Joint Employer Responsibility for Meal Periods

A recent decision from the California Court of Appeal explains how a staffing agency may satisfy its obligation to its employees to provide meal periods in accordance with the California wage orders. See Serrano v. Aerotek, Inc., Case No. A149187 (1st Dist. Ct. App. 3/9/2018).

Aerotek was a staffing agency that placed temporary employees with its clients. Its contract with the client stated that the client was responsible for the work environment, and the the client would comply with applicable federal, state and local laws. The client set the work schedules for the temporary employees, and managed their breaks. Aerotek had a handbook for temporary employees assigned to clients, which contained a meal period policy that complied with California law -- that is, that employees were to be provided with an uninterrupted 30-minute off-duty meal break by the end of the fifth hour of work.

One of the temporary employees filed a class action complaint against Aerotek and the client, alleging that the client did not actually provide meal periods in accordance with the law. Aerotek had a manager at the client's workplace, who declared that no Aerotek employee had ever complained to him that he or she had been from taking a meal period, even though Aerotek's policy required them to notify Aerotek if they believed they were being prevented from taking meal breaks. In written discovery, the temporary employee conceded that she was unaware of any actions by Aerotek that prevented her from taking her meal periods.

Employers are not required to police meal breaks. They need only provide a reasonable opportunity for employees to take their breaks, and refrain from impeding or discouraging them from doing so. See Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004. Aerotek fulfilled that obligation by establishing a policy that followed California law, and by not interfering with the taking of meal breaks. Even if Aerotek was aware that its temporary employees were not actually taking meal periods by the end of their fifth hour of work, it would not violate the meal period requirement. It did not have to make sure that the employees actually took their meal periods. The Court of Appeal affirmed the trial court's grant of summary judgment to Aerotek.

Joint Employment Revisited

A new California statute that imposes liability on general contractors for unpaid wages of their sub-contractors employees prompts us to revisit the principles of joint employment. For previous posts on the topic, click here.

The new statute, AB 1701, provides that, for contracts entered into after January 1, 2018, a "direct" contractor (as defined in Civil Code section 8018) is liable for for wages owed to a wage claimant that is incurred by a subcontractor, acting under the direct contractor, for the wage claimant’s performance of labor included in the subject of the direct contractor's contract with the property owner.

Usually, joint employment issues are determined by application of general principles governing the establishment of an employment relationship. This requires analysis of the various factor used by courts and administrative agencies to determine who is an employer. In any given situation it is possible that more than one person will be an employer of a particular worker. For an explanation of the standard that the Department of Labor uses to determine joint employment under the Fair Labor Standards Act see the Wage and Hour Division's Fact Sheet 35. For an application of joint employment principles in a Title VII case, see Peppers v. Cobb County (11th Cir. 2016) 835 F.3d 1289. For the allocation of responsibility for providing FMLA benefits, see 29 CFR section 825.106.  For an application of joint employment principles to a California wage and hour claim, see Guerrero v. Superior Court (2013) 213 Cal.App.4th 912. For a discussion of the dual employer principle under California worker's compensation law, see In-Home Supportive Servs. v. Workers' Comp. Appeals Bd. (1984) 152 Cal.App.3d 720.

New NLRB General Counsel Signals Enforcement Changes

The United States Senate confirmed Peter Robb as the new General Counsel to the National Labor Relations Board on November 8, 2017. On December 1, 2017, Mr. Robb issued a memorandum to the NLRB regional offices that required those contemplating enforcement actions to seek advice before proceeding. The categories for which advice must be sought are (1) cases over the last eight years that overruled precedent and involved one or more dissents on the Board, (2) cases involving issues that the Board has not decided, and (3) other cases that region officials believe will be of importance to the General Counsel. The requirement that enforcement authorities seek advice in such cases suggests that the General Counsel may be contemplating a change in enforcement policy on those issues.

The memorandum identified several examples of the kinds of issues that would require seeking advice, among them the following:

Inappropriate Social Media Postings. In Pier Sixty, LLC, 362 N.RB No. 59 (Mar. 31, 2015), the Board ruled that a catering service company unlawfully discharged an employee for posting a vulgarity-filled comment to Facebook about a member of management, knowing that his coworkers who were Facebook friends would be able to read the comment. The posting, although its language was "distasteful," constituted concerted activity protected under section 8 of the National Labor Relations Act.

Employee Handbook Conduct Provisions. In Casino San Pablo, 361 NLRB No. 148 (Dec. 16, 2014), the Board ruled that a handbook rule barring "disrespectful conduct" was too broad, and could be interpreted by employees in a manner that would discourage them from exercising their rights under section 7 of the National Labor Relations Act to engage in collective activity.

Joint Employer Status. In Browning-Ferris Industries of California, Inc., 362 NRLB No. 186 (Aug. 27, 2015), the Board revised its standard for determining whether an employer had joint employer status. It ruled that it would find two or more entities to be joint employers if they are both employers within the meaning of the common law, and if they share or codetermine matters governing the essential terms and conditions of employment. In that case BFI relied on workers supplied by an independent company to sort streams of material into categories at BFI's recycling plant. Because BFI had control over who the independent company could hire, barred the company from paying its workers more than BFI paid its employees for comparable work, and provided some day-to-day supervision of the independent company's workers, it was deemed a joint employer. In a notable application of this standard, several NLRB regions have brought complaints against McDonald's, alleging that it is a joint employer with its independent franchisees. Read the NLRB press release on the complaints against McDonald's.

Update: On December 14, 2017, the Board overturned the Browning-Ferris standard in Hy-Brand Industrial Contractors, Ltd and Brandt Construction, Co., 365 NLRB No. 156. Two new appointees to the Board joined one of the Browning-Ferris dissenters to announce a "return" to the joint liability principles applied before Browning-Ferris, which the decision described as "requir[ing] direct control over one or more essential terms and conditions of employment to constitute an entity the joint employer of another entity’s employees."

Other examples are provided in the full text of the memorandum, which is available here on the NLRB website.

DOL Gives Continued Attention To Joint Employment

In recent years, the U.S. Department of Labor has paid particular attention to misclassification of employees as independent contractors. It has worked with other federal and state agencies to help misclassified employees get the wages, benefits, and protections to which they are entitled. On January 20, 2016, the Administrator of the Department's Wage and Hour Division issued Interpretation No. 2016-1, entitled Joint employment under the Fair Labor Standards Act and Migrant and Seasonal Agricultural Worker Protection Act. The interpretation emphasizes that joint employment should be defined expansively. It discusses two different types of joint employment:

• Horizontal joint employment occurs when two or more employers each separately employ an employee and are sufficiently associated with or related to each other with respect to the employee. DOL regulations address this type of joint employment at 29 CFR section 791.2.
• Vertical joint employment occurs when an employee of one employer (which the Administrator calls an “intermediary employer”) is also, with regard to the work performed for the intermediary employer, economically dependent on another employer.

To determine whether horizontal joint employment exists, the following questions should be asked: (1) who owns the potential joint employers (i.e., does one employer own part or all of the other or do they have any common owners), (2) do the potential joint employers have any overlapping officers, directors, executives, or managers, (3) do the potential joint employers share control over operations (e.g., hiring, firing, payroll, advertising, overhead costs), (4) are the potential joint employers’ operations inter-mingled (for example, is there one administrative operation for both employers, or does the same person schedule and pay the employees regardless of which employer they work for), (5) does one potential joint employer supervise the work of the other, (6) do the potential joint employers share supervisory authority for the employee, (7) do the potential joint employers treat the employees as a pool of employees available to both of them, (8) do the potential joint employers share clients or customers, and (9) are there any agreements between the potential joint employers.

The interpretation provides the following example of horizontal joint employment: An employee is employed at two locations of the same restaurant brand. The two locations are operated by separate legal entities (Employers A and B). The same individual is the majority owner of both Employer A and Employer B. The managers at each restaurant share the employee between the locations and jointly coordinate the scheduling of the employee’s hours. The two employers use the same payroll processor to pay the employee, and they share supervisory authority over the employee.

To determine whether vertical joint employment exists, the following factors should be considered: (1) Directing, Controlling, or Supervising the Work Performed, (2) Controlling Employment Conditions, (3) Permanency and Duration of Relationship, (4) Repetitive and Rote Nature of Work, (5) Integral to Business, (6) Work Performed on Premises, and (7) Performing Administrative Functions Commonly Performed by Employers.

The interpretation provides the following example of vertical joint employment: A laborer is employed by ABC Drywall Company, which is an independent subcontractor on a construction project. ABC Drywall was engaged by the General Contractor to provide drywall labor for the project. ABC Drywall hired and pays the laborer. The General Contractor provides all of the training for the project. The General Contractor also provides the necessary equipment and materials, provides workers’ compensation insurance, and is responsible for the health and safety of the laborer (and all of the workers on the project). The General Contractor reserves the right to remove the laborer from the project, controls the laborer’s schedule, and provides assignments on site, and both ABC Drywall and the General Contractor supervise the laborer. The laborer has been continuously working on the General Contractor’s construction projects, whether through ABC Drywall or another intermediary.

You can find a summary of the DOL's views on joint employment in Fact Sheet 35.

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).

Who Is The (An) Employer?

Questions may arise about which of multiple actors is responsible for various aspects of an employment relationship. When a temporary agency provide a worker to one of its clients, can the client be sued for not providing a meal period? Is the agency or the client responsible for compliance with the family leave statutes? If an outside contractor supplies employees to provide document services at its client's work site, who is liable for any workplace harassment claims? Can a payroll service be held liable to its client's employees for failure to pay wages in accordance with the California Labor Code? The last was the subject of the Court of Appeal's recent decision in Aleksick v. 7-Eleven, Inc., Case No. D059236 (May 8, 2012). It provides a good jumping off point for a discussion of the legal principles that determine who a particular worker's employer is.

Kimberly Aleksick worked for a 7-Eleven franchise owned by Michael Tucker. His franchise agreement with 7-Eleven to use a payroll service operated by 7-Eleven. Aleksick brought a class action against 7-Eleven claiming that its practice of converting minutes to hundredths of an hour sometimes shorted employees a few seconds worth of pay. The dispositive question was whether 7-Eleven could be considered Aleksick's employer by operation of the payroll service.

Common Law

Determining whether a worker is an employee is an issue in many areas of law. At common law, the issue arises with respect to responsibility for the worker's torts. If an organization hires an independent contractor to carry out a task, and the independent contractor is negligent, the organization is not liable. Foster v. County of San Luis Obispo, 14 Cal. App. 4th 668, 17 Cal. Rptr.2d 730 (1993) (county not liable for legal malpractice of independent lawyer retained to represent indigent defendant). But, the organization is liable under the doctrine of respondeat superior for negligence of its employees. Barner v. Leeds, 24 Cal. 4th 676, 13 P.3d 704, 102 Cal. Rptr. 2d 97 (2000) (county is liable for malpractice of deputy public defender whom it employs).

The common law standard looks to the degree of control that the putative employer has over the manner and means by which the worker carries out his or her task. The California Employment Development Department published the Employment Determination Guide, which explains the standard in question and answer format, and provides concrete examples.

Wage and Hour

Federal and state law impose minimum wage, overtime and other wage and hour requirements on employers. Those who meet the common law definition of employer must comply with those regulations. However, the laws contain their own definitions that may be more encompassing.

The California wage orders refer to the common law standard but defines employ to include  "to exercise control over the wages, hours or working conditions" or "to suffer or permit to work." (The California wage orders are available from the Industrial Welfare Commission website.) The suffer or permit to work language is derived from child labor legislation designed to prevent companies that controlled a work site from disclaiming responsibility for minors who might be working there although not under the direct control of the company. The exercising control standard allows the law to reach through straw men and sham arrangements to get at the true employer, and to apply to situations where multiple entities control different aspects of the employment relationship. The California Supreme Court explained the standards in Martinez v. Combs, 49 Cal.4th 35, 109 Cal. Rptr. 3d 514, 231 P.3d 259 (2010).

In the Aleksick case referred to at the outset the Court of Appeal determined that the payroll service did not meet any of the definitions of employer under California law.

Although the federal Fair Labor Standards Act definition of employ includes suffer or permit to work, the United States Supreme Court has adopted an economic reality test that does not necessarily match the more all-encompassing definition under California law. Tony and Susan Alamo Foundation v. Secretary of Labor, 471 U.S. 290 (1985).

Workers Compensation

California's Workers Compensation Act covers persons in the service of an employer under any contract of hire, but not independent contractors. The Act defines an independent contractors as "any person who renders service for a specified recompense for a specified result, under the control of his principal as to the result of his work only and not as to the means by which such result is accomplished. Because of the remedial purposes of the Act, the coverage may sometimes extend beyond those who would be considered employees under the common law test. S.G. Borello & Sons v. DIR, 48 Cal.3d 341, 769 P.2d 399, 256 Cal. Rptr. 543 (1989) ("sharefarmers" engaged to harvest cucumbers were employees of the grower).

Anti-Discrimination Laws

Federal and state laws prohibit employers from harassing, and discriminating and retaliating against their employees based on protected characteristics. Where more than one entity has control over conditions in the workplace, liability may extend beyond the one considered the employer under common law principles. The EEOC has published an Enforcement Guidance on the application of equal employment opportunity laws to contingent workers placed by staffing firms. The following example from the guidance illustrates how the laws apply to one such situation:

Example 9: A temporary employment agency receives a job order for a temporary receptionist. The client requires that the individual assigned to it speak English fluently because a large part of the job entails communication with English-speaking persons who call the client or who come to the client's work place. The agency assigns an Asian American individual who speaks English fluently, but with an accent. The client insists that the agency replace her with someone who can speak unaccented English. The agency complies with that request and sends an individual who speaks English fluently with no accent. The Asian American individual files a charge with the EEOC. The investigator determines that English fluency was necessary for the job. However, he further determines that CP's accent does not interfere with her ability to communicate and that she has effectively performed similar jobs. The investigator properly concludes that both the client and the staffing firm are liable for terminating CP on the basis of her national origin.

FMLA

The federal Family and Medical Leave Act and the California Family Rights Act require employers with 50 or more employees to provide unpaid leave benefits. As with the anti-discrimination laws, questions may arise about which entity is responsible for the benefits and providing a job when the employee is ready to return to work. The Department of Labor has explained the principles in section 825.106 of its regulations.

The need to determine whether an employment relationship exists arises in many other contexts. While some of those may have unique standards, the general standards discussed here are a useful starting point for all such determinations.

One Worker, Two Related Employers

Allegations in a recent lawsuit against several McDonald's franchisees in Monterey County raise an issue about application of the wage and hour laws to employees who work for more than one employer. The complaint filed on behalf of several hundred employees alleges that the franchisees used a "dual-shift" practice whereby a worker would be paid by two employers for the same pay period in an attempt to avoid paying overtime. Garcia v. Forza Management LLC, Case No. GNM 98240 (Monterey County Superior Court Apr. 13, 2009). While we do not know what the evidence in the case will show, we can examine the legal principles used to decide such cases.

The applicable U.S. Department of Labor regulation is found at 29 CFR section 791.2. The California Labor Commissioner does not have a formal regulation, but the Division of Labor Standards Enforcement Enforcement Policies and Interpretations Manual appears to follow federal principles. Under those principles, there are three possible scenarios:

1. If two or more employers act entirely independently of each other, and are completely dissociated from each other, their wage and hour obligations to an individual whom they both employ are treated separately. Assume that Ginnie works an eight-hour shift at McDonald's, takes a nap for a couple of hours, and then works four hours selling hot dogs at Dodger Stadium. Although Ginnie worked 12 hours that day, she is not entitled to overtime pay from either employer.

2. If two or more employers act jointly with respect to an individual employed by both, they are jointly responsible for the total number of hours worked by both. Any overtime hours that the employee works must be apportioned among the employers based on the number of hours worked for each. Assume that ABC Petroleum employed Hector as a security guard eight hours a day. After a one hour break, Hector continued working as a security guard for another four hours, but transferred his attention to the facilities of XYZ Pipeline, which transported ABC's product from the oil fields to a shipping terminal. ABC and XYZ are not related and each issues its own paycheck to Hector, but XYZ relies on ABC to hire all security guards. Hector is entitled to four hours of overtime pay, with two-thirds paid by ABC, and one-third by XYZ. See Mid-Continent Pipe Line Co. v. Hargrave, 129 F.2d 655 (10th Cir. 1942).

3. If two or more employers are not completely disassociated with respect to the employment of a particular employee and may be deemed to share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer, the controlling employer is responsible for all hours worked. Assume that Sammy works eight hours for Janice in her oil fields, and then four hours at other oil fields as an employee of Janice Corp., of which Janice is the sole shareholder, board member and officer. All Janice's employees are also employees of Janice Corp. Sammy is entitled to four hours of overtime pay from Sammy. See Durkin v. Waldron, 130 F.Supp. 501 (D. La. 1955).