Joint Employment

As we have pointed out in previous posts (One Worker, Two Related Employers, Who Is The (An) Employer), there may be more than one person involved on the employer side of an employment relationship. If each of those persons has enough control, a joint employment relationship may be created. Here, we examine the concept in the context of three statutory schemes: Title VII, the Fair Labor Standards Act, and the Family and Medical Leave Act.

Title VII

The federal employment discrimination statute defines employer as "a person engaged in an industry affecting commerce who has fifteen or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year," and employee as "an individual employed by an employer." 42 U.S.C. section 2000e. It does not define employ. However, the federal courts have made clear that there is no liability under Title VII unless there is an employment relationship between the "employee" plaintiff and the "employer" defendant. To determine whether there is a sufficient relationship, the courts evaluate a number of factors.

The EEOC lists the following factors in its Compliance Manual: (1) The employer has the right to control when, where, and how the worker performs the job; (2) The work does not require a high level of skill or expertise; (3) The employer furnishes the tools, materials, and equipment; (4) The work is performed on the employer's premises; (5) There is a continuing relationship between the worker and the employer; (6) The employer has the right to assign additional projects to the worker; (7) The employer sets the hours of work and the duration of the job; (8) The worker is paid by the hour, week, or month rather than the agreed cost of performing a particular job; (9) The worker does not hire and pay assistants; (10) The work performed by the worker is part of the regular business of the employer; (11) The employer is in business; (12) The worker is not engaged in his/her own distinct occupation or business; (13) The employer provides the worker with benefits such as insurance, leave, or workers' compensation; (14) The worker is considered an employee of the employer for tax purposes; (15) The employer can discharge the worker; (16) The worker and the employer believe that they are creating an employer-employee relationship. See, EEOC Compliance Manual, section 2-III-A-1. The U.S. Supreme Court endorsed the manual's approach in Clackamas Gastroenterology Assocs., P.C. v. Wells, 538 U.S. 440 (2003).

For a case that applied the concept to a disability discrimination claim, see Bristol v. Bd. of County Comm'rs, 312 F.3d 1213 (10th Cir. 2002). There, the 10th Circuit held that, under Colorado law, the County Board of Commissioners did not have sufficient control over sheriff's department employees to be considered a joint employer with the sheriff.

Fair Labor Standards Act

The FLSA defines employer to include "any person acting directly or indirectly in the interest of an employer in relation to an employee." Employee means "any individual employed by an employer." Employ includes "to suffer or permit to work." 29 U.S.C. section 203. The Department of Labor's regulations add that these definitions look to "economic reality" rather than "technical concepts." 29 CFR 784.8. The analysis is similar to that used to decide who is protected under Title VII. See Lambert v. Ackerley, 180 F.3d 997 (9th Cir. 1999). The Department of Labor also has regulations that speak specifically to joint employment under the Fair Labor Standards Act. 29 CFR 791.1 and 791.2.

The Third Circuit recently discussed the test for joint employer status under the Fair Labor Standards Act in the context of a holding company providing shared services to its subsidiaries in In re Enterprise Rent-a-Car Wage and Hour Employment Practices Litigation, 2012 U.S. App. LEXIS 13229 (3d Cir. June 28, 2012). For a discussion of joint employment in the context of an attempt by prisoners to hold state officials responsible for FLSA violations, see Gilbreath v. Cutter Biological, Inc., 931 F.2d 1320 (9th Cir. 1991).

Family and Medical Leave Act

The FMLA expressly adopts the definitions of the FMLA. See 29 U.S.C. section 2611. The Department of Labor has a regulation that addresses the joint employment relationship, and its effect on FMLA requirements. See 29 CFR section 825.106.

For a case that applied the concept to an FMLA claim, see Moreau v. Air France, 356 F.3d 942 (9th Cir. 2004), where the Ninth Circuit affirmed a federal district court's ruling that Air France was not a joint employer with the entity that supplied ground handling services.

UPDATE [8/22/2012]

A recent decision from the United States District Court in Oregon illustrates the high stakes involved in a decision about who the employer is. A plaintiff who alleged that his priest molested him sued the Holy See itself, claiming that the Vatican was the priest's employer. On August 20, 2012, United States District Judge Michael Mosman ruled that the evidence did not establish enough control by the Vatican to render it the priest's employer. Doe v. Holy See, Case No. 02-CV-00430 (U.S. Dist. Ct. Ore. 8/20/212). In March 2009, the Ninth Circuit had ruled that the plaintiff's claim of respondeat superior liability for the priest's actions was not barred by the Foreign Sovereign Immunities Act. Doe v. Holy See, 557 F.3d 1066 (9th Cir. 2009).

Mandated Leaves in California

Employers in California must comply with three overlapping statutes that require them to give their employees time off -- the federal Family and Medical Leave Act (FMLA), the California Family Rights Act (CFRA), and the pregnancy disability leave provisions of the Fair Employment and Housing Act (PDL). This post will give you the basics. If you would like training on the details of these statutes, please contact us at calvin.house@gphlawyers.com.

FMLA

Under this statute, employers with 50 or more employees must grant eligible employees up to 12 weeks off per year in the following circumstances -- (1) for the employee's own serious health condition, (2) when needed to care for a spouse, child or parent with a serious health condition, (3) in connection with the birth of a child or placement of a child for adoption or foster care (sometimes called baby bonding leave), (4) for exigencies created by the call up of a family member from the reserves or National Guard, and (5) when needed to care for a family member in the military who has been injured in the line of duty (this entitlement is up to 26 weeks). An employee is eligible for leave under the FMLA if he or she has been on the payroll for a year, and has actually worked 1250 hours within the 12 months immediately preceding the leave. Employers must maintain group health benefits during FMLA leave. The text of the statute is available here. The Department of Labor's FMLA regulations are available here.

CFRA

The CFRA has the same coverage and eligibility requirements as the FMLA. It differs in two important respects -- (1) the definition of serious health condition excludes pregnancy related conditions, and (2) by operation of the Registered Domestic Partners Rights and Responsibilities Act, the word "spouse" is interpreted to include registered domestic partners. The text of the statute is available here (Government Code section 12945.2). The Department of Fair Employment and Housing's regulations are available here (sections 7297.0 - 7297.11).

PDL

Employers with five or more employees must allow any female employee (no matter how long she has been an employee) to take up to four months of leave when she is disabled by pregnancy. Disabled by pregnancy means unable to perform the essential functions of her job without undue risk to herself, to others, or to her unborn child. Because the CFRA excludes pregnancy related conditions from its coverage, a woman will have up to 12 weeks of baby bonding time under the CFRA after she has exhausted her pregnancy leave. Her FMLA time runs concurrently with her PDL time. A new law that is effective January 1, 2012, requires employers to maintain group health benefits during pregnancy leave. The text of the statute is available here (Government Code section 12945). The DFEH's regulations are available here (sections 7291.2 - 7291.16).

Employment Cases on the Supreme Court's Calendar

U.S. Supreme Court Building

The U.S. Supreme Court's new term got under way on October 3, the first Monday in October. Here are the employment cases for which the Court has so far granted review. We will update this posting with developments in these cases and any other employment cases for which review is granted.

Coleman v. Court of Appeals of Maryland, No. 10-1016. On March 20, 2012, the Court ruled that Congress did not abrogated the States' Eleventh Amendment immunity when it included a right to time off for an employee's own serious health condition in the Family and Medical Leave Act. The Fourth Circuit ruled that the Eleventh Amendment barred an FMLA claim against the Maryland Court of Appeals. The case was argued on January 11, 2012. The briefs filed in the case are available at the ABA's Supreme Court Preview site. A transcript of the oral argument is available here.

Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC, No. 10-553. On January 12, 2012, the Court ruled that the First Amendment requires a "ministerial" exception to employment discrimination laws, and that the exception barred the claims in the case before it. The Sixth Circuit had ruled that the exception did not bar the teacher's claims under the Americans with Disabilities Act. The case was argued on October 5, 2011. The briefs filed in the case are available at the ABA's Supreme Court Preview site. A transcript of the oral argument is available here.

Knox v. SEIU Local 1000, No. 10-1121. This case clarifies a union's obligations to nonunion public employees who are compelled to pay fair share fees for union representation under Chicago Teachers Union, Local No. 1 v. Hudson, 475 U.S. 292 (1986). On June 21, 2012, the Court ruled that any dues increase that funds political activities must be preceded by notice and an opportunity to object. The Ninth Circuit decision under review is available here. The case was argued on January 10, 2012. The briefs filed in the case are available at the ABA's Supreme Court Preview site. A transcript of the oral argument is available here.

Pacific Operators Offshore, LLP v. Valladolid, No. 10-507. The case concerns compensation for workers injured as a result of operations conducted on the outer continental shelf. On January 12, 2012, the Court affirmed the decision under review, adopting the "substantial nexus" text for determining whether the operative statute applies. The Ninth Circuit decision under review is available here. The case was argued on October 11, 2011. The briefs filed in the case are available at the ABA's Supreme Court Preview site. A transcript of the oral argument is available here.

Roberts v. Sea-Land Services, Inc., No. 10-1399. On March 20, 2012 the Court ruled that an employee is “newly awarded compensation” when he first becomes disabled and thereby becomes statutorily entitled to benefits, no matter whether, or when, a compensation order issues on his behalf, under the Longshore and Harbor Workers Compensation Act. The Ninth Circuit decision under review is available here.The case was argued on January 11, 2012. The briefs filed in the case are available at the ABA's Supreme Court Preview site. A transcript of the oral argument is available here.

UPDATE [10/19/2011]

Elgin v. Department of the Treasury, No. 11-45. On June 11, 2012, the Court ruled that the Civil Service Reform Act establishes the exclusive means for obtaining judicial review for covered employees who challenge covered adverse employment actions. The First Circuit decision under review is reported at 641 F.3d 6 (1st Cir. 2011). The case was argued on February 27, 2012. The briefs filed in the case are available at the ABA's Supreme Court Preview site. A transcript of the oral argument is available here.

UPDATE [11/17/2011]

NFIB v. Sebelius, No. 11-393; Florida v. Department of Health and Human Services, No. 11-400. On June 28, 2012, the Court upheld the individual mandate of the Patient Protection and Affordable Care Act as a tax measure, but struck down the requirement that States join the expansion of Medicaid under threat of losing all Medicaid funding. The Eleventh Circuit decision under review is reported at 648 F.3d 1235 (11th Cir. 2011). For information about the law's anticipated effect on employers, see this analysis from the Rand Corporation and this one from The New England Journal of Medicine. The case was argued over three days: March 26, 27 and 28. The briefs filed in the case are available at the ABA's Supreme Court Preview site. Transcripts of each day's oral arguments are available here.

UPDATE [2/21/2012]

Christopher v. SmithKline Beecham, No. 11-204. On June 18, 2012, the Court ruled that the FLSA's outside salesperson's exemption applies to pharmaceutical sales representatives, who do not sell directly to consumers. The Ninth Circuit decision under review (which applied the exemption to the representatives) is reported at 635 F.3d 383 (9th Cir. 2011). The case was argued on April 16, 2012. The briefs filed in the case are available at the ABA's Supreme Court Preview site.

Think Twice About A Lawsuit Against An Employee

A recent high profile trial illustrates the dangers employers face when they assert claims against their employees. On Friday, September 16, a Los Angeles Superior Court jury awarded bond trader Jeffrey Gundlach $67 million in a lawsuit that was started by the company that fired him -- Trust Company of the West. Claiming that it feared he was going to abandon the company and set up a rival business, TCW fired Gundlach and then sued him for breach of trust and theft of trade secrets. Gundlach cross-complained for money he claimed TCW should have paid him. The jury agreed with TCW that Gundlach had acted inappropriately, but declined to award any damages for loss of business because TCW caused that loss itself by letting Gundlach go. After further proceedings, Judge Carl West will determine if TCW is entitled to all or any part of the $89 million in damages it claims to have suffered from the loss of trade secrets.

There are other types of claims that might tempt an employer when an employee leaves. The Family and Medical Leave Act gives an employer the right to recover group health premiums if an employee is able to return from leave but does not. An employer may try to recoup overpayment of compensation, as illustrated by Koehl v. Verio, Inc., 142 Cal.App.4th 1313, 48 Cal.Rptr.3d 749 (2006). Some employers give loans to employees, and then sue if they are not repaid by the time employment terminates, as illustrated by Maggio, Inc. v. Neal, 196 Cal.App.3d 745, 241 Cal.Rptr. 883 (1987). Filing those claims or any others risks a countersuit by the employee for such claims as wrongful termination, discrimination, harassment, and failure to pay overtime. Even if the employer's lawsuit does not draw a countersuit, it may end badly. In FLIR Systems, Inc. v. Parrish, 174 Cal. App. 4th 1270 (2009), the employer was found to have proceeded in bad faith under the Uniform Trade Secrets Act (Cal. Civ. Code section 3426.4) and wound up on the hook for $1.6 million in fees and costs.

Bottom line: Don't sue an employee unless you have suffered substantial damage, and then only if you have a rock solid case.

New FMLA Regulations

The U.S. Department of Labor has issued its long-awaited amendments to its regulations under the Family and Medical Leave Act. Published on November 17, 2008, the new rules will take effect on January 16, 2009. The Department issued a press release that summarizes the changes. The full text of the publication in the Federal Register is available here. The Department has also published a fact sheet that describes the amendments.

The basics of FMLA remain the same, but employers should take note of the following significant changes:

1. The Department has exercised its authority under the new military family leave provisions of the FMLA to define the qualifying exigencies for which employees with relatives who are in the National Guard or Reserves can use FMLA leave as follows: (1) short-notice deployment, (2) military events and related activities, (3) childcare and school activities, (4) financial and legal arrangements, (5) counseling, (6) rest and recuperation, (7) post-deployment activities, and (8) other activities that the employer and employee agree on.

2. When paid leave is substituted for FMLA leave, all forms of employer paid leave (vacation, sick leave, personal time off, and so on) will be treated the same.

3. The regulations revamp the employer notice obligations. Employers must provide (1) a general notice about FMLA rights, (2) an eligibility notice, (3) a rights and responsibilities notice, and (4) a designation notice. The regulations include new forms to assist employers in complying with their notice obligations. The forms (which include ones tailored to the new military family leave provisions) do not yet appear independently on the Department's website, but are included as appendixes to the regulations.

4. The regulations rework the medical certification process, and provide a new suggested form for obtaining certification. California employers should note that the new Form WH-380 medical certification still asks the medical provider for "medical facts" (including "diagnosis") about the employee's condition. A California Family Rights Act regulation prohibits employers from obtaining such information without patient authorization.

FMLA Leave for Military Families

At the beginning of the year, the Family and Medical Leave Act was amended to to permit an eligible employee who is a "spouse, son, daughter, parent, or next of kin" to take up to 26 workweeks of leave to care for a "member of the Armed Forces, including a member of the National Guard or Reserves, who is undergoing medical treatment, recuperation, or therapy, is otherwise in outpatient status, or is otherwise on the temporary disability retired list, for a serious injury or illness." This provision was made effective immediately.

As with other types of FMLA leave, an employee is eligible for leave only if he or she as 12 months of service, and 1250 hours of actual work in the last 12 months. Employers may require certification of the member's health condition.

Another part of the amendment requires employers to grant leave because of any "qualifying exigency" arising out of the fact that the spouse, or a son, daughter, or parent of the employee is on active duty (or has been notified of an impending call or order to active duty) in the Armed Forces in support of a contingency operation. This provision will not take effect until the Secretary of Labor promulgates regulations identifying what constitutes a qualifying exigency.

The Department of Labor has included a discussion of planned regulations to implement the military family provisions in the proposed overhaul to the existing FMLA regulations published in the Federal Register on February 11, 2008. You can read the entire proposal here. Comments were due by April 11, 2008. Final regulations implementing the military family leave provisions can be expected by the end of the year.

Until the regulations are in effect, the Department of Labor "encourages" employers to provide leave for exigencies created by a call up. Here are some of the comments from the deliberations leading to the enactment of the amendment, which may provide guidance about the circumstances that would qualify for leave:

"The wife of a recently deployed military servicemember could use the Family and Medical Leave Act to arrange for childcare. The husband of a servicemember could use the Family Medical Leave Act to attend predeployment briefings and family support sessions. The parents of a deployed servicemember could take Family Medical Leave Act time to see their raised child off or welcome them back home." [Rep. Jason Altmire]

"For every soldier who is deployed overseas, there is a family back home faced with new and challenging hardships. The toll extends beyond emotional stress. From raising a child to managing household finances to day-to-day events, families have to find the time and resources to deal with the absence of a loved one." [Rep. Tom Udall]

"Under this amendment family members can use the leave to take care of issues like making legal and financial arrangements and making child care arrangements or other family obligations
that arise and double when family members are on active duty deployments. ... These deployments and extended tours are not easy on families, and two-parent households can suddenly become a single-parent household and one parent is left alone to deal with paying the bills, going to the bank, picking up the kids from school, watching the kids, providing emotional support to the rest of the family. You have got to deal with these predeployment preparations." [Rep. George Miller]