A new case from the Massachusetts Supreme Judicial Court touches on an important aspect of employment litigation: When more than one companies are joint employers of a worker.
Workers at One Company Claim a Different Company is Their Joint Employer
The case, Jinks v. Credico (USA) LLC, involved three workers – one employee and two independent contractors – who worked as salespeople for the company DFW Consultants, Inc. Credico contracted with DFW to provide door-to-door sales work in Massachusetts for Credico's clientele.
DFW's three workers sued DFW, as well as Credico, for misclassifying two of them as independent contractors rather than as employees, and for violating Massachusetts wage laws mandating minimum wage and overtime pay. They claimed that Credico should be held liable because it was their joint employer, based on the influence that Credico had over their employment status and the fact that Credico was economically benefiting from their work.
The SJC disagreed.
What is a Joint Employer?
Generally, an employee only has one employer: The company or other entity for whom the employee performs services. However, there are three exceptions to this rule:
- When the direct employer is a mere alter ego of another company, and that other company is making the direct employer's decisions,
- When the direct employer is the creation of another company, specifically to avoid obligations under Massachusetts' wage laws, and
- When a company contracts with the direct employer, and then retains sufficient control over the direct employer's employees that the company becomes their joint employer.
This third exception is what the salespeople aimed for. They said that they worked for DFW, but the control exerted by Credico over their work made Credico a joint employer.
SJC Adopts FLSA Test for Joint Employers
After determining that Massachusetts' wage laws covered joint employers as well as regular employers, the SJC had to decide how much control a company had to exert to become a joint employer.
Credico argued for the “paycheck test”: Companies should only be deemed a joint employer if the worker received a paycheck from the company. The SJC disagreed, noting that such a test would all but eliminate the joint employer exception.
The workers wanted the court to apply the test that distinguished employees from independent contractors in G.L.c 149, § 148B. The SJC disagreed with that idea, as well, because it answered a different question than the one at issue.
Instead, the SJC noted that Massachusetts' wage laws are modeled on the federal Fair Labor Standards Act (FLSA), and adopted the joint employer test that courts had fashioned for the FLSA.
Under the FLSA test, entities are joint employers based on the totality of the circumstances, guided by whether the employer:
- Had the power to hire and fire the employees,
- Supervised and controlled the conditions of employment and the employees' work schedules,
- Determined the rate and the method of payment, and
- Maintained employment records.
Based on these factors, it became clear that Credico was not the joint employer of DFW's workers.
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