October 2014 Bar Bulletin
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October 2014 Bar Bulletin

The Ins and Outs of Joint Employment

By Karen Sutherland

 

Who is your employer? This sounds like a simple question - it is the entity whose name appears on your W-2, right? But there is more to it than that. Under certain circumstances, two or more entities can be considered joint employers even though all of the formal paperwork indicates that the individual is only employed by one entity.

Why does it matter? If two or more entities are joint employers, then they can all be found liable for violating various laws that affect the employee-employer relationship. For example, from the perspective of the employee, this means that there may be another source to pay for unpaid wages if the W-2 employer is, shall we say, financially challenged.

From the perspective of the government, pressure can be placed on large companies to oversee the activities of smaller companies with whom they have contractual relationships. From the perspective of the employer, it means that if you exert too much influence over the work being done by employees of your franchisees or subcontractors, you can be held liable for their conduct.

Recent State Case Law

Joint employment has been a frequent topic of discussion recently on the state and national levels. On the state level, in Becerra v. Expert Janitorial, LLC,1 the Washington Supreme Court examined the concept of joint employment in the context of unpaid overtime hours worked under the state Minimum Wage Act (MWA), RCW ch. 49.46.

The facts in the case were that Fred Meyer Stores, Inc. outsourced facility maintenance services to Expert Janitorial, LLC, which in turn subcontracted with at least nine janitorial service providers. The plaintiffs were janitors who worked for one of the two subcontractors. Expert Janitorial's contract with Fred Meyer required that specific work be performed to Fred Meyer's reasonable satisfaction at a specific price. Expert Janitorial in turn paid a flat fee per store to the subcontractors for whom the janitors worked.

One of the subcontractors, All Janitorial, allegedly did not pay plaintiffs minimum wages or overtime, nor did it pay into Social Security or worker's compensation on their behalf. The owner of All Janitorial testified, "We ran the numbers, and the amount we were getting paid ... we would go negative if we would treat them as employees." Instead, All Janitorial treated the janitors as independent contractors.

In addition to bringing suit against the subcontractors, the plaintiffs sued Expert Janitorial and Fred Meyer for violations of the MWA (among other things). The plaintiffs contended that as a matter of economic reality, they were employed by Fred Meyer and Expert Janitorial and that both companies knew they were misclassified and improperly denied them overtime wages.


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