Mario Salinas v. Commercial Interiors, Inc. ( 2017 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 15-1915
MARIO SALINAS; WILLIAM ASCENCIO, Plaintiffs, on behalf of
themselves and others similarly situated; BERNALDINO SALINAS;
FRANKLIN HENRIQUEZ,
Plaintiffs - Appellants,
and
JOSE DOLORES MANCIA; OSMEL HERNANDEZ; HENRY GARCIA
VIERA; HENRY GARCIA,
Plaintiffs,
v.
COMMERCIAL INTERIORS, INC.,
Defendant - Appellee,
and
J.I. GENERAL CONTRACTORS, INC.; JUAN FLORES RAMIREZ,
personally; ISAIAS FLORES RAMIREZ, personally,
Defendants.
--------------------------------------------------
SECRETARY OF LABOR; NATIONAL EMPLOYMENT LAW
PROJECT; LABORERS' INTERNATIONAL UNION OF NORTH
AMERICA MID-ATLANTIC REGIONAL ORGANIZING COALITION;
CENTRO DE LOS DERECHOS DEL MIGRANTES,
Amici Supporting Appellant.
Appeal from the United States District Court for the District of Maryland, at
Greenbelt. J. Frederick Motz, Senior District Judge. (8:12-cv-01973-JFM)
Argued: October 27, 2016 Decided: January 25, 2017
Before WYNN, FLOYD, and HARRIS, Circuit Judges.
Reversed by published opinion. Judge Wynn wrote the opinion, in which Judge
Floyd and Judge Harris joined.
ARGUED: Sally Jean Dworak-Fisher, PUBLIC JUSTICE CENTER, Baltimore,
Maryland, for Appellants. Michael J. Jack, LAW OFFICES OF MICHAEL J.
JACK, Marriottsville, Maryland, for Appellee. Dean Romhilt, UNITED STATES
DEPARTMENT OF LABOR, Washington, D.C., for Amicus Secretary of Labor.
ON BRIEF: Darin M. Dalmat, Kathy L. Krieger, JAMES & HOFFMAN, P.C.,
Washington, D.C., for Appellants. M. Patricia Smith, Solicitor of Labor, Jennifer
S. Brand, Associate Solicitor, Paul L. Frieden, Counsel for Appellate Litigation,
Office of the Solicitor, UNITED STATES DEPARTMENT OF LABOR,
Washington, D.C., for Amicus Secretary of Labor. Brian J. Petruska, LIUNA MID
ATLANTIC REGIONAL ORGANIZING COALITION, Reston, Virginia;
Catherine K. Ruckelshaus, NATIONAL EMPLOYMENT LAW PROJECT, INC.,
New York, New York, for Amici National Employment Law Project, Laborers’
International Union of North America Mid-Atlantic Regional Organizing
Coalition, and Centro De Los Derechos Del Migrantes.
2
WYNN, Circuit Judge:
J.I. General Contractors, Inc. (“J.I.”), a now-defunct framing and drywall
installation subcontractor owned by brothers Juan and Isaias Flores Ramirez,
directly employed Plaintiffs Mario Salinas, William Ascencio, Bernaldino Salinas,
and Franklin Henriquez as drywall installers. During its existence, J.I.—and
therefore Plaintiffs—worked almost exclusively for Commercial Interiors, Inc.
(“Commercial”), a company offering general contracting and interior finishing
services, including drywall installation, carpentry, framing, and hardware
installation.
Plaintiffs sued J.I., the Ramirez brothers, and Commercial (collectively,
“Defendants”) for violations of the Fair Labor Standards Act (“FLSA”), 29 U.S.C.
§§ 201 et seq.; the Maryland Wage and Hour Law, Md. Code Ann., Lab. & Empl.
§§ 3-401 et seq.; and the Maryland Wage Payment and Collection Law, Md. Code
Ann., Lab. & Empl. §§ 3-501 et seq. According to the complaint, Commercial and
J.I. jointly employed Plaintiffs, (1) requiring aggregation of Plaintiffs’ hours
worked for Commercial and J.I. to assess compliance with the FLSA and Maryland
law and (2) rendering Commercial and J.I. jointly and severally liable for any
violations of the statutes.
The district court granted summary judgment to Commercial, holding that
Commercial did not jointly employ Plaintiffs because J.I. and Commercial entered
3
into a “traditionally . . . recognized,” legitimate contractor-subcontractor
relationship and did not intend to avoid compliance with the FLSA or Maryland
law. J.A. 1138–39.1 But the legitimacy of a business relationship between
putative joint employers and the putative joint employers’ good faith are not
dispositive of whether entities constitute joint employers for purposes of the FLSA.
Rather, joint employment exists when (1) two or more persons or entities share,
agree to allocate responsibility for, or otherwise codetermine—formally or
informally, directly or indirectly—the essential terms and conditions of a worker’s
employment and (2) the two entities’ combined influence over the essential terms
and conditions of the worker’s employment render the worker an employee as
opposed to an independent contractor.
Applying this test, we conclude, based on the undisputed facts, that
Commercial jointly employed Plaintiffs for purposes of the FLSA and the
analogous Maryland law. Accordingly, we reverse.
I.
A.
J.I. directly employed Plaintiffs as drywall installers. Since 2009, J.I.
contracted to provide labor for two companies: Commercial and a now-defunct
1
Citations to “J.A. __” refer to the Joint Appendix filed by the parties in this
appeal.
4
contractor known as P & P. Nearly all of J.I.’s work came through its contracts
with Commercial. Notably, J.I. contracted to provide labor for P & P only when
Commercial had no work available for J.I. to complete—which occurred twice, at
most. Thus, as J.I. employees, Plaintiffs worked almost exclusively for
Commercial during the course of their employment.
J.I. generally was responsible for hiring and firing Plaintiffs, though one
Plaintiff testified that a Commercial foreman threatened him with termination due
to work the Commercial foreman viewed as substandard. And on another
occasion, when J.I. had difficulty enrolling in an insurance program mandated for a
particular jobsite, Commercial required several Plaintiffs to complete applications
for employment with Commercial and to work directly for Commercial on the
project. Typically, J.I. paid Plaintiffs; however, on at least a few occasions,
Plaintiffs received paychecks issued by Commercial.
Commercial also played a role in determining Plaintiffs’ daily and weekly
schedules. At each jobsite, the general contractor and others, including
Commercial, decided upon the start and end times for work on the jobsite. In
addition to regular hours on the site, Commercial foremen told certain Plaintiffs to
work additional hours or to report to work on Sundays. Commercial also was
involved in determining where Plaintiffs worked each day. Commercial’s
superintendent regularly communicated Commercial’s site-specific staffing needs
5
to the Ramirez brothers, who assigned J.I.’s employees in accordance with
Commercial’s requests.
While working on Commercial’s jobsites, Plaintiffs wore hardhats and vests
bearing the Commercial logo. And Commercial foremen gave J.I. supervisors
sweatshirts branded with Commercial’s logo for those supervisors to wear while
working on Commercial projects. In addition to these outward markers, Plaintiffs
were instructed to tell anyone who asked that they worked for Commercial.
Upon reporting to the assigned jobsite each day, Commercial required
Plaintiffs to sign in on timesheets provided by Commercial and bearing
Commercial’s logo. Commercial retained these timesheets, storing them in a
temporary office typically located on each jobsite before sending them to
Commercial’s main office in Maryland for retention. Using these timesheets,
Commercial foremen recorded the time Plaintiffs reported to work, as well as the
time Plaintiffs finished working each day. By contrast, J.I. did not keep or
maintain written records of Plaintiffs’ hours.
After signing in for work on nearly every morning, Commercial required
Plaintiffs to attend meetings. At these meetings, Commercial foremen gave
instructions regarding the projects Plaintiffs needed to complete and the methods
they needed to follow in doing so. Commercial also required Plaintiffs to attend a
weekly safety meeting. Because Plaintiffs are native Spanish speakers and speak
6
limited English, J.I. supervisors generally translated the Commercial foremen’s
instructions to Plaintiffs.
Commercial foremen continually supervised Plaintiffs as they completed
their assigned tasks. For example, when J.I. did not have a supervisor at a jobsite,
Commercial foremen told Plaintiffs what to do and how to do it. And regardless of
whether J.I. had a supervisor at a jobsite, Commercial foremen “check[ed]”
Plaintiffs’ work throughout each day to “[m]ak[e] sure that the work [wa]s
quality.” J.A. 78c. Commercial foremen also verified that J.I. employees’ work
was “acceptable” before Commercial issued payment to J.I. J.A. 81b. If Plaintiffs’
work was not up to Commercial’s standards or specifications and J.I. had a
supervisor on site, Commercial communicated the deficiencies to Plaintiffs via
J.I.’s onsite supervisors. Plaintiffs were then expected to remedy the identified
shortcomings.
Commercial owned and provided nearly all the tools and materials Plaintiffs
used to complete their tasks, even though Commercial’s contract with J.I. provided
that J.I. was obligated to provide all materials and equipment. In particular,
Commercial supplied Plaintiffs with nail guns, chop saws, lasers, safety goggles,
ropes, gloves, earplugs, and gangboxes (metal storage boxes) for overnight tool
storage. Commercial also provided the materials Plaintiffs needed to complete
their work, including metal studs used for framing and the drywall installed on
7
Commercial projects. By contrast, J.I. did not own or provide Plaintiffs with any
equipment or materials, and Plaintiffs provided only small, handheld tools.
B.
On July, 2, 2012, Plaintiffs filed a collective action under the FLSA, the
Maryland Wage and Hour Law, and the Maryland Wage Payment and Collection
Law against Defendants in the United States District Court for the District of
Maryland.2 The complaint alleged that Defendants willfully failed to pay
Plaintiffs’ wages, including overtime wages, in violation of the FLSA and
Maryland law. Plaintiffs asserted that they were jointly employed by Commercial
and J.I., rendering Commercial and J.I. jointly and severally liable for any
violations of the FLSA or Maryland statutes. 3
2
Franklin Henriquez, Osmel Hernandez, Jose Mancia, Bernaldino Salinas,
and Henry Viera—Mario Salinas’s and William Ascencio’s coworkers at J.I.—
joined as plaintiffs soon thereafter. Osmel Hernandez and Jose Mancia accepted
Rule 68 offers of judgment from J.I. and the Ramirez brothers and are not parties
to this appeal. Henry Garcia also is no longer a plaintiff in this action. Therefore,
only Mario Salinas, William Ascencio, Bernaldino Salinas, and Franklin
Henriquez remain as Plaintiffs.
3
On appeal, the parties address only whether Commercial was Plaintiffs’
joint employer under the FLSA. Our resolution of the FLSA joint employment
question also resolves Plaintiffs’ claims under the Maryland Wage and Hour Law,
which defines “employer” consistently with the FLSA. 29 U.S.C. § 203(d)
(defining employer as “any person acting directly or indirectly in the interest of an
employer in relation to an employee”); Md. Code Ann., Lab. & Empl. § 3-401(b)
(defining “employer” as including “a person who acts directly or indirectly in the
interest of another employer with an employee”). We have interpreted these laws
(Continued)
8
Commercial moved for summary judgment, arguing that it did not jointly
employ Plaintiffs. To determine whether Commercial and J.I. jointly employed
Plaintiffs, the district court created and applied a novel multifactor test focusing on
the legitimacy of the contracting relationship between Commercial and J.I. and
whether the putative joint employers intended to evade federal and state wage and
hour laws. In particular, the court’s test examined the following five factors:
(1) Was the relationship between JI and Commercial one that
traditionally has been recognized in the law?
(2) Was the amount paid by Commercial to JI pursuant to the
contract between them sufficient to permit the direct employer
to meet its legal obligations under the FLSA while earning a
reasonable profit?
(3) Did the relationship between JI and Commercial appear to be a
“cozy” one, i.e., one that is virtually exclusive and shaped by
things other than objective market forces?
(4) Is the alleged violation of the FLSA one of which Commercial,
during the ordinary course of performance of its own duties,
should have been aware?
consistently in prior cases. See McFeeley v. Jackson St. Entm’t, 825 F.3d 235, 240
(4th Cir. 2016) (“Because plaintiffs’ claims under Maryland labor laws run parallel
to their claims under the FLSA, our analysis of federal law extends as well to the
state law claims.”). Plaintiffs acknowledge that their claim under the Maryland
Wage Payment and Collection Law “is now moot.” Appellants’ Opening Br. at 6.
Accordingly, our decision does not address that claim.
9
(5) Are there other indicia that the relationship between JI and
Commercial was designed to abuse the employees of the direct
employer?
J.A. 1138. Applying this test, the district court concluded that Commercial did not
jointly employ Plaintiffs. Consequently, Plaintiffs (1) could not aggregate the
hours they worked for J.I. and Commercial in determining compliance with the
FLSA and Maryland law and (2) could not hold Commercial jointly and severally
liable for the alleged wage and hour violations.
With Commercial dismissed from the suit, Plaintiffs’ claims against J.I. and
the Ramirez brothers proceeded to trial. After a three-day bench trial, the district
court entered judgment in favor of Plaintiffs against J.I. and the Ramirez brothers,
in the amount of $18,482.16. The district court later awarded Plaintiffs $7,850 in
attorneys’ fees and costs. J.I. and the Ramirez brothers satisfied the judgment in
full.4
Plaintiffs now appeal the district court’s conclusion that Commercial did not
jointly employ Plaintiffs. On appeal, Plaintiffs assert that the district court’s novel
joint employment test (1) did not conform to the FLSA’s definitions of “employ,”
“employee,” and “employer”; (2) failed to adhere to the Department of Labor’s
longstanding regulations regarding joint employment; and (3) improperly limited
4
In footnote 5, infra, we explain why this judgment does not render
Plaintiffs’ claims against Commercial moot.
10
joint employment liability to situations in which “a court finds evidence of
subterfuge or indicia of abuse.” Appellants’ Opening Br. at 1–2. For the reasons
given below, we agree with Plaintiffs’ assertions.
II.
A.
Congress enacted the FLSA in 1938—in the midst of the Great
Depression—to combat the pervasive “evils and dangers resulting from wages too
low to buy the bare necessities of life and from long hours of work injurious to
health.” S. Rep. No. 75-884, at 4 (1937). Congress intended the FLSA “to free
commerce from the interferences arising from production of goods under
conditions that were detrimental to the health and well-being of workers,”
Rutherford Food Corp. v. McComb, 331 U.S. 722, 727 (1947), and “to protect ‘the
rights of those who toil, of those who sacrifice a full measure of their freedom and
talents to the use and profit of others.’” Benshoff v. City of Va. Beach, 180 F.3d
136, 140 (4th Cir. 1999) (quoting Tenn. Coal, Iron & R.R. Co. v. Muscoda Local
No. 123, 321 U.S. 590, 597 (1944), superseded in part by statute, 29 U.S.C. §
254(a) (1947)). To that end, the FLSA establishes a federal minimum wage and
requires employers to pay “a rate not less than one and one-half times the regular
rate” to employees who work more than forty hours in a single workweek. 29
U.S.C. §§ 206(a), 207(a)(1).
11
Consistent with the FLSA’s “remedial and humanitarian” purpose, Tenn.
Coal, 321 U.S. at 597, Congress adopted definitions of “employ,” “employee,” and
“employer” that brought a broad swath of workers within the statute’s protection.
In particular, Congress defined “employ” as “to suffer or permit to work.” 29
U.S.C. § 203(g). This definition derived from state child-labor laws, which
imposed liability not only on businesses that directly employed children but also
on “businesses that used middlemen to illegally hire and supervise children.”
Antenor v. D & S Farms, Inc., 88 F.3d 925, 929 n.5 (11th Cir. 1996); Rutherford
Food, 331 U.S. at 728 & n.7; see also People ex rel. Price v. Sheffield Farms-
Slawson-Decker Co., 121 N.E. 474, 476 (N.Y. 1918) (explaining that a New York
child-labor law’s definition of “employed” as “permitted or suffered to work”
imposed liability “equally” on businesses that employed children directly and
businesses that employed children indirectly through agents).
Likewise, Congress defined “employee” as “any individual employed by an
employer,” 29 U.S.C. § 203(e)(1), describing this language as “the broadest
definition that has ever been included in any one act.” United States v.
Rosenwasser, 323 U.S. 360, 363 n.3 (1945) (quoting 81 Cong. Rec. 7657 (1937)
(statement of Sen. Hugo Black)); Tony & Susan Alamo Found. v. Sec’y of Labor,
471 U.S. 290, 300 n.21 (1985) (same). And Congress defined “employer” in a
similarly expansive fashion, providing that an “employer” is “any person acting
12
directly or indirectly in the interest of an employer in relation to an employee.” 29
U.S.C. § 203(d) (emphasis added). The Supreme Court has explained that the
“striking breadth” of these definitions brings within the FLSA’s ambit workers
“who might not qualify as [employees] under a strict application of traditional
agency law principles” or under other federal statutes. Nationwide Mut. Ins. Co. v.
Darden, 503 U.S. 318, 326 (1992).
Although the FLSA does not expressly reference “joint employment,” the
Department of Labor’s first set of regulations implementing the statute—which
remain in force—recognize that “[a] single individual may stand in the relation of
an employee to two or more employers at the same time under the Fair Labor
Standards Act of 1938, since there is nothing in the act which prevents an
individual employed by one employer from also entering into an employment
relationship with a different employer.” 29 C.F.R. § 791.2(a).
To that end, the regulations distinguish “separate and distinct employment”
and “joint employment.” Id. Separate employment exists when “all the relevant
facts establish that two or more employers are acting entirely independently of
each other and are completely disassociated with respect to the” individual’s
employment. Id. (emphasis added). Separate employers may “disregard all work
performed by the employee for the other employer” when determining their
obligations under the FLSA. Id. By contrast, joint employment exists when “the
13
facts establish . . . that employment by one employer is not completely
disassociated from employment by the other employer[].” Id. (emphasis added).
“[J]oint employers are responsible, both individually and jointly, for
compliance with all of the applicable provisions of the act, including the overtime
provisions, with respect to the entire employment for the particular workweek.”
Id. Accordingly, the hours an individual works for each joint employer in a single
workweek must be aggregated to determine whether and to what extent the
individual must be paid overtime to comply with the FLSA.5 See Chao v. A-One
5
The principle that joint employers are jointly and severally liable for
complying with the FLSA, including its overtime provisions, serves as the basis for
our rejection of Commercial’s argument that Plaintiffs’ claims are moot.
Commercial asserts that Plaintiffs were awarded a judgment against J.I. and the
Ramirez brothers; that this judgment was satisfied; and that, since Plaintiffs
claimed that Defendants were jointly and severally liable for all violations,
Plaintiffs recovered all of the relief available to them through that judgment. We
reject Commercial’s reasoning. Far from having “no remaining claims,”
Appellee’s Response Br. at 21–22, Plaintiffs assert claims for relief that can be
granted only if we reverse the district court’s award of summary judgment and
conclude that Commercial was Plaintiffs’ joint employer. Namely, Plaintiffs seek
payment of unpaid overtime wages from weeks in which they worked less than
forty hours for J.I. and Commercial considered separately, but more than forty
hours for J.I. and Commercial in the aggregate.
Plaintiffs have adduced sufficient evidence for us to conclude that, if we
deem Commercial their joint employer, additional relief may be available. In
particular, Plaintiffs point to documents showing at least one week in which each
Plaintiff worked more than forty hours for Commercial and J.I. in the aggregate,
but less than forty hours for each entity considered separately. These unpaid hours
were not covered by Plaintiffs’ judgment against J.I. and the Ramirez brothers,
which reflected only unpaid overtime wages from weeks in which Plaintiffs
(Continued)
14
Med. Servs., Inc., 346 F.3d 908, 916–18 (9th Cir. 2003) (aggregating an
employee’s hours for each joint employer to determine whether the joint employers
complied with the FLSA overtime provision); Karr v. Strong Detective Agency,
Inc., 787 F.2d 1205, 1207–08 (7th Cir. 1986) (aggregating the hours worked for
each joint employer separately to determine the total overtime pay owed).
Therefore, the joint employment doctrine: (1) treats a worker’s employment by
joint employers as “one employment” for purposes of determining compliance
with the FLSA’s wage and hour requirements and (2) holds joint employers jointly
and severally liable for any violations of the FLSA. Schultz v. Capital Int’l Sec.,
Inc., 466 F.3d 298, 305, 307, 310 (4th Cir. 2006).
The Supreme Court has long recognized that two or more entities may
constitute joint employers for purposes of the FLSA. For example, in Rutherford
Food—which predated the Department of Labor regulations setting forth the
circumstances in which joint employment generally exists—the Court observed
that the plaintiff meat boners could be employed both by the subcontractor that
worked more than forty hours for J.I. alone. As instructed by Cedar Coal Co. v.
United Mine Workers of America, 560 F.2d 1153 (4th Cir. 1977), we have
considered the relevant documents only “[i]n ascertaining whether the case[ is]
moot” and not “in ascertaining the merits.” 560 F.2d at 1166. On remand, the
district court is tasked with determining whether and to what extent Plaintiffs are
entitled to damages for unpaid overtime wages associated with this evidence.
15
directly employed them and by a slaughterhouse operator who supervised and
controlled their daily work. 331 U.S. at 724–25, 730; see also Zheng v. Liberty
Apparel Co., 355 F.3d 61, 70 (2d Cir. 2003) (“Rutherford was a joint employment
case, as it is apparent from the Supreme Court’s opinion that the boners were, first
and foremost, employed by the [independent contractor] who had entered into a
contract with the slaughterhouse.”). Likewise, in Falk v. Brennan, 414 U.S. 190
(1973), the Court found that maintenance workers who provided services to
apartment complexes were employed both by the owners of the complexes and by
the company that contracted to provide management services for the complexes
because that company maintained “substantial control” over the conditions of the
workers’ employment. 414 U.S. at 195.
Following the Department of Labor’s regulation and the Supreme Court’s
decisions recognizing the joint employment doctrine, Congress repeatedly has
reaffirmed that the FLSA’s definitions of “employ,” “employee,” and “employer”
dictate that two or more entities can constitute “joint employers” for purposes of
the FLSA. For example, in amending the FLSA in 1988, Congress recognized the
“FLSA joint employment rule,” explaining that “there are some situations in which
an employee who works for two separate employers or in two separate jobs for the
same employer has all of the hours worked credited to one employer for purposes
of determining overtime liability.” S. Rep. No. 99-159, at 12 (1985); H.R. Rep.
16
No. 99-331, at 23 (1985). Congress also endorsed the FLSA’s joint employment
doctrine in enacting the Migrant and Seasonal Agricultural Workers Protection
Act, 29 U.S.C. §§ 1801 et seq. (the “Migrant Workers Act”), which uses the same
definition of “employ” as the FLSA. 128 Cong. Rec. S11,749 (daily ed. Sept. 17,
1982) (adopting “[t]he exact same principles . . . to define the term ‘employ’ in
[Migrant Workers Act] joint employment situations as are used under FLSA”
(emphasis added)).
B.
Notwithstanding the joint employment doctrine’s venerable and entrenched
position, courts have had difficulty developing a coherent test distinguishing
“separate employment” from “joint employment.” As explained below, courts’
attempts to distinguish separate employment from joint employment have spawned
numerous multifactor balancing tests, none of which has achieved consensus
support.
The genesis of the confusion over the joint employment doctrine’s
application appears to be the Ninth Circuit’s decision in Bonnette v. California
Health and Welfare Agency, 704 F.2d 1465 (9th Cir. 1983). Emphasizing that
courts must consider “the circumstances of the whole activity” and that no set of
factors was “etched in stone,” the Bonnette Court concluded that four,
nonexclusive factors “provide a useful framework” for determining whether an
17
entity constitutes a joint employer: “whether the alleged employer (1) had the
power to hire and fire the employees, (2) supervised and controlled employee work
schedules or conditions of employment, (3) determined the rate and method of
payment, and (4) maintained employment records.” 704 F.2d at 1469–70 (internal
quotation marks omitted).
Bonnette’s four-factor joint employment test derived from the test the Ninth
and Fifth Circuits used to distinguish employees from independent contractors for
purposes of the FLSA. Id. (citing Real v. Driscoll Strawberry Assocs., Inc., 603
F.2d 748, 756 (9th Cir. 1979); Hodgson v. Griffin & Brand of McAllen, Inc., 471
F.2d 235, 237–38 (5th Cir. 1973)). These factors reflect the common-law test for
determining whether an agency relationship exists, which focuses on the putative
principal’s “formal right to control the physical performance of another’s work.”
Zheng, 355 F.3d at 69 (citing Restatement of Agency § 220(1) (1933) (“A servant
is a person employed to perform service for another in his affairs and who, with
respect to his physical conduct in the performance of the service, is subject to the
other’s control or right to control.”)). A number of courts, including district courts
in this Circuit, apply the Bonnette factors in determining whether two entities
constitute joint employers for purposes of the FLSA. See, e.g., Gray v. Powers,
673 F.3d 352, 355 (5th Cir. 2012); Baystate Alt. Staffing, Inc. v. Herman, 163 F.3d
18
668, 675–76 (1st Cir. 1998); Dalton v. Omnicare, Inc., 138 F. Supp. 3d 709, 717
(N.D. W. Va. 2015).
Emphasizing that Congress intended for the FLSA to “stretch[] the meaning
of ‘employee’ to cover some parties who might not qualify as such under a strict
application of traditional agency law principles,” Darden, 503 U.S. at 326, several
circuits have liberalized the Bonnette test, see, e.g., Zheng, 355 F.3d at 69; In re
Enterprise Rent-A-Car Wage & Hour Emp’t Practices Litig., 683 F.3d 462, 468–
70 (3d Cir. 2012). As the Second Circuit explained, “the four-factor test cannot be
reconciled with the ‘suffer or permit’ language in the [FLSA], which necessarily
reaches beyond traditional agency law.” Zheng, 355 F.3d at 69. Accordingly,
although satisfaction of the Bonnette factors “can be sufficient to establish
employer status . . . a positive finding on those four factors is [not] necessary to
establish an employment relationship.” Id. (emphasis omitted).
Rather than developing an entirely new joint employment test, courts have
elected to supplement the four Bonnette factors with additional factors intended to
take into account the FLSA’s more expansive definition of “employee.” For
example, Zheng identified six additional factors that speak to whether, as a matter
of “economic reality,” a putative employer “has functional control over workers
even in the absence of . . . formal control.” Id. at 72. The Eleventh Circuit applies
an eight-factor test—with five factors that derive from regulations implementing
19
the Migrant Workers Act and speak to many of the considerations addressed by the
Bonnette factors—designed to assess whether a worker is “economically
dependent” on a putative joint employer. 6 Layton v. DHL Express (USA), Inc., 686
F.3d 1172, 1176–77 (11th Cir. 2012). And although the Ninth Circuit has not
expressly replaced the Bonnette test, it now assesses whether a joint employment
relationship exists using thirteen nonexclusive factors, five from the text of the
Migrant Workers Act regulations and eight derived from case law. Torres-Lopez
v. May, 111 F.3d 633, 639–41 (9th Cir. 1997). “[L]ike other open-ended balancing
tests,” this universe of nebulous factor tests has “yield[ed] unpredictable and at
times arbitrary results.” Lexmark Int’l, Inc. v. Static Control Components, Inc.,
134 S. Ct. 1377, 1392 (2014) (Scalia, J.).
6
The Migrant Workers Act and the FLSA identically define “employ” as “to
suffer or permit to work.” 29 U.S.C. § 203(g); id. § 1802(5) (defining “employ” as
having “the meaning given such term under section 3(g) of the Fair Labor
Standards Act of 1938”). Moreover, the regulations promulgated pursuant to the
Migrant Workers Act define joint employment under that Act as having the same
scope as joint employment under the FLSA. 29 C.F.R. § 500.20(h)(5) (“The
definition of the term employ includes the joint employment principles applicable
under the Fair Labor Standards Act.”); H.R. Rep. No. 97-885, at 6 (1982)
(explaining that the Migrant Workers Act’s adoption of the FLSA definition “was
deliberate and done with the clear intent of adopting the ‘joint employer’ doctrine
as a central foundation of this new statute”). Therefore, cases involving joint
employment claims under the Migrant Workers Act are particularly relevant to an
examination of joint employment under the FLSA. The “regulatory factors” often
relied upon by courts in considering joint employment claims are located in 29
C.F.R. § 500.20(h)(5)(iv).
20
We agree that Bonnette’s reliance on common-law agency principles does
not square with Congress’s intent that the FLSA’s definition of “employee”
encompass a broader swath of workers than would constitute employees at
common law. See Darden, 503 U.S. at 326. Accordingly, courts should not rely
on the Bonnette factors in determining whether a worker constitutes an employee
or independent contractor for purposes of the FLSA and analogous labor statutes.7
But focusing on Bonnette’s errant reliance on common-law agency principles
diverts attention from two more fundamental problems with the use of the Bonnette
factors—and tests built upon those factors—in the joint employment context: that
the factors (1) improperly focus on the relationship between the employee and
putative joint employer, rather than on the relationship between the putative joint
employers, and (2) incorrectly frame the joint employment inquiry as a question of
an employee’s “economic dependence” on a putative joint employer.
As to the first problem, recall that the joint employment doctrine addresses
whether a relationship exists between two entities such that they should be treated
as a single employer for purposes of determining compliance with and liability
under the FLSA. To that end, the Department of Labor regulations state that joint
7
This Court follows the six-factor test set forth in United States v. Silk, 331
U.S. 704 (1947), abrogated in part by 503 U.S. 318 (1992), to determine whether a
worker is an independent contractor or employee for purposes of the FLSA. See
infra Part IV.B.
21
employment exists when employment by one employer is “not completely
disassociated from employment by the other employer[].” 29 C.F.R. § 791.2(a)
(emphasis added). Likewise, we have held that the joint employment inquiry must
address the “relationship between the employer who uses and benefits from the
services of workers and the party that hires or assigns the workers to that
employer.” Schultz, 466 F.3d at 306 (emphasis added) (internal quotation mark
omitted) (quoting Ansoumana v. Gristede’s Operating Corp., 255 F. Supp. 2d 184,
193 (S.D.N.Y. 2003)).
Tests focusing on the relationship between a worker and a putative joint
employer—like the Bonnette test—do not address, much less solve, the problem of
whether two entities are “entirely independent” or “not completely disassociated”
with regard to the essential terms and conditions that govern a worker’s
employment, 29 C.F.R. § 791.2(a), and thus whether the worker’s employment
with the two entities should be treated as “one employment” for purposes of
determining compliance with the FLSA, Schultz, 466 F.3d at 307. In particular,
regardless of whether two entities qualify as employers under the Bonnette factors,
courts still must determine whether those two entities are “not completely
disassociated,” 29 C.F.R. § 791.2(a), with regard to the terms of a worker’s
employment, such that “all of [the] hours worked [should be] credited [as if] to one
employer for purposes of determining overtime liability,” S. Rep. No. 99-159, at
22
12. Likewise, even if two entities do not independently constitute employers under
the Bonnette test, their combined influence over the terms and conditions of a
worker’s employment may give rise to liability under the FLSA if the entities are
“not completely disassociated” with regard to the worker’s employment. See
Schultz, 466 F.3d at 305 (“The district court therefore erred by weighing the degree
of control exercised by [one putative joint employer] against that exercised by [the
other]. The court should have instead weighed the agents’ control against the total
control exercised by [both joint employers].”). In other words, Bonnette and its
progeny do not squarely address the “joint” element of the “joint employer”
doctrine.
The second problem with the Bonnette factors and related tests—their focus
on whether “as a matter of economic reality, the individual is dependent” on a
putative joint employer, Layton, 686 F.3d at 1175—also reflects a failure to
distinguish the joint employment inquiry from the separate, employee-independent
contractor inquiry. Courts’ focus on economic dependency derives from the
Supreme Court’s decisions in Rutherford Food and Goldberg v. Whitaker House
Cooperative, Inc., 366 U.S. 28, 33 (1961). See, e.g., Torres-Lopez, 111 F.3d at
639–40; Antenor, 88 F.3d at 932; Bonnette, 704 F.2d at 1469. Yet neither case
supports the use of economic dependence to guide the entire joint employment
analysis.
23
In Rutherford Food, the Supreme Court considered whether Kaiser, a
slaughterhouse operator, employed meat boners who were directly employed by an
independent contractor that provided labor for Kaiser’s meat deboning process.
331 U.S. at 724–25. The meat boners “did a specialty job on [Kaiser’s] production
line,” working in one room within the slaughterhouse to remove the bones from
cattle carcasses as they were conveyed into the room by Kaiser employees on an
overhead rail running throughout the slaughterhouse. Id. at 726, 730. In
performing their tasks, the meat boners used Kaiser’s premises and equipment and
were supervised by one of Kaiser’s “managing official[s].” Id. at 730. These
factors, among others, reflected that “the circumstances of the whole activity”
compelled the conclusion that the “meat boners were employees of” Kaiser for
purposes of the FLSA. Id.
Although Rutherford Food recognized joint employment—that both Kaiser
and the independent contractor employed the meat boners—the case principally
addressed whether the meat boners were employees or independent contractors of
Kaiser, not whether Kaiser and its independent contractors were joint employers.
See id. at 727–28 (“We pass only upon the question whether the boners were
employees of [Kaiser] under the Fair Labor Standards Act.”). Indeed, before the
case reached the Supreme Court, the Tenth Circuit characterized “[t]he strongly
contested issue [as] whether the boners were and are employees of Kaiser, within
24
purview of the Act, or were and are independent contractors.” Walling v.
Rutherford Food Corp., 156 F.2d 513, 516 (10th Cir. 1946), aff’d, 331 U.S. 722
(1947). Therefore, Rutherford Food embraced economic dependency as a vehicle
for distinguishing employees from independent contractors—not for determining
whether two entities jointly employ a putative employee for purposes of the FLSA.
Goldberg likewise applied the “economic dependence” test to distinguish
between employees and independent contractors and not as the basis for finding
joint employment. There, the Court considered whether members of a cooperative
that made and sold “knitted, crocheted, and embroidered goods of all kinds” were
also the cooperative’s employees. 366 U.S. at 28–29. The Court concluded that
the members, who made goods for the cooperative, were neither “self-employed”
nor “independent,” but rather were “employees” based on the “economic reality”
test. Id. at 32–33. Goldberg did not address joint employment and relied heavily
on United States v. Silk, 331 U.S. 704 (1947)—the foundational case addressing
how to distinguish employees from independent contractors for purposes of the
FLSA. Id. at 33.
Although economic dependency is the prism through which courts should
distinguish employees from independent contractors, as Rutherford Food and
Goldberg demonstrate, it does not capture key ways in which putative joint
employers may be “not completely disassociated” with respect to establishing the
25
terms and conditions of a worker’s employment—the relevant question in
determining whether entities constitute joint employers. 29 C.F.R. § 791.2(a). For
example, in determining whether entities are joint employers, courts have
considered whether workers perform a “specialty job on the production line,”
Torres-Lopez, 111 F.3d at 640; work on a putative joint employer’s premises, id.,
or perform a job “integral” to a putative employer’s business, Antenor, 88 F.3d at
932; and whether the putative joint employer prepares payroll, id., or maintains
possession or control over the workers’ employment records, Enterprise Rent-A-
Car, 683 F.3d at 471. We agree that these considerations are relevant to the joint
employment analysis in that they speak to whether putative joint employers are
“not completely disassociated” with respect to the terms and conditions of a
worker’s employment, but we also recognize that these facts do not render a
worker economically dependent on a putative joint employer.
Courts’ conflation of economic dependency with whether two entities are
“not completely disassociated” with respect to a worker’s employment arises from
their improper focus on the relationship between a putative joint employer and a
worker, rather than the relationship between putative joint employers. If a court
addresses whether one entity is a worker’s “employer” under the FLSA, then it
makes sense to examine economic dependency. After all, that focus is derived
from cases that seek to answer the same question framed in reverse: whether an
26
individual is an entity’s “employee.” But such a focus is inapposite to the joint
employment inquiry, which requires courts to determine whether the putative joint
employers are not wholly disassociated or, put differently, share or codetermine the
essential terms and conditions of a worker’s employment.
In sum, courts have failed to develop a coherent test for determining whether
entities constitute joint employers. The myriad existing tests—most of which
derive from Bonnette—improperly (1) rely on common-law agency principles; (2)
focus on the relationship between a putative joint employer and a worker, rather
than the relationship between putative joint employers; and (3) view joint
employment as a question of economic dependency. Accordingly, district courts
should not follow Bonnette and its progeny in determining whether two or more
persons or entities constitute joint employers for purposes of the FLSA.
C.
In Schultz, this Court established a two-step framework for analyzing FLSA
joint employment claims, under which courts must first determine whether two
entities should be treated as joint employers and then analyze whether the worker
constitutes an employee or independent contractor of the combined entity, if they
are joint employers, or each entity, if they are separate employers. 8 466 F.3d at
8
We recognize that deeming two or more persons or entities “joint
employers” after determining that the first step of the joint employer framework is
(Continued)
27
305–07. Regarding the first step, Schultz identified the Department of Labor
regulations as the starting point for determining whether two or more entities
constitute joint employers for purposes of the FLSA and focused on the nature of
the relationship between putative joint employers. Id. at 306; see also Nat’l Cable
& Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967, 986 (2005) (holding
that if a statute is silent or ambiguous as to a particular issue, courts must “defer
. . . to the agency’s interpretation so long as the construction is a reasonable policy
choice for the agency to make” (internal quotation marks omitted)).
But unlike many of our Sister Circuits, we have not identified specific
factors courts should consider in determining whether a joint employment
satisfied—in other words, that the persons or entities codetermine the essential
terms and conditions of a worker’s employment—seems to put the cart before the
horse by suggesting that the persons or entities are “employers” before we
determine whether the worker at issue is an “employee” within the meaning of the
FLSA. Accordingly, we reiterate that joint employment exists when both (1) two
or more persons or entities share, agree to allocate responsibility for, or otherwise
codetermine the essential terms and conditions of a worker’s employment and (2)
the worker is an “employee” within the meaning of the FLSA.
However, we continue to refer to persons or entities that codetermine the key
terms and conditions of a worker’s employment as “joint employers” (even before
analyzing whether the worker is an employee) for two reasons. First, the
Department of Labor’s regulation suggests that “joint employer” is the appropriate
term for a person or entity that satisfies the first step of our framework by being
“not completely disassociated” with respect to the worker’s employment. 29
C.F.R. § 791.2(a). And second, “joint employer” is a term of art commonly used
by courts to refer to persons or entities that codetermine the essential terms and
conditions of a worker’s employment.
28
relationship exists, prompting our district courts to apply a variety of multifactor
tests. See, e.g., Dalton, 138 F. Supp. 3d at 717 (applying the four-factor Bonnette
test); Jennings v. Rapid Response Delivery, Inc., Civil No. WDQ-11-0092, 2011
WL 2470483, at *3–4 (D. Md. June 16, 2011) (applying a nine-factor test derived
from Bonnette and Zheng); Heath v. Perdue Farms, Inc., 87 F. Supp. 2d 452, 457
n.4 (D. Md. 2000) (applying a nine-factor test derived from the Migrant Workers
Act regulations and case law).9
In light of this confusion—and our admonition that courts should no longer
employ Bonnette or tests derived from Bonnette in the FLSA joint employment
context—we now set forth our own test for determining whether two persons or
entities constitute joint employers for purposes of the FLSA. In doing so, we are
guided by the Supreme Court’s direction that the FLSA “must not be interpreted or
applied in a narrow, grudging manner.” Tenn. Coal, 321 U.S. at 597. Rather,
“because the Act is remedial and humanitarian in purpose, it should be broadly
interpreted and applied to effectuate its goals.” Benshoff, 180 F.3d at 140 (internal
quotation marks and citation omitted).
9
Notably, the trial judge in this case applied a different joint employment
test from that applied in another recent case. See Hall v. DIRECTV, LLC, Civil
Nos. JFM-14-2355, JFM-14-3261, 2015 WL 4064692, at *2 (D. Md. June 30,
2015).
29
As we made clear in Schultz, any joint employment inquiry must begin with
the Department of Labor’s regulations, which distinguish between “separate”
employment—when two persons or entities are “entirely independent” with respect
to a worker’s employment—and “joint” employment—when the two persons or
entities are “not completely disassociated.” 29 C.F.R. § 791.2(a). To that end, the
regulations identify three nonexclusive scenarios in which joint employment, as
opposed to separate employment, generally exists:
(1) Where there is an arrangement between the employers to share
the employee’s services, as, for example, to interchange
employees; or
(2) Where one employer is acting directly or indirectly in the
interest of the other employer (or employers) in relation to the
employee; or
(3) Where the employers are not completely disassociated with
respect to the employment of a particular employee and may be
deemed to share control of the employee, directly or indirectly,
by reason of the fact that one employer controls, is controlled
by, or is under common control with the other employer.
Id. § 791.2(b) (footnotes omitted). Each of these scenarios focuses on the
relationship between the putative joint employers—the proper focus of the first
step of the joint employment inquiry, which turns on the relative association or
disassociation between entities with respect to establishing the essential terms and
conditions of a worker’s employment.
30
Although the regulations identify three distinct scenarios, all three speak to
one fundamental question: whether two or more persons or entities are “not
completely disassociated” with respect to a worker such that the persons or entities
share, agree to allocate responsibility for, or otherwise codetermine—formally or
informally, directly or indirectly—the essential terms and conditions of the
worker’s employment. Cf. Enterprise Rent-A-Car, 683 F.3d at 468 (“[W]here two
or more employers . . . share or co-determine those matters governing essential
terms and conditions of employment—they constitute ‘joint employers’ under the
FLSA.” (internal quotation marks omitted)).
In answering this question courts should consider six factors:
(1) Whether, formally or as a matter of practice, the putative joint
employers jointly determine, share, or allocate the power to
direct, control, or supervise the worker, whether by direct or
indirect means;
(2) Whether, formally or as a matter of practice, the putative joint
employers jointly determine, share, or allocate the power to—
directly or indirectly—hire or fire the worker or modify the
terms or conditions of the worker’s employment;
(3) The degree of permanency and duration of the relationship
between the putative joint employers;
(4) Whether, through shared management or a direct or indirect
ownership interest, one putative joint employer controls, is
controlled by, or is under common control with the other
putative joint employer;
31
(5) Whether the work is performed on a premises owned or
controlled by one or more of the putative joint employers,
independently or in connection with one another; and
(6) Whether, formally or as a matter of practice, the putative joint
employers jointly determine, share, or allocate responsibility
over functions ordinarily carried out by an employer, such as
handling payroll; providing workers’ compensation insurance;
paying payroll taxes; or providing the facilities, equipment,
tools, or materials necessary to complete the work.
We emphasize that these six factors do not constitute an exhaustive list of all
potentially relevant considerations. To the extent that facts not captured by these
factors speak to the fundamental threshold question that must be resolved in every
joint employment case—whether a purported joint employer shares or
codetermines the essential terms and conditions of a worker’s employment—courts
must consider those facts as well.
We also emphasize that “[t]he ultimate determination of joint employment
must be based upon the circumstances of the whole activity.” Schultz, 466 F.3d at
306 (internal quotation marks omitted); 29 C.F.R. § 791.2(a) (“A determination of
whether the employment by the employers is to be considered joint employment or
separate and distinct employment for purposes of the act depends upon all the facts
in the particular case.”). As Judge Easterbrook explained in Reyes v. Remington
Hybrid Seed Co., 495 F.3d 403 (7th Cir. 2007), “[a] score of 5 to 3 decides a
baseball game,” not whether two entities constitute joint employers under the
relevant totality-of-the-circumstances test, 495 F.3d at 407. And, the Department
32
of Labor regulation’s focus on whether two entities are “entirely independent” or
“not completely disassociated,” 29 C.F.R. § 791.2(a) (emphasis added), indicates
that one factor alone can serve as the basis for finding that two or more persons or
entities are “not completely disassociated” with respect to a worker’s employment
if the facts supporting that factor demonstrate that the person or entity has a
substantial role in determining the essential terms and conditions of a worker’s
employment. 10
D.
We adopt the test set forth above for several reasons. First, the test focuses
on the relevant relationship—the relationship between the putative joint
employers—as dictated by the Department of Labor regulation and the purpose of
the joint employment doctrine. 29 C.F.R. § 791.2(a). Focusing on whether
putative joint employers share or codetermine the terms and conditions of a
worker’s employment also prevents courts from conflating the two separate
10
We reiterate that the joint employment inquiry is a highly factual analysis.
Accordingly, while one factor supported by significant facts pointing to two or
more entities’ codetermination of the key terms and conditions of a worker’s
employment may be sufficient to establish that the entities are joint employers,
another factor with weaker factual support may not be. For example, a general
contractor that sets the start and end times for all work on a jobsite or establishes
site-wide safety protocols may not be a joint employer absent additional evidence
of the general contractor’s codetermination of the essential terms and conditions of
the workers’ employment.
33
inquiries within the joint employment analysis: (1) whether two or more entities
are “not completely disassociated” with respect to a worker’s employment and (2)
in the context of the worker’s entire employment, whether the worker is an
employee protected by the FLSA or an independent contractor outside the statute’s
scope. That courts must apply different factors in determining whether entities are
joint employers and whether workers are employees or independent contractors,
and must weigh those factors through different lenses—whether the putative joint
employers are “not completely disassociated” with regard to establishing the
essential terms of a worker’s employment versus whether workers are
economically dependent on a putative employer—further serves to differentiate the
two inquiries.
By focusing on the relationship between putative joint employers, our test
also captures situations that tests focusing solely on the relationship between a
worker and a putative joint employer cannot resolve. For instance, a finding that
two entities independently constitute a worker’s employers for purposes of the
FLSA does not resolve whether the entities amount to joint employers such that the
worker’s hours for both employers must be aggregated to determine compliance
with the statute. Likewise, two entities that do not individually employ a worker
within the meaning of the FLSA may still have to comply with the FLSA if their
combined influence over the essential terms and conditions of the worker’s
34
activities gives rise to an employer-employee relationship. Our test provides
clarity in such situations, whereas tests focusing solely on the relationship between
a worker and each putative joint employer, like Bonnette, fail to address—much
less resolve—the entities’ joint obligations.
Finally, the test set forth above is appropriately different from—and more
inclusive than—joint employment tests applied under other statutes that do not
define “employ,” “employer,” and “employee” as broadly as the FLSA. The
Supreme Court has contrasted the “striking breadth” of the FLSA’s definition of
“employee” with other statutes that define the term more narrowly, stating that an
entity may constitute an employer for purposes of the FLSA even if it is not an
employer under other statutes. Darden, 503 U.S. at 326.
We highlighted the implications of this difference in the context of joint
employment in Butler v. Drive Automotive Industries of America, Inc., 793 F.3d
404 (4th Cir. 2015). There, we dealt with whether two entities were joint
employers for the purposes of Title VII of the Civil Rights Act of 1964. 793 F.3d
at 408. We adopted a nine-factor “hybrid test” for determining when joint
employment exists for Title VII purposes, deeming “the common-law element of
control . . . the ‘principal guidepost’ in the analysis.” Id. at 414. In adopting this
test, we noted that “FLSA cases . . . are not particularly transferrable to Title VII
cases” because the FLSA defines “employee” more broadly than Title VII and a
35
number of other federal labor statutes. Id. at 412 n.10. By rejecting the common-
law “control” tests—like Butler and Bonnette—and instead focusing on whether
two entities are “not completely disassociated” with regard to their
codetermination of the key terms and conditions of a worker’s employment, the
test set forth above remains true to Congress’s intent to define employment more
expansively in the FLSA than in other statutes.
E.
In reaffirming Schultz’s two-step analysis and setting forth factors to aid in
determining whether two or more entities are “not completely disassociated” with
respect to a worker’s employment, we also reject the novel test developed and
applied by the district court, which focused on whether the relationship between
putative joint employers was (1) “traditionally . . . recognized in the law,” (2)
represented a reasonable business decision, or (3) reflected a bad faith effort to
avoid compliance with wage and hour laws. J.A. 1138–39.
That the general contractor-subcontractor relationship—or any other
relationship—has long been “recognized in the law” and remains prevalent in the
relevant industry has no bearing on whether entities codetermine the essential
terms and conditions of a worker’s employment and, therefore, constitute joint
employers for purposes of the FLSA. As the Second Circuit has noted, “the
prevalence of an industry-wide custom is subject to conflicting inferences. While,
36
on the one hand, it may be ‘unlikely’ that a prevalent action is ‘a mere subterfuge
to avoid complying with labor laws,’ on the other hand, the very prevalence of a
custom may ‘be attributable to widespread evasion of labor laws.’” Barfield v.
N.Y.C. Health and Hosps. Corp., 537 F.3d 132, 146 (2d Cir. 2008) (quoting Zheng,
355 F.3d at 73–74).
More significantly, classifying contractors and subcontractors that share,
allocate responsibility for, or codetermine the essential terms and conditions of a
worker’s employment as joint employers and requiring them to comply with the
FLSA’s wage and hour requirements does not undermine the many reasons the law
has “traditionally” recognized the general contractor-subcontractor relationship. In
particular, to the extent a subcontractor constitutes a bona fide independent
contractor, the general contractor will limit its liability for the subcontractor’s
negligence. Rowley v. Mayor & City Council of Balt., 505 A.2d 494, 496–97 (Md.
1986) (“The general rule is that the employer of an independent contractor is not
liable for the negligence of the contractor or his employees.”); Restatement
(Second) of Torts § 409 (1965). And by entering into a general contractor-
subcontractor relationship, the general contractor may not have to comply with tax,
labor, and benefits laws that have narrower definitions of “employ,” “employee,”
and “employer” than the FLSA. See Darden, 503 U.S. at 322–27. Accordingly,
contrary to Commercial’s protestations, applying the joint employment doctrine in
37
accordance with the intent of Congress and the Department of Labor does not
undermine—let alone deal a fatal blow to—the “traditional” benefits of general
contractor-subcontractor relationships; it simply ensures that “the wages paid by
private employers are sufficient to maintain the bare cost of living.” 11 H.R. Rep.
No. 75-2182, at 6 (1938).
The fact that contracting out employment services represents a “reasonable
business decision” likewise has no bearing on whether two entities constitute joint
employers and therefore must jointly comply with the FLSA’s wage and hour
provisions. In numerous circumstances, courts have deemed an arrangement
between two entities joint employment for purposes of the FLSA, notwithstanding
the entities’ reasonable business purpose for entering into the arrangement. For
example, in Barfield, the Second Circuit acknowledged that a hospital contracted
with referral agencies for temporary nursing services as a result of a “legitimate
business concern” stemming from the shortage of health care workers available for
full-time employment. 537 F.3d at 146. Nonetheless, the court held that the
hospital jointly employed a nursing assistant who was directly employed and paid
by three referral agencies with which the hospital contracted. Id. at 145–48.
11
Again, we emphasize that certain elements of “traditional” general
contractor control over workers on a jobsite may not be enough alone to trigger a
finding that the general contractor jointly employs every worker on the site. See
supra n.10.
38
Likewise, in Schultz, we concluded that a Saudi diplomat and an independent
security services contractor jointly employed plaintiff security agents for purposes
of the FLSA, notwithstanding that the contracting relationship made “business”
sense because of licensing requirements for security businesses. 466 F.3d at 300–
01.
Finally, that two persons or entities did not enter into a relationship with the
intent to avoid compliance with the FLSA is not dispositive as to whether the
persons or entities codetermine the key terms and conditions of a worker’s
employment or whether, ultimately, they are joint employers. To be sure, the joint
employment doctrine serves to “preserve[] . . . [FLSA] protection so as to prevent
such abuses as manipulation of job scheduling or rotation of workers to circumvent
overtime requirements.” H. Rep. No. 99-331, at 23–25. Accordingly, facts
demonstrating that two entities jointly engaged in a bad faith effort to evade
compliance with the FLSA—such as by strategically allocating levers of control
over a worker so that neither entity independently constitutes the worker’s
employer—will provide strong evidence that the entities are “not completely
disassociated” with respect to that worker’s employment.
But as the Third Circuit has recognized in the context of the National Labor
Relations Act—a labor statute that defines employment more narrowly than the
FLSA—joint employment also can exist when “one employer while contracting in
39
good faith with an otherwise independent company, has retained for itself
sufficient control of the terms and conditions of employment of the employees who
are employed by the other employer.” N.L.R.B. v. Browning-Ferris Indus. of Pa.,
Inc., 691 F.2d 1117, 1123 (3d Cir. 1982) (emphasis added). For this reason, we
join other courts in rejecting joint employment tests, like the one developed and
applied by the district court in this case, that turn on whether an arrangement
between putative joint employers was “purposely structured to avoid FLSA
obligations.” Barfield, 537 F.3d at 146–47 (holding that an entity can constitute a
“joint employer even absent a showing of subterfuge or business bad faith”).
III.
A.
We now apply the joint employment test set forth above to determine
whether summary judgment was properly granted in favor of Commercial’s
position that it did not jointly employ Plaintiffs. We review a district court’s award
of summary judgment de novo, Morrison v. Cty. of Fairfax, 826 F.3d 758, 765 (4th
Cir. 2016), viewing all facts in the light most favorable to the nonmovant,
Monahan v. Cty. of Chesterfield, 95 F.3d 1263, 1265 (4th Cir. 1996). A court may
award summary judgment only when “the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(a).
40
We also review de novo whether an entity is a joint employer for purposes of
the FLSA. Moreau v. Air France, 356 F.3d 942, 945 (9th Cir. 2004); cf. Schultz,
466 F.3d at 304 (“[W]hether a worker is an employee or independent contractor
under the FLSA presents a legal question that we review de novo.”). In this case,
we conclude that any factual disputes are immaterial and, therefore, resolve the
joint employment question based on the undisputed facts in the record.
Applying the joint employment test set forth above, we conclude that
Commercial and J.I. jointly employed Plaintiffs based on the following undisputed
facts:
• Plaintiffs performed nearly all of their work on Commercial jobsites and for
Commercial’s benefit;
• Commercial provided the tools, materials, and equipment necessary for
Plaintiffs’ work, with Plaintiffs providing only small, handheld tools;
• On at least one occasion, Commercial rented a house near the jobsite for J.I.
employees to stay in during a project;
• Commercial actively supervised Plaintiffs’ work on a daily basis by having
foremen walk the jobsite and check Plaintiffs’ progress;
• Commercial required Plaintiffs to attend frequent meetings regarding their
assigned tasks and safety protocols;
• Commercial required Plaintiffs to sign in and out with Commercial foremen
upon reporting to and leaving the jobsite each day;
• Commercial foremen frequently directed Plaintiffs to redo deficient work,
communicating problems to J.I. supervisors who translated the information
to Plaintiffs;
41
• Commercial foremen told certain Plaintiffs to work additional hours or
additional days;
• Commercial communicated its staffing needs to J.I., and J.I. based Plaintiffs’
jobsite assignments on Commercial’s needs;
• When J.I. performed certain “time and materials” work for Commercial and
was paid on an hourly, rather than lump-sum, basis, Commercial told J.I.
how many of its employees to send to the project and how many hours those
employees were permitted to work;
• Commercial provided Plaintiffs with stickers bearing the Commercial logo
to wear on their hardhats and vests bearing Commercial logos to don while
working on Commercial jobsites;
• J.I. supervisors instructed Plaintiffs to tell anyone who asked that they
worked for Commercial;
• Commercial provided J.I. supervisors with Commercial-branded sweatshirts
to wear while working on Commercial projects;
• On at least one occasion, Commercial required J.I. employees to apply for
employment with Commercial and directly hired those employees.
Although a majority of factors are not necessary to support a finding that two or
more entities are “not completely disassociated” with respect to a worker’s
employment, see supra Part III.C., based on these facts, nearly all of the factors we
identified above support such a finding.12
12
We note that, under these undisputed facts, Commercial would amount to
Plaintiffs’ joint employer under the four-factor Bonnette test, which we held no
longer applies in FLSA cases. See supra Part II.B. Thus, though the framework
we announce today supplants other formulations of the FLSA joint employment
test and makes clear that tests derived from principles of common-law control are
(Continued)
42
Regarding the first factor—supervision—Commercial and J.I. jointly
directed, supervised, and controlled Plaintiffs. In particular, Commercial
continuously supervised Plaintiffs, providing feedback and direction—both
formally, through frequent mandatory meetings, and informally, through one-on-
one instruction—regarding the methods and quality of Plaintiffs’ work and
compliance with safety protocols. Commercial also could—and did—require
Plaintiffs to redo work Commercial found deficient. J.I. supervisors assisted in this
supervision by translating Commercial’s instructions and providing additional
direction to Plaintiffs. Not only did Commercial supervise Plaintiffs’ work, it also
required Plaintiffs to hold themselves out as Commercial employees by providing
Plaintiffs and J.I. supervisors with Commercial-branded clothing and safety
equipment to wear on Commercial jobsites.
The second factor—authority over terms and conditions of employment—
also supports a finding that Commercial and J.I. were “not completely
disassociated” with respect to Plaintiffs’ employment. Although J.I. generally was
responsible for hiring and firing its employees, Commercial, in consultation with
insufficient to capture all employment situations that come within the auspices of
the FLSA, there will be cases—like this one—in which it produces the same result
as those formulations. Put differently, control is a sufficient condition—but not a
necessary condition—for an entity to constitute a joint employer for purposes of
the FLSA.
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others, dictated Plaintiffs’ hours and, at times, required Plaintiffs to work
additional hours or on additional days. And when J.I. performed work for
Commercial paid on an hourly, as opposed to lump-sum, basis, Commercial
instructed J.I. regarding how it should staff the project and when it could pay
overtime. Additionally, in at least one instance, Commercial directly hired at least
one Plaintiff due to J.I.’s inability to enroll in an insurance program required for its
employees to continue working on Commercial’s jobsites.
Regarding the third and fourth factors, although Commercial did not own
J.I., Commercial and J.I. had a longstanding business relationship. The
overwhelming majority of J.I.’s contracts were with Commercial, and Plaintiffs
worked almost exclusively on Commercial jobsites. Even after J.I. went out of
business, Commercial continued its business relationship with the Ramirez
brothers, who formed a new business, F.R. General Contractors, Inc., that has
contracted with Commercial to provide drywall and framing services.
That Plaintiffs worked on premises controlled by Commercial speaks to the
fifth factor—whether Plaintiffs worked in a location controlled by one or more of
the putative joint employers. Indeed, Commercial required Plaintiffs to sign in and
out of the jobsite with Commercial foremen and supervised Plaintiffs’ actions
while they were on the jobsite.
44
The final factor—codetermination or allocation of responsibility over
functions ordinarily carried out by employers—also supports a finding that
Commercial and J.I. were “not completely disassociated” with respect to Plaintiffs’
employment. In particular, Commercial supplied Plaintiffs with all the tools,
materials, and equipment necessary to perform their work. Moreover, on one
occasion, Commercial provided a house for J.I. employees to live in while working
on a Commercial jobsite. And while J.I. issued Plaintiffs’ paychecks, Commercial
recorded Plaintiffs’ hours on timesheets, maintained those timesheets, and required
Plaintiffs to sign in and out each day.
B.
Nevertheless, Commercial maintains that it did not jointly employ Plaintiffs
for four reasons. First, it asserts that “Commercial and JI had nothing more or less
than the contractor-subcontractor relationship which is normal and standard in the
construction industry.” Appellee’s Response Br. at 13, 53. But, as explained
above, that Commercial and J.I. engaged in a “traditional,” “normal,” or “standard”
business relationship has no bearing on whether they jointly employ a worker for
purposes of the FLSA. See supra Part III.E.
Second, Commercial emphasizes that its practice of having foremen
supervise Plaintiffs’ work and, through J.I. supervisors, demand corrections as
needed amounted to “quality control” and therefore was not indicative of joint
45
employment. Appellee’s Response Br. at 29, 50. We agree that an entity does not
become a joint employer by engaging in the oversight necessary to ensure that a
contractor’s services meet contractual standards of quality and timeliness. See
Moreau, 356 F.3d at 951 (finding that “indirect supervision or control . . . to ensure
compliance with various safety and security regulations” was not indicative of joint
employment when done “to verify that the task was done properly”); Zheng, 355
F.3d at 74–75 (finding that although “extensive supervision of a plaintiff’s work is
indicative of an employment relationship,” “supervision with respect to contractual
warranties of quality and time of delivery has no bearing on the joint employment
inquiry”).
But in this case, Commercial’s supervision of Plaintiffs went beyond
“double-check[ing] to verify that the task was done properly.” Moreau, 356 F.3d
at 951. Rather, Commercial foremen engaged in daily oversight of Plaintiffs’ work
and provided regular feedback and instruction, through J.I. supervisors, to
Plaintiffs regarding the pace and quality of their work. In addition, Commercial
foremen conducted frequent meetings to instruct Plaintiffs regarding the projects
they needed to complete and the methods by which they should do so, as well as
the safety protocols they should follow. Taken together, these facts amount to
“extensive supervision . . . indicative of an employment relationship,” rather than
an assessment of compliance with contractual quality and timeliness standards.
46
Zheng, 355 F.3d at 74; see also Torres-Lopez, 111 F.3d at 642 (finding that the
putative joint employer’s “daily presence” on the jobsite and ability to “inspect all
the work performed . . . both while it was being done and after” its completion
weighed in favor of finding joint employment).
Contrary to Commercial’s protestations, we also give little weight to the fact
that Commercial’s foremen generally spoke only to J.I.’s supervisors and did not
speak to Plaintiffs directly. The FLSA provides that indirect control is sufficient to
render an entity an “employer” under the statute. 29 U.S.C. § 203(d) (defining
“employer” as “any person acting directly or indirectly in the interest of an
employer in relation to an employee” (emphasis added)). The regulations
implementing the FLSA also expressly contemplate that direct or indirect
supervision and control is probative of joint employment, stating that joint
employment will generally exist when employers “share control of the employee,
directly or indirectly.” 29 C.F.R. § 791.2(b)(3) (emphasis added).
To that end, courts have concluded that “the ‘suffer or permit to work’
standard was developed to assign responsibility to businesses that did not directly
supervise putative employees.” Antenor, 88 F.3d at 933 (emphasis added); see
also Torres-Lopez, 111 F.3d at 642–43 (concluding that “indirect control as well as
direct control can demonstrate a joint employment relationship”). Accordingly,
“[i]t is well-settled that supervision is present whether orders are communicated
47
directly to the laborer or indirectly through the contractor.” Aimable v. Long &
Scott Farms, 20 F.3d 434, 441 (11th Cir. 1994); see also Hodgson, 471 F.2d at 238
(“The fact that [the putative joint employer] effect[s] the supervision by speaking
to the crew leaders, who in turn sp[eak] to the [workers], rather than speaking
directly to the [workers] does not negate a degree of apparent on-the-job control
over the [workers].”). Here, Commercial supervised Plaintiffs by communicating
instructions, on a daily basis, to Plaintiffs through J.I. supervisors. Commercial’s
use of J.I. supervisors to convey instructions to Plaintiffs, therefore, supports,
rather than precludes, a finding that Commercial jointly employed Plaintiffs.
Third, Commercial emphasizes that its relationship with J.I. was that of a
principal and an independent contractor, with J.I. receiving a “fixed price” or
“lump sum” for supplying labor to Commercial. Appellee’s Response Br. at 45.
Although the FLSA does not define employee “so broadly that all or almost all
employees of independent contractors . . . become ‘employees’ of every firm
whose premises they enter,” Reyes, 495 F.3d at 406, neither does the FLSA
automatically exempt entities that use independent contractors to provide labor
from complying with the statute’s wage and hour provisions. Significantly,
“independent contractor status does not necessarily imply the contractor is solely
responsible for his employees under the [FLSA]. Another employer may be jointly
responsible for the contractor’s employees.” Hodgson, 471 F.2d at 237. Here,
48
Commercial and J.I. codetermined the key terms and conditions of Plaintiffs’
employment and therefore constituted joint employers, regardless of whether J.I. is
properly characterized and treated as Commercial’s independent contractor for
other purposes.
Finally, Commercial maintains that a ruling in Plaintiffs’ favor will render
every general contractor a joint employer of its subcontractor’s employees and
thereby impose unreasonable financial burdens on general contractors. We
disagree. As an initial matter, we reiterate that courts must assess joint
employment “based upon the circumstances of the whole activity.” Schultz, 466
F.3d at 306 (internal quotation marks omitted). Accordingly, were we confronted
with different facts establishing that a general contractor possessed—and
exercised—less pervasive authority to determine the essential terms and conditions
of employment of a subcontractor’s workers, our conclusion as to whether the
entities were “not completely disassociated” may have been different.
Additionally, we note that, given the FLSA’s particularly expansive definition of
“employee,” a finding that a general contractor constitutes a joint employer for
purposes of the FLSA does not necessarily mean the general contractor is a joint
employer for purposes of other federal and state laws. See supra Part III.D.
Regarding the implications of our holding on the continued financial
viability of the general contractor-subcontractor relationship, we commend the
49
Seventh Circuit’s astute observation in Reyes that “[i]f everyone abides by the law,
treating a firm . . . as a joint employer will not increase its costs.” 495 F.3d at 409.
Put differently, when—as here—a general contractor contracts work out to a
subcontractor that directly employs workers, the general contractor will face no
FLSA liability so long as it either (1) disassociates itself from the subcontractor
with regard to the key terms and conditions of the workers’ employment or (2)
ensures that the contractor “cover[s] the workers’ legal entitlements” under the
FLSA. Id. Only when the general contractor “hires a fly-by-night operator . . . or
one who plans to spurn the FLSA” is the entity “exposed to the risk of liability on
top of the amount it has agreed to pay the contractor. And there are ways to avoid
this risk: either deal only with other substantial businesses or hold back enough on
the contract to ensure that workers have been paid in full.” Id.
*****
In sum, the undisputed facts establish that Commercial and J.I. shared
authority over and codetermined the key terms and conditions of Plaintiffs’
employment, rendering Commercial Plaintiffs’ joint employer.
B.
Having concluded that Commercial and J.I. were “not completely
disassociated” with respect to Plaintiffs’ employment, we next must consider
whether, based on their “one employment” with Commercial and J.I., Plaintiffs
50
were employees or independent contractors. Schultz, 466 F.3d at 305, 307. As we
explained above—and unlike with the threshold codetermination inquiry—“[i]n
determining whether a worker is an employee covered by the FLSA, a court
considers the ‘economic realities’ of the relationship between the worker and the
putative employer” or employers, in the event the worker is jointly employed. Id.
at 304 (emphasis added). “The focal point is whether the worker ‘is economically
dependent on the business to which he renders service or is, as a matter of
economic [reality], in business for himself.” Id. (alteration in original) (quoting
Henderson v. Inter-Chem Coal Co., 41 F.3d 567, 570 (10th Cir. 1994)); see also
Bartels v. Birmingham, 332 U.S. 126, 130 (1947) (“[I]n the application of social
legislation employees are those who as a matter of economic reality are dependent
upon the business to which they render service.”).
When a worker is economically dependent on a putative employer—or, in
the event two or more entities codetermine the essential terms and conditions of the
worker’s employment, his putative joint employers—he qualifies as an employee
protected by the FLSA. By contrast, a worker whose profit or loss depends upon
his own creativity, ingenuity, and skill is an independent contractor outside of the
FLSA’s scope. Walling v. Portland Terminal Co., 330 U.S. 148, 152 (1947) (“The
definition ‘suffer or permit to work’ was obviously not intended to stamp all
51
persons as employees who, without any express or implied compensation
agreement, might work for their own advantage on the premises of another.”).
We consider six factors in determining whether a worker constitutes an
employee or independent contractor: “(1) the degree of control that the putative
employer has over the manner in which the work is performed; (2) the worker’s
opportunities for profit or loss dependent on his managerial skill; (3) the worker’s
investment in equipment or material, or his employment of other workers; (4) the
degree of skill required for the work; (5) the permanence of the working
relationship; and (6) the degree to which the services rendered are an integral part
of the putative employer’s business.” Schultz, 466 F.3d at 304–05. These
factors—which derive from the Supreme Court’s opinion in United States v. Silk—
are “designed to capture the economic realities of the relationship between the
worker and the putative employer.” Schultz, 466 F.3d at 305.
Here, the district court found—and the parties do not dispute—that Plaintiffs
were J.I.’s employees. Because Plaintiffs were economically dependent on J.I.
alone, they were necessarily economically dependent on Commercial and J.I. in the
aggregate. Indeed, were we to analyze the Silk factors from the perspective of
Plaintiffs’ “one employment” with Commercial and J.I., Schultz, 466 F.3d at 307,
several factors would weigh even more heavily in favor of deeming Plaintiffs
“employees” within the meaning of the FLSA. For example, with regard to the
52
first factor, due to Commercial’s daily supervision of Plaintiffs, Commercial and
J.I.—as Plaintiffs’ “one employer”—exercised greater control over Plaintiffs’ work
than J.I. exercised alone. Likewise, given that Commercial, rather than J.I.,
provided all of the materials, supplies, tools, and equipment that Plaintiffs used for
their work, the third factor weighs more heavily in favor of employment when
viewed from the proper perspective of Plaintiffs’ “one employment” with
Commercial and J.I. Accordingly, we conclude that Plaintiffs were employees
based on their entire employment for both J.I. and Commercial, and that J.I. and
Commercial jointly employed Plaintiffs for purposes of the FLSA.
IV.
In sum, the district court errantly applied its novel five-factor test to
determine whether Commercial jointly employed Plaintiffs. Under the proper test,
joint employment exists when (1) two or more persons or entities share, agree to
allocate responsibility for, or otherwise codetermine—formally or informally,
directly or indirectly—the essential terms and conditions of a worker’s
employment and (2) the two or more persons’ or entities’ combined influence over
the terms and conditions of the worker’s employment render the worker an
employee as opposed to an independent contractor. Applying this test, we find that
Commercial and J.I. jointly employed Plaintiffs for purposes of the FLSA.
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Therefore, we reverse the district court’s award of summary judgment in favor of
Commercial and remand for further proceedings.
REVERSED
54