On Jan. 25, 2017, the 4th Circuit Court of Appeals, which includes South Carolina, clearly articulated a test for “joint employment” relationships under the Fair Labor Standards Act (“FLSA”) in the case Salinas v. Commercial Interiors, Inc. “Joint employment,” or co-employment, can arise in many different ways and we typically see it in the staffing agency context where an employee may be hired or paid by a staffing agency but work for a customer or client as a third party. Virtually any company that uses contractors or shares employees with another company is at risk for creating a joint-employment relationship.
In Salinas, the companies involved were in the construction industry. Salinas and the other Plaintiffs were directly employed by a drywall installation subcontractor (J.I. General Contractors) that had a contract with a commercial general contracting firm (Commercial Interiors) to perform work. Salinas sued both their direct employer, J.I. General, and the general contractor, Commercial, for violations of the FLSA and the Maryland Wage Payment Act. At the lower court level, the District Court sided with Commercial and found that no joint employment relationship existed. The 4th Circuit, siding with the employees, disagreed and reversed.
In finding a joint employment relationship, the Fourth Circuit started by analyzing the legislative history and intent behind the FLSA. Thereafter, the Court set forth a list of six factors for courts to use in considering whether a joint employment relationship exists:
- Whether the companies at issue jointly determine, share, or allocate the power to direct, control, or supervise the worker, whether by direct or indirect means;
- Whether the companies 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;
- The degree of permanency and duration of the relationship between the companies;
- Whether, through shared management or a direct or indirect ownership interest, one company is controlled by or is under common control with the other;
- Whether the work is performed on a premises owned or controlled by one or more of the companies, independently or in connection with one another;
- Whether, formally or as a matter of practice, the companies 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 facilities, equipment, tools, or materials necessary to complete the work.
Overall, this decision has been largely viewed as a victory for both employees and the U.S. Department of Labor. Until and unless the United States Supreme Court reviews this issue, this test will remain the law within the 4th Circuit (South Carolina, North Carolina, Virginia, Maryland, and West Virginia).