The Massachusetts Judicial Supreme Court issued an opinion in Jinks v. Credico (USA), LLC setting out the appropriate standard governing joint employer liability under the Massachusetts Wage Act.
The notice is available here.
The issue was whether the “ABC” misclassification test under the Massachusetts Independent Contractors Act should be used to determine whether an entity is a joint employer for the purposes of the Wages Act. The SJC has determined that the ABC test does not apply, and the appropriate test is defined by the Fair Labor Standards Act (FLSA).
Credico has contracted with DFW to provide regional door-to-door sales. DFW in turn hired the complainants as independent contractors to perform sales services for Credico. Under the agreement between DFW and Credico, DFW retained (i) control over the manner and means of performing the service, and (ii) exclusive control over its labor and employment practices, such as hiring, firing, transferring and suspending workers. Credico asked DFW to certify that its employees had passed background checks and signed nondisclosure agreements. Workers reported to the DFW office at the start and end of the working day, but spent the day making sales calls and never made it to the Credico offices.
Three DFW employees filed a complaint against Credico, DFW and DFW owner and operator Jason Ward, alleging, in part, that Credico was their joint employer and that she, along with DFW, had violated the contractor’s status self-employed by wrongly classifying them as self-employed entrepreneurs and the Wages Act (MGL c. 149, Â§ 148) by not paying the minimum wage and overtime. DFW sought summary judgment, arguing that it was not a joint employer of the workers.
In its decision, the Court noted that usually the entity for which the person directly provides services is the sole âemployerâ responsible for compliance with wage laws. Indeed, the direct employer is the entity presumed to have made the erroneous classification decision. However, there are exceptions to this general rule. One such exception is when two entities act as joint employers. Joint employer status is typically found when an employer enters into a good faith contract with an otherwise independent company, but retains sufficient control over the terms and conditions of employment of employees who are employed by the other employer.
The plaintiffs argued that the ABC test set out in the Independent Contractor Act, MGL v. 149, Â§ 148B, should govern the joint employer’s analysis. The ABC test predicts that a worker is an employee unless each of the following is true:
- The individual is free to control and direct the performance of the service, both under the service contract and, in fact,
- The service is rendered outside the ordinary course of the employer’s business, and
- The individual is usually engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service rendered.
The court disagreed, noting that the ABC test asks “who, if any, controls the work other than the worker herself”, which is not the appropriate question. Rather, a joint employer analysis should determine whether an individual, whose work is controlled by one entity, is also subject to the control of another entity. The court categorically rejected the use of the ABC test, equating it with “using a hammer to drive a screw”.
The appropriate test, according to the SJC, is the more flexible framework established by the FLSA, which uses a “totality of the circumstances” test. The FLSA framework takes into account four factors: whether the entity (1) has the authority to hire and fire the individual, (2) has supervised and controlled the working hours or conditions of employment of the individual , (3) determined the rate and method of payment, and (4) employment records retained. No one factor is determinative, but the set of factors provides a framework that captures the nature and structure of the employment relationship, as well as the level of control exercised by the putative employer.
In the case of Credico and DFW, the plaintiffs have presented no evidence that Credico had the power to hire or fire DFW employees or to control working hours or conditions. Although Credico exercised quality control measures, such as background checks and drug tests, this alone did not constitute monitoring or control of working conditions. In addition, there is nothing in the file to support the conclusion that Credico determined the rate or method of remuneration of DFW employees or kept the employment records. The contract between Credico and DFW, which set out the timing of payments between the parties, was not sufficient evidence to demonstrate control over the rate of pay of individual employees. After considering these factors, the Court determined that the plaintiffs had no reasonable expectation of proving that Credico was a joint employer and granted summary judgment.
To take with
Given the mandatory treble damages and recovery of attorney fees available to employees who prevail under the wage law, the SJC’s decision should be good news for companies contracting with others for the provision of services. The decision not only offers clear guidance on the factors to consider in the joint employer analysis, but also aligns state law with federal law on the matter. Companies should carefully draft their agreements and business relationships with FLSA factors as a guide.