The U.S. Supreme Court Jan. 8 declined to weigh in on the lightning rod issue of when related businesses can be held liable for each other’s illegal employment practices.
The decision means that a range of different tests to determine when companies are joint employers will persist in the 13 regional federal appellate courts.
The National Labor Relations Board, which handles workplace complaints and union organizing, also recently established its own new test on the issue, reversing course from a broader standard established during President Barack Obama’s administration. A federal appeals court was in the process of reviewing the Obama-era standard when the NLRB established a new one and asked the court to send the case back to the board. The court initially granted the request, which would validate the board’s new standard, although a labor union appealed that decision last week.
The justices’ decision not to consider the issue came in a case in which the U.S. Court of Appeals for the Fourth Circuit ruled that DirecTV is liable as a joint employer of technicians hired by an intermediary. The technicians claimed they were misclassified as independent contractors and stiffed on overtime pay, filing claims under the Fair Labor Standards Act (DirecTV LLC v. Hall, U.S., No. 16-01449, cert denied 1/8/18).
“We continue to believe that the Fourth Circuit correctly interpreted and applied the FLSA’s broad definition of employment,” George Hanson of Steuve Siegel Hanson LLP, lead attorney for the plaintiffs, told Bloomberg Law in an email Jan 8. “Hopefully the Fourth Circuit’s opinion will prove helpful to the thousands of workers in this country who are misclassified as independent contractors and denied the benefits of the employment relationship.”
DirecTV spokesman Marty Richter told Bloomberg Law via email Jan. 8 that it’s “unfortunate that the Court declined to hear the case.” DirecTV was acquired by AT&T in 2015.
Debate Remains on Standards
The NLRB’s standard applies to claims under the National Labor Relations Act. But courts and the board have borrowed analysis from each other on the joint employer question in FLSA cases, and some lawmakers and business advocates have called for a single joint employer test for all federal workplace laws to give businesses clarity.
Employers and conservatives have criticized the Obama-era labor board interpretations and certain circuit courts’ tests as being too expansive.
They argue that the focus should be on whether a business has direct control of workers and actually sets the terms and conditions of their jobs. Businesses also say a standard that makes it easier to find two entities responsible for legal violations will have negative effects on the workforce and entrepreneurship.
Democrats, unions, and worker advocates, on the other hand, say more expansive standards are necessary due to “economic realities,” pointing to the proliferation of contractors, gig work, and other nontraditional employer-employee relationships.
Business Relationship Test Stands
The Fourth Circuit FLSA standard that the high court has allowed to stand focuses first on the relationship between the two alleged employers, as opposed to only looking at the relationships between workers and employers.
“Under this framework, we first must determine whether the defendant and one or more additional entities shared, agreed to allocate responsibility for, or otherwise codetermined the key terms and conditions of the plaintiff’s work,” the Fourth Circuit wrote in the underlying case. If “the defendant and another entity codetermined the key terms and conditions of the worker’s employment, then we must consider whether the two entities’ combined influence over the terms and conditions of the worker’s employment render the worker an employee as opposed to an independent contractor.”
If there isn’t the sort of relationship described between the businesses, then courts in the Fourth Circuit will consider whether the worker is an employee or independent contractor with regard to each alleged employer separately.
A number of other federal circuits use somewhat similar multifactor tests that seek to examine the details of the relevant relationships. Others focus on the power of the business alleged to be a joint employer to hire and fire, and to directly control employees’ workday.
House Republicans have passed legislation to settle the joint employer question, but it hasn’t seen any action in the Senate, where it seems a long shot. There are other cases pending in the circuit courts, which means the high court could still take on this issue in a different case and establish definitive precedent.
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