As I continue to work on a major redesign and relaunch that I hope (!) to roll out by month’s end which has held up some blog posts, my colleague Gary Starr returns this morning with a new post regarding a recent Connecticut court decision and temps. 

starrEmployers who use a staffing company to supplement their employees may find themselves in for a rude awakening if the temp gets hurt at their worksite.

Ordinarily, an employee injured on the job would be covered by the workers compensation insurance.

A recent Superior Court decision rejected the idea that the temp is covered by the employer’s workers compensation insurance and is allowing a lawsuit to go forward against the employer.

The court found that the temp was an employee of the staffing company and not the employer, even though the temp accepted the assignment with the employer, the work was being done for the employer, and the temp was under the control of the employer at the worksite, and not the staffing company.

While there are several state court decisions that have found this arrangement to be a dual employment situation, other courts have rejected the concept of dual employment.  Under dual employment, the temp would have been covered under the employer’s workers compensation insurance.

Until an appellate court or the Connecticut Supreme Court rules on this issue or the legislature clarifies the statutory scheme, employers using staffing companies to fill out their employment needs, run the risk that if the temp gets hurt, they could be sued.

Such a lawsuit would present a risk of liability that could exceed the workers compensation formulas, with possible punitive damages.

Employers should be careful in their negotiations with staffing companies to try to establish a dual employment relationship with the temp, even having the temp sign a written agreement with the employer accepting the assignment with the employer.  There should also be clarification of the scope of any indemnity.  The employer should check with its workers compensation insurance carrier to ensure coverage of any temps.

While these steps may not avoid the consequences described above, it may provide a basis for arguing for dual employment and for coverage under workers compensation.

Of course, dual employment has its own set of challenges as well so employers using temps need to understand both the pros and cons in such a relationship.

Can an employee work for more than one employer at the same time? Under a theory of law called “joint employment”, the answer is yes.

But how do you make that determination?

Suppose a private bus company provides services all over Connecticut. It’s largest customer happens to be a very large private university in the state. The company provides both interstate and intrastate service for the university, as well as shuttle bus service for the campus.

Are the bus drivers employees of both the bus company and the university?  A recent case in the federal court in Connecticut set forth the various tests that the courts in Connecticut use to make that determination.

(Ultimately, the court denied the drivers’ claims that they were employees of the university.)

The court’s decision in Velez v. New Haven Bus Service can be downloaded here.

The Tests

Where a plaintiff claims multiple simultaneous employers, or “joint employers” under the FLSA, “the overarching concern is whether the alleged employer possessed the power to control the workers in question . . . with an eye to the economic reality presented by the facts of each case.”  In this so-called “economic reality” test, a court must first evaluate whether the alleged joint employer exercised formal control over a plaintiff’s employment.

The Second Circuit has recognized a four-factor joint-employer test to establish formal control, which asks whether an 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.

Simple enough, right?

Well, not exactly.  In fact, the Second Circuit “did not hold . . . that those [four] factors are necessary to establish an employment relationship” as the court said in another case (Zheng v. Liberty Apparel Co.).  That decision applied a “functional control” test.

In doing so, a court may also consider the following factors:

(1) whether [the putative employer’s] premises and equipment were used for the plaintiffs’ work; (2) whether [the direct employer] had a business that could or did shift as a unit from one putative joint employer to another; (3) the extent to which plaintiffs performed a discrete line-job that was integral to [the putative employer’s] process of production; (4) whether responsibility under the contracts [between the direct and putative employers] could pass from one [entity] to another without material changes; (5) the degree to which the [putative employers or its] agents supervised plaintiffs’ work; and (6) whether plaintiffs worked exclusively or predominately for the [putative employer].

As the District Court recognized in the Velez case, the Second Circuit has not announced a definitive set of factors to establish functional control, recognizing that there will be “different sets of relevant factors based on the factual challenges posed by particular cases.”

How many of those factors will need to be met to satisfy a claim? That’s still unclear, but in the Velez case, two was not enough to establish joint employment.

The Takeaway?

Of course, longtime readers will know that this is not a new topic. 

Employers should always be vigilant in making it clear who is and is not an employee of theirs. If you contract out certain work (food service, for example), make sure that you are not crossing the lines that seem like you are more their employer than a customer. For example, if you set these contractors’ hours and discipline them and they only worked for you, that might be closer to the joint employment relationship than you may have intended.

Contracts may help, but as you can see from the above, the courts will look past the language and look to either the “economic realities” or the “functional control” to make that final determination.

“How You Doin’? said the character Joey from the TV show “Friends“.  I say that here because this post is about the “joint employer” test for the Fair Labor Standards Act and its an otherwise dry post.

“I know!” (You might be saying, if you were Monica from that same show.)

“Could that BE any more boring?” (To paraphrase Chandler.)

Your response should be, a la, Rachel, “Nooooo!!!

But here’s why you should care and not take a break from this topic (besides knowing that “We were on a break” is not a valid defense to an FLSA claim.) 

Friends and Joint Employers

In this age of leased employees and independent contractors who aren’t really independent, wage & hour issues like joint employment are getting more heavily scrutinized by the Department of Labor and courts.

So how does the issue of a “joint employer” come up? 

Two ways: First when employees work for two employers, and the total hours worked is over 40, the employee may be eligible for overtime if the employers share the employee or get benefit from that employee’s work.

Second, if the employee works for two employers, then the employer may have to include him or her in determining the the number of employees each employer has.

The Wage & Hour Development blog reported on an important new case out of the Third Circuit Court of Appeals recently.  While it hasn’t yet been adopted in Connecticut or the Second Circuit, it is already providing important guidance to courts and employers elsewhere because its logic is perceived to be sound.

The Court concluded that Enterprise Holdings Inc. was not a joint employer with its car rental subsidiaries’. The plaintiff assistant managers could not seek relief against the parent company. As recapped in the blog post:

In its groundbreaking opinion, the Third Circuit enumerated a standard that involves examination of the putative employer’s: 1) ability to hire and fire the relevant employees; 2) ability to issue and implement work rules/assignments; 3) ability to establish conditions of employment for the workers; 4) involvement in day-to-day supervision of workers, notably the right to discipline; and, 5) actual control of employee records, such as payroll, insurance, or taxes.

The Court took pains to point out that these factors are not exclusive and should not be rigidly applied. The Court emphasized that if other factors demonstrated that an entity exercised significant control over a group of employees, then that evidence, when coupled with the enumerated factors, might be persuasive on the issue of whether a joint employment relationship exists.

So what’s the takeaway from this? If faced with a joint employer question, courts will look at the control and direction by the employer.  If you use leased employees or joint employer relationships, this case should give you new reason to review them to make sure they can pass muster under this test.

Hopefully, it makes sense. Otherwise, I may have to follow the advice from Chandler: “You have to stop the Q-Tip when there’s resistance.”