Seyfarth Shaw LLP | www.seyfarth.com Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) 199 XX. Overview Of Joint Employer Liability Class action lawsuits often involve wage and hour claims asserted against multiple defendants who are alleged to be “joint employers” of the same putative class of workers. These claims are commonly asserted against affiliated corporate entities such as parent and subsidiary companies, franchisor and franchisee companies, and companies that utilize employment agencies to provide temporary workers. In these situations, putative class members allege that the terms and conditions of their employment were jointly controlled by multiple affiliated or contracting entities. This type of joint employment is commonly referred to as “vertical joint employment.” In contrast, “horizontal joint employment” exists when two or more companies that separately employ the same workers are associated with each other with respect to the workers, such as where they have an arrangement to share the workers or where they both employ the same managers who control the workers. If joint employment is found, all joint employers are individually and jointly liable for wage and hour violations to jointly employed workers. A. Joint Employer Liability Standards Under The FLSA The term “joint employer” is not specifically defined in the FLSA. In 1958, the DOL published a somewhat amorphous joint employer rule, providing that joint employment exists if “employment by one employer is not completely disassociated from employment by the other employer(s).” 961 That rule, and subsequently-issued rules and guidance on the topic have been controversial, and no longer exist.962 Thus, federal courts have adopted tests, which vary by jurisdiction, for determining when multiple entities can be held liable as joint employers. Courts in the Ninth Circuit utilize a four-part “economic reality” test for determining whether multiple employers are joint employers under the FLSA when they are in a vertical joint employment scenario. Under that test, the court determines whether an alleged joint 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.”963 961 (Former) 29 C.F.R. § 791.2(a) (effective Aug. 5, 1958, to Mar. 15, 2020). 962 In 2016 the DOL issued guidance on the factors to be reviewed in determining vertical and horizontal joint employment under the FLSA, but the guidance was withdrawn in 2017. Subsequently, in January 2020, the DOL promulgated a final rule for determining joint employer status; that final rule was later rescinded following a lawsuit by 18 states against the DOL which resulted in a ruling by a U.S. District Court holding that portions of the rule were illegal. See New York v. Scalia, 490 F. Supp. 3d 748, 796 (S.D.N.Y. 2020) (finding that the final joint-employer rule violated the Administrative Procedure Act and constituted a “novel interpretation for vertical joint employer liability conflicts with the FLSA and is arbitrary and capricious.”). 963 Bonnette v. Cal. Health & Welfare Agency, 704 F.2d 1465, 1470 (9th Cir. 1983), abrogated on other grounds by Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528 (1985). The DOL has opined that vertical joint employment exists “when an employee of one employer ... is also, with regard to the work performed for the intermediary employer, economically dependent on another employer.” Opinion Letter from U.S. Dep't of Labor, Wage & Hour Div., 2016 WL 284582, at *4 (Jan. 20, 2016).
RkJQdWJsaXNoZXIy OTkwMTQ4