Labor & Employment Law

Joint Employer Finding Can Lead To Significant Liability Under The FLSA

By Mark Tabakman

In a September 16, 2010 posting in the New York Labor & Employment Report, John Ho wrote about the issue of joint employer status under the Fair Labor Standards Act ('FLSA'). These are potentially explosive situations, especially if employees work from one facility to another.  When employees float between ostensible joint employers, their hours must be aggregated, meaning that, oftentimes, overtime situations ensue, i.e. employer liability.  John's posting can be found at http://www.nylaborandemploymentlawreport.com/2010/09/articles/wage-and-hour/jury-not-court-determines-whether-an-entity-is-a-joint-employer-under-the-flsa/index.html

There are a number of factors that a court analyzes to determine joint employer status.  These were enumerated in a Second Circuit case entitled Zheng v. Liberty Apparel Company in 2003.  In Zheng, the entire case turned on whether the entities were joint employers.  The jury found that they were and the employer appealed.

The thrust of the appeal was that since the federal judge in the district court should have been the 'decider' in ascertaining whether the entities were joint employers, not the jury.  The Second Circuit has just recently ruled that the proper deciding body was the jury.

There is a bigger question here than just the procedural issue of whether this mixed question of law and fact should have been decided by a judge or jury.  Employers must be aware that if they have a relationship with another entity that is more than a vendor or supplier relationship there could be an issue of joint employer status.  The factors enunciated in Zheng were: 1) do the workers work predominantly for the joint employer; 2) the permanence or duration of the working relationship; 3) if the alleged joint employer's premises/equipment are used by the employees; 4) the extent of control exercised by the joint employer; 5) whether the workers are an integral part of the business; and, 6) whether the workers had a business organization that could shift as a unit from one putative joint employer to another.

Although these factors were set down in the context of the garment industry, many of them are applicable to any other industry.  The point, as John Ho stated, is that every employer must examine its relationship with other affiliated entities, as well as temporary staffing agencies that it may work with.  It is with these staffing agencies that the biggest danger for a joint employer finding arises.
 

Full post as published by Wage & Hour - Development & Highlights on September 17, 2010 (boomark / email).