United States Court of Appeals' New FLSA Test: Part 1

In Salinas, et al. v. Commercial Interiors, Inc., No. 15-1915 (4th Cir. Jan. 25, 2017), the United States Court of Appeals for the Fourth Circuit issued a new test for determining a “joint employer” under the FLSA.

FACTS

J.I. General Contractors, Inc. (“J.I.”), a now-defunct framing and drywall installation subcontractor, directly employed Plaintiffs 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.

LAWSUIT

Plaintiffs sued J.I. – its owners personally – and Commercial for violations of the Fair Labor Standards Act (“FLSA”); the Maryland Wage and Hour Law; and the Maryland Wage Payment and Collection Law.

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 United States District Court of Maryland granted summary judgment to Commercial, holding that Commercial did not jointly employ Plaintiffs because J.I. and Commercial entered into a “traditionally . . . recognized,” legitimate contractor-subcontractor relationship and did not intend to avoid compliance with the FLSA or Maryland law.

APPEAL

On appeal, the United States Court of Appeals for the Fourth Circuit held that 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.

The Court explained that 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 the test, the Court concluded, based on the undisputed facts, that Commercial jointly employed Plaintiffs for purposes of the FLSA and the analogous Maryland law.

On the same day the Court issued this opinion, the Court issued another similar opinion that further clarifies and applies the new test, as our next post will explain.

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