There are many layers of risk involved in the context of different employment relationships. One source of unexpected liability for businesses is when a business is deemed to be a “joint employer” of an employee and therefore subject to certain employment laws. This may occur, for example, when a business leases employees from an employee leasing firm, or relies upon temporary employees from a staffing agency. The primary employer of the individuals providing the services is the leasing firm or staffing agency in these examples, but the business that is actually using those services may also be held liable under certain employment laws if it is deemed a “joint employer.”
The Massachusetts Supreme Judicial Court (SJC) established helpful guidance on the standard for determining joint employer status under Massachusetts law in its December 13, 2021 decision in Jinks v. Credico USA LLC, Case No. SJC-13106. In Jinks, the SJC held that (1) the concept of joint employment applies to Massachusetts wage-and-hour laws, and (2) the test to determine whether an entity should be considered a joint employer is the same as the test used under the federal Fair Labor Standards Act (FLSA) totality of the circumstances test, and not the “ABC Test” used under the Massachusetts Independent Contractor Statute. The decision provides clarity and eases the burden on businesses when forming their employment arrangements with contractors, service providers and third-party vendors.
In Jinks, DFW Consultants provided sales services for Credico’s clients. In doing so, DFW retained several individuals, the plaintiffs, to work as salespeople in Massachusetts for Credico’s clients, who DFW classified as independent contractors. The agreement between the two companies confirmed that DFW had exclusive control over its policies regulating the wages, hours and working conditions of its employees. The plaintiffs, relying upon a joint employer theory, brought a class-action lawsuit against Credico alleging they were misclassified as independent contractors, and claimed violations of Massachusetts wage-and-hour laws, including claims for alleged unpaid wages and overtime. The trial court dismissed the claims against Credico in their entirety, applying the FLSA totality of the circumstances test.
In affirming the decision of the trial court, the SJC rejected the plaintiffs’ argument that the “ABC Test” set out in the Massachusetts Independent Contractor Statute should apply as it was evident that the plaintiffs did not provide services directly to Credico. Instead, the SJC turned to the multifactor test traditionally followed under the FLSA. Under the FLSA test, the court looks to the totality of the circumstances to determine whether an employer has the right of control over the entity, including whether the employer “(1) had the power to hire and fire the employee, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.”
The SJC ultimately held that there was insufficient evidence to conclude Credico was a joint employer as it was DFW who had sole discretion over employee assignments, labor and employee relations policies, policies relating to wages, hours, working conditions, and all hiring and firing decisions. Therefore, the plaintiffs were not employed by Credico for purposes of the Massachusetts wage-and-hour laws and all claims were dismissed against Credico.
This decision makes it clear that federal court rulings applying the FLSA test will serve as guiding precedent for Massachusetts-based joint employment claims. Massachusetts employers should bear this decision in mind when drafting their contractor and service agreements. To minimize the risk of being liable for another entity’s wage-and-hour violations and to ensure compliance with this new decision, please contact Mike Chinitz or Elizabeth Inglis at Chinitz Law LLC.
This information is a general description of the law and is intended for general information purposes only. It is not intended to provide specific legal advice nor is it intended to create an attorney-client relationship with Chinitz Law LLC. Before taking any action on this information you should seek professional counsel. Attorney advertising. Prior results do not guarantee a similar outcome.