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Massachusetts SJC Sets Standard For Joint Employer Liability Under Wage Laws

The Massachusetts Supreme Judicial Court has established the legal standard for determining whether an entity is an employee’s “joint employer” for purposes of determining liability under Massachusetts wage and hour laws. In Jinks v. Credico (SJC 13106), DFW Consultants, Inc. entered into an agreement with Credico to provide sales services for Credico’s clients. As part of its services, DFW hired sales workers to assist with Credico’s marketing efforts, and retained control over their wages, hours, and working conditions. A group of DFW sales workers filed suit claiming they were jointly employed by both Credico and DFW, and that both entities had misclassified them as independent contractors rather than employees, and that they should be jointly liable for payment of regular and overtime wages. The lower court ruled that Credico was not a joint employer, applying the test employed under the Federal Fair Labor Standards Act (“FLSA”), rather than the standard used under the Massachusetts independent contractor statute, M.G.L. c. 149, § 148B.

On appeal, the SJC acknowledged that a joint employer could be deemed liable for misclassification of workers and failure to comply with wage laws, but those laws do not provide a standard for determining when such joint employment status exists. Thus, the Court considered whether to borrow the standard set by the independent contractor statute (which applies to workers’ compensation obligations) or the FLSA standard.

The plaintiffs urged the Court to adopt the broader standard applied under the independent contractor statute, which provides that an individual performing services for a company is considered an employee unless (1) the individual is free from control and direction in connection with the performance of the service in fact and under the contract; (2) the service is performed outside the usual course of the business of the employer; and (3) the individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed. Since the plaintiffs did not control their own work, they argued that any entity which derived an economic benefit from their work should be treated as a joint employer and held responsible for compliance with the wage laws.

The SJC disagreed, concluding that this standard was too broad to be applied in the context of the wage laws, and failed to address the question of whether the individual’s work was subject to control by more than one entity. Instead, the Court agreed with the lower court that the standard applied under the FLSA – which is the statute the state wage laws were modeled after – was more appropriately applied. That standard calls for a “totality of the circumstances” analysis, focusing on four factors to determine whether joint employment exists. Those factors are whether the alleged 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. The SJC explained that these factors provide a framework which “capture[s] both the nature and structure of the working relationship as well as the putative employer’s control over the economic aspects of the working relationship.” Applying the standard to the case at hand, the SJC agreed that Credico was not the plaintiffs’ joint employer because DFW alone controlled the workers’ hiring, termination, and working conditions, and there was no evidence that Credico determined the rate and method of payments to the plaintiffs, or maintained their personnel files and other records.

The SJC’s holding is significant because it clarifies the nature of employment relationships which may give rise to liability under the Commonwealth’s wage and hour laws, and adopts a narrower view of the circumstances under which an entity may be deemed a joint employer. While the four factors taken from the FLSA by the SJC are not rigid in their application, they nonetheless provide a helpful framework to permit companies relying on outside staffing providers to structure their agreements to avoid liability for alleged wage and hour violations.

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