Broad Fourth Circuit Decision Finds Joint Employer Liability Unless Companies Are "Completely Disassociated"

April 07, 2017

Those who assume that a new National Labor Relations Board and Department of Labor will reverse the controversial expansion of joint employer liability are overlooking the role of the courts, as illustrated by a sweeping new decision by the Fourth Circuit Court of Appeals.  In Salinas v. Commercial Interiors, the court decided that a general contractor and a drywall company were joint employers of the latter’s employees under the Fair Labor Standards Act.  The new joint employer test adopted by the court is perhaps the broadest yet, even going farther than the NLRB’s test or DOL’s Administrator’s Interpretation letter.  The three-judge panel began by noting that a number of FLSA-based joint employer tests have been developed by other federal circuits, and then created its own test for the Fourth Circuit.  Essentially, the panel held that to avoid joint employer status, two companies have to be "completely disassociated," which is determined by whether they “share, agree to allocate responsibility for, or otherwise co-determine—formally or informally, directly or indirectly—the essential terms and conditions of the worker’s employment."  The panel then identified six non-exhaustive factors that courts should use to determine joint employer status and noted that "one factor alone” can serve as the basis for finding that two entities are not completely disassociated.  Apart from the National Labor Relations Act, most labor laws where the joint employer issue arises include private rights of action.  Thus, as in the Salinas case, even a return to the traditional standard by the administration will not preclude the federal courts from adopting the more expansive standards pressed by the Obama administration (which filed an amicus brief in the Salinas case).  Only a legislative solution could establish certainty at this point.