Fourth Circuit: Unique Six Factor Test to Determine Joint Employer Status

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January 25, 2017

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In Salinas v. Commercial Interiors Inc., the Fourth Circuit Court of Appeals recently established a unique six factor test for determining joint employer status that aligns with the Department of Labor’s broad interpretation of joint employer status, and rejected the more narrow “economic realities” test used in other circuit courts.

There, plaintiffs worked for J.I. General Contractors, a subcontractor to Defendant Commercial Interiors.  The employees alleged that they were jointly employed by the two entities and that the hours they worked for each entity should be aggregated when applying federal FLSA and state wage and hour regulations.  The Fourth Circuit rejected the summary judgment in favor of defendants, instead announcing the following six, non-exclusive factors that district courts should consider:

  1. Whether entities jointly determine, share, or allocate the power to direct, control or supervise the worker, by direct or indirect means;
  2. Whether the entities jointly determine, share, or allocate the power to hire/fire workers or modify the terms or conditions of employment, by direct or indirect means;
  3. The degree of permanency and duration of relationship between the entities;
  4. Whether one of the entities controls, is controlled by, or is under common control with the other entity, by shared management or direct or indirect ownership interest;
  5. Whether work is performed on premises owned or controlled by one or more of the entities, independently or in connection with one another; and
  6. Whether the entities jointly determine, share, or allocate responsibility for typical employer functions (e.g., payroll processing and paying payroll taxes, providing equipment, tools or uniforms, or purchasing workers’ compensation insurance).

Among these six factors, the Fourth Circuit noted that these items should be considered whether or not the factor is performed formally or informally as a matter of practice.  The Fourth Circuit also reiterated that a subcontracting relationship being “typical” for the industry does not establish or deny joint employer status in and of itself.  The six factor test should be considered non-exhaustive, and district courts must consider any other facts relevant to the potential joint employer relationship.

Action Items

  1. Review any potential joint employer relationships with legal counsel.
  2. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

© 2017 ManagEase, Incorporated.

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