How Much Control Is Needed to Determine Joint Employment?

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By Michael Trimarchi

“I had only two jobs this week and that barely covered the cost of gasoline for my truck,” said Doug, who installed equipment for a satellite TV company. “How can I support my family on so little work?”

“You're paid by the job,” said Rick, a manager at the company. “The subcontractor that hired you determines your installation schedule. We just supply the satellite dishes and the TV service.”

FACTS: A provider of digital television programs through satellite dishes relied on technicians to install its equipment. The technicians were hired through a network of home-service providers, secondary service providers and subcontractors.

The satellite company's primary service provider generally entered into contracts with other providers, which in turn contracted directly with installation technicians or formed agreements with subcontractors that retained the technicians.

Technicians hired through the provider networks were classified as independent contractors. They were required to pass screening and background checks and obtain certification before they could install satellite television equipment.

Satellite television equipment was to be installed according to the policies, procedures, practices and performance standards of the satellite company. The provider agreements controlled nearly all aspects of the technicians' work. Each technician, who was issued an identification number, was assigned a work order through a central database that was controlled by the satellite company.

After arriving at each work site, the technicians were required to check-in with the satellite company. After an assigned job, they were required to report to the service providers that the installation was complete.

Technicians were required to buy and wear a uniform that displayed the satellite company's insignia. The insignia also had to be on vehicles driven to customers' homes. They were required to buy supplies necessary to perform installations as well as maintain and fuel their vehicles.

Compensation was based on a piece-rate schedule for specific tasks. Technicians were not paid for assembling satellite dishes, transportation to and from assignments, contacting customers to confirm installations, assisting other technicians and returning to installations that needed additional work.

A satellite TV company paid equipment installers, who were hired through service providers, on a piece-rate schedule.

The workers filed a lawsuit directly against the satellite company, claiming that the company was joint employer that required them to work without overtime pay and for less than the federal hourly minimum wage as required by the Fair Labor Standards Act. The workers said they were misclassified as independent contractors.

ISSUE: Is the satellite company a joint employer under the FLSA?

DECISION: The satellite company was not a joint employer, a federal district court ruled. For a joint-employer relationship to exist, two or more employers must exercise control over working conditions, it said.

The satellite company did not have the power to hire or fire the technicians, determine the rates or methods of compensation or exercise supervision or control of the technicians, the court said.

The technicians claimed that the company and its primary contractor could effectively terminate them by ceasing to issue work orders. The court said, however, that such an allegation did not prove that the companies had the power to hire or fire the workers.

The court said that the satellite company and its primary service provider established performance standards and technician qualifications and enforced various quality-control requirements, but that does not equate to supervision and control.

Although the satellite company determined what tasks were compensable in the piece-rate compensation system, the court said it could find no claim that the company determined the rate of compensation.

The court added that the technicians admitted that they were paid through the payroll systems of home service providers and secondary service providers, but did not make clear whether the company was one of those providers (Hebron v. DirecTV LLC, 2015 BL 344322, N.D. Ill., No. 14-08155, 10/13/15).

POINTERS: Courts analyze various factors to determine whether a business is a joint employer, including whether the company had the power to hire and fire employees, supervised and controlled employee work schedules or conditions of payments, determined the rate and method of payment and maintained employment records.

Joint-employer liability has been a hotly contested issue. In a recent ruling, the National Labor Relations Board ruled 3-2 that a company can be the joint employer of workers provided by another company if the companies co-determine matters governing the essential terms and conditions of the workers' employment (Browning-Ferris Indus. of Calif. Inc., 362 NLRB, No. 186, 8/27/15).

The decision by the NLRB, combined with Labor Department efforts to combat employee misclassification, may mean that nontraditional labor relationships are under attack, said some business groups, including the U.S. Chamber of Commerce.

This analysis illustrates how courts resolve pay-related disputes. The names and dialogue are fictitious.

To contact the reporter on this story: Michael Trimarchi in Washington at mtrimarchi@bna.com.