It’s Not Just the DOL That Thinks You May Have More Employees

27 July 2015 Labor & Employment Law Perspectives Blog

Just last week, the DOL provided guidance about people treated as independent contractors, but who may really be your employees. That is just part of the trend. Another way you may have “extra” employees is through joint employment, most commonly through use of a staffing agency.

A recent case from South Carolina illustrates the point. The worker was hired by a staffing company and assigned to work for the company against which the worker brought the lawsuit. She complained about sexual remarks from one of the company supervisors, and the worker’s assignment with the company was terminated a few days later. The worker then sued both the staffing agency and the company. There was no dispute that the staffing agency had employed her, but the company escaped liability, or so it thought, by claiming it was not the worker’s employer. The appeals court said the company exercised sufficient control over the worker to also be considered her employer and therefore told the trial court it had to consider her claims on the merits.

In reaching that decision, the appeals court noted that both the company and the staffing agency had control over various items regarding the worker’s employment, even though the company had taken some steps to avoid looking like her employer. This included having her (and the other people employed by the staffing agency): 1) wear uniforms from the staffing agency; 2) be paid by the staffing agency; 3) park in an area designated for the staffing agency employees; and 4) assign the staffing agency ultimate responsibility for discipline and termination. However, there were also indications that the company might be the worker’s employer included: 1) the company determined the work schedule; 2) it arranged portions of her training; 3) she was supervised by company employees when she worked in the factory; and 4) her testimony that she was told she worked for both the company and the staffing agency.

The appeals court noted there are three ways to determine if a joint employment relationship is established: 1) looking at common law regarding agency theory (focused on control); 2) looking at the economic realities (focused on financial leverage); or 3) a combination of the two – commonly referred to as the hybrid test. Under the hybrid test, control is still the most critical issue but allows for some weight to be given to the financial reality of the situation.

In adopting the hybrid test, the appeals court listed the following nine factors to be considered when contemplating joint employment:

  1. Authority to hire and fire
  2. Day-to-day supervision, including ability to discipline
  3. Who furnishes equipment or the place to work
  4. Possession of and responsibility for employment records, including payroll, insurance, and taxes
  5. Length of relationship
  6. Provision of training
  7. Similarity of duties as compared to company employees
  8. If worker’s assignment is to single entity
  9. Whether there is indication of intent to enter into employment relationship

Notably, the court said three factors in the specific case at issue were more important than the others: ability to hire and fire, supervisory responsibility, where and how the work takes place. Here, despite the mixed bag of control, the court relied on the fact that the company told the staffing agency to replace the worker; that the company’s employees directed her work; and that the worker performed the same work as company employees, actually working right next to them.

This decision simply provides another reason to be cautious about who is considered an employee. Avoiding being a joint employer will be especially difficult if you have people from a staffing agency working on your site and being supervised by your employees.

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