affirmed a trial verdict that fraud investigators met the exemption requirements, both under the FLSA and similar state law. Foster v. Nationwide Mut. Ins. Co., No. 12-3107 (6th Cir. Mar. 21, 2013). The dispute focused on whether the primary duties of the investigators (a) related to the general business operations of the company and (b) required the exercise of discretion and independent judgment. The trial court heard evidence about the investigators’ specific duties and concluded they were not involved in selling insurance policies, but in the general business operations of the company, and, although they were subject to procedures, their ultimate task was to determine whether a claim was valid. Consequently, the trial court found the exemption applied. The Court of Appeals agreed: determining the truth requires the exercise of discretion and independent judgment.

The application of an FLSA exemption depends on the facts of the specific employees’ duties. Here the parties had to go to trial over the primary duties of insurance investigators. The ruling applies to other employers’ investigators only if the employees perform the same duties. The exemption probably doesn’t apply to employees who always go by the book.

Undocumented Workers Are FLSA Eligible 2013-03-11T16:00:01-06:00

Posted on March 11, 2013

By Bryan Stillwagon

In 2002, the Supreme Court ruled that the NLRB cannot award backpay to undocumented workers even if their employer discharged them for union activity. Awarding backpay to undocumented aliens, the Court said, would encourage future immigration violations. The same ruling does not extend to Fair Labor Standards Act (“FLSA”) violations, according to the Eleventh Circuit Court of Appeals. Lamonica et al. v. Safe Hurricane Shutters, Inc., No. 11-15743 (11th Cir. Mar. 6, 2013). In this recent case, the Eleventh Circuit approved an award of unpaid wages and liquidated damages under the FLSA to a group of former employees, including one worker who had applied for work using a false Social Security number and was not authorized to work in the United States. According to the Circuit Court, the FLSA violation was different from the NLRA violation because, in the NLRA case, the terminated employee is seeking the right to work, but in the FLSA case the plaintiff was seeking wages and premium pay for work already performed. Thus, the court concluded that the ex employee’s ability to recover unpaid wages under the FLSA did not depend on his immigration status.

This case is another reminder of the FLSA’s expansive coverage. Undocumented workers—fake Social Security numbers or not—are FLSA-protected “employees,” too.

Posted on January 15, 2020

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Posted on April 3, 2018

Posted on March 26, 2013

Posted on March 11, 2013

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