This week has
brought two developments impacting FLSA compliance and claims. First, the federal Department of Labor issued
an Administrative
Interpretation 2016-1 concerning joint employment. Essentially, the AI describes when two businesses
will become liable for wages and overtime worked by a shared employee even if
that overtime was earned while working for the other employer. It describes both horizontal (i.e., related)
and vertical (i.e., staffing) relationships that can lead to joint
employment. Second, the U.S. Supreme
Court issued a class action decision involving spam text messages, but the
holding about offers of judgment and mootness of claims will be important to
employers attempting
to defend FLSA class actions by making offers of judgment (i.e., complete
relief) to the class representatives. Campbell-Ewald
Co. v. Gomez, No. 14-857
(1-20-16). The Court held that an offer
of judgment rejected by the class representative does not moot the pending litigation
claim, even if the offer was rejected before the certification of the class. As discussed here a few
years ago, if the rejected offer of judgment mooted the claim, then the FLSA
case was left moot and was dismissed.
The Court left open for another day whether the result would be
different if the defendant had actually deposited the amount of the offer into
an account payable to the plaintiff and then the court entered judgement in
that amount in the plaintiff’s favor.
In the
Administrative Interpretation, the DOL summarized its position on when two or
more employers may be held jointly liable for the FLSA obligations regarding an
employee who works for each of the employers.
It describes one situation as horizontal joint employment when the two
or more technically separate businesses are associated or related (through
common ownership, management, contracts to share employees, etc.) The focus of the analysis is on the
relationship of the businesses with each other (because it is already clear
that the worker is an employee of each entity) This can happen, for instance, with
restaurants and home health care, property management, etc. When joint
employment is identified, each employer becomes jointly and severally liable
for the employee’s wages for each week worked, including overtime wages,
regardless of how many hours the employee worked for that particular entity. See 29 C.F.R. §791.2(a).
The following facts may be relevant when analyzing the degree of
association between, and sharing of control by, potential horizontal joint
employers:
·
who owns the potential joint employers (i.e., does one employer
own part or all of the other or do they have any common owners);
·
do the potential joint employers have any overlapping officers,
directors, executives, or managers;
·
do the potential joint employers share control over operations
(e.g., hiring, firing, payroll, advertising, overhead costs);
·
are the potential joint employers’ operations inter-mingled (for
example, is there one administrative operation for both employers, or does the
same person schedule and pay the employees regardless of which employer they
work for);
·
does one potential joint employer supervise the work of the other;
·
do the potential joint employers share supervisory authority for
the employee;
·
do the potential joint employers treat the employees as a pool of
employees available to both of them;
·
do the potential joint employers share clients or customers; and
·
are there any agreements between the potential joint employers.
Of course, merely
because an employee holds more than one job does not make his or her employers
joint employers. “Joint employment does not exist, however, if the employers
“are acting entirely independently of each other and are completely
disassociated” with respect to an employee who works for both of them. 29
C.F.R. 791.2(a).”
The AI describes a
second situation -- called vertical
joint employment -- where there is an intermediary employer which supplies workers
to a client and the economic realities show that the client exercises
sufficient control over the worker to make that worker economically dependent
on it and, thus, its employee for purposes of the FLSA. Unlike horizontal relationships, the analysis
in vertical relationships is on the economic realities of the relationship
between the worker and the client to determine whether the employee is
economically dependent on the client. These situations arise for instance in
construction (when a subcontractor supplies employees to the general
contractor), in agriculture (when laborers are supplied to a grower) and in
warehouses (when workers are supplied to the operator or owner of the
warehouse) and medical (where nurses are placed by a staffing agency).
The AI lists the
following factors are relevant in determining the economic realities and
economic dependence:
A. Directing, Controlling, or Supervising the Work Performed. To
the extent that the work performed by the employee is controlled or supervised
by the potential joint employer beyond a reasonable degree of contract
performance oversight, such control suggests that the employee is economically
dependent on the potential joint employer. The potential joint employer’s
control can be indirect (for example, exercised through the intermediary
employer) and still be sufficient to indicate economic dependence by the
employee. See
Torres-Lopez, 111 F.3d at 643 (“indirect control as well as direct
control can demonstrate a joint employment relationship”) (citing pre-1997 MSPA
regulation); Antenor,
88 F.3d at 932, 934; 29 C.F.R. 500.20(h)(5)(iv). Additionally, the potential
joint employer need not exercise more control than, or the same control as, the
intermediary employer to exercise sufficient control to indicate economic
dependence by the employee.17
B. Controlling Employment Conditions. To
the extent that the potential joint employer has the power to hire or fire the
employee, modify employment conditions, or determine the rate or method of pay,
such control indicates that the employee is economically dependent on the
potential joint employer. Again, the potential joint employer may exercise such
control indirectly and need not exclusively exercise such control for there to
be an indication of joint employment.
C. Permanency and Duration of Relationship. An
indefinite, permanent, full-time, or long-term relationship by the employee
with the potential joint employer suggests economic dependence. This factor
should be considered in the context of the particular industry at issue. For
example, if the work in the industry is by its nature seasonal, intermittent,
or part-time, such industry condition should be considered when analyzing the
permanency and duration of the employee’s relationship with the potential joint
employer.
D. Repetitive and Rote Nature of Work. To
the extent that the employee’s work for the potential joint employer is
repetitive and rote, is relatively unskilled, and/or requires little or no
training, those facts indicate that the employee is economically dependent on
the potential joint employer.
E.
Integral to Business. If
the employee’s work is an integral part of the potential joint employer’s
business, that fact indicates that the employee is economically dependent on
the potential joint employer. Whether the work is integral to the employer’s
business has long been a hallmark of determining whether an employment
relationship exists as a matter of economic reality. See, e.g.,
Rutherford Food Corp. v. McComb, 331 U.S. 722, 729-30 (1947).
F.
Work Performed on
Premises. The employee’s performance of the work on premises owned
or controlled by the potential joint employer indicates that the employee is
economically dependent on the potential joint employer. The potential joint
employer’s leasing as opposed to owning the premises where the work is
performed is immaterial because the potential joint employer, as the lessee,
controls the premises.
G. Performing Administrative Functions Commonly Performed by
Employers. To the extent that the potential joint employer performs
administrative functions for the employee, such as handling payroll, providing
workers’ compensation insurance, providing necessary facilities and safety
equipment, housing, or transportation, or providing tools and materials
required for the work, those facts indicate economic dependence by the employee
on the potential joint employer.
See 29
C.F.R. 500.20(h)(5)(iv).
In Gomez, the
Court addressed the issue which is passed on in 2013 in Genesis HealthCare Corp., 569 U. S., at ___, and
adopted Justice Kagan’s dissenting opinion from that case:
We hold today, in
accord with Rule 68 of the Federal Rules of Civil Procedure, that an unaccepted
settlement offer has no force. Like other unaccepted contract offers, it
creates no lasting right or obligation. With the offer off the table, and
the defendant’s continuing
denial of liability, adversity between the parties persists.
However, the Court left open the possibility that a claim
could be mooted by the offer of complete relief:
We need not, and do not, now decide whether the result would
be different if a defendant deposits the full amount of the plaintiff ’s
individual claim in an account payable to the plaintiff, and the court then
enters judgment for the plaintiff in that amount. That question is
appropriately reserved for a case in which it is not hypothetical.
NOTICE: This summary
is designed merely to inform and alert you of recent legal developments. It
does not constitute legal advice and does not apply to any particular situation
because different facts could lead to different results. Information here can
be changed or amended without notice. Readers should not act upon this
information without legal advice. If you have any questions about anything you
have read, you should consult with or retain an employment attorney.
