As labor and employment law attorneys in Columbia, South Carolina, we know it can be unclear for whom an employee is working. For example, a general contractor may hire a drywall company to do work on a job. That drywall company has employees who do the actual drywall work. Do the drywall employees work for the general contractor or for the drywall company? This is a typical scenario for a joint employer question. The answer matters because if the drywall company fails to pay its employees, the general contractor may be on the hook for their compensation. The Fourth Circuit Court of Appeals, which makes decisions that affect South Carolina among other states, debuted a new joint employer test earlier this year to help define joint employment. In this article, we’ll explain South Carolina’s law regarding joint employers.
Duties of Joint Employers in South Carolina
Joint employment issues fall under the Fair Labor Standards Act (FLSA). We have written several blogs detailing FLSA issues, including overtime, fair pay, safe workplaces, sick leave and white collar exemptions. The Department of Labor has provided some direction to identify joint employment, publishing that when “an employee is employed by two or more employers such that the employers are responsible, both individually and jointly, to the employee for compliance with a statute.”
Joint employment as identified by the Department of Labor is most likely to arise when an employee has two or more separate but related or associated employers or where an employer provides labor to another employer and the workers are dependent on both employers for payment. The first scenario is guided by the FLSA. The second scenario is guided by the Migrant and Seasonal Agricultural Worker Protection Act (MSPA), but may include issues with staffing agencies, construction, warehouse and logistics, farm labor contractors, or other labor providers. An employer that is a joint employer, such as the general contractor in the drywall scenario, may owe duties to the employee under the FLSA or the MSPA, including payment of minimum wage, payment of overtime, and leave including under the Family Medical Leave Act.
Identifying Different Joint Employment Scenarios
There are two types of joint employment, commonly referred to as vertical and horizontal joint employment. Though the Fourth Circuit Court of Appeals has provided guidance on joint employment factors, it is helpful for employers to understand the varying relationships where joint employment can appear.
Vertical joint employment exists where an employee has an employment relationship with one employer, but the worker is actually economically dependent on another entity that is guiding the work. Vertical joint employment applies to staffing agencies, subcontractors, labor providers or other temporary or intermediary employers. The focus of this relationship should be on the economic reality, not on control. For example, a temporary receptionist is paid by the staffing company, but she is not paid unless the second employer selects her from the staffing agency. Ultimately, the receptionist is economically reliant on the hiring agency rather than the staffing agency. As such, both the staffing agency and the hiring agency would be joint employers of the temporary receptionist.
Horizontal joint employment exists where an employee has employment relationships with two or more employers and the employers are associated such that they jointly employ the employee. Horizontal joint employment might occur where a worker is employed by two different locations of the same restaurant brand, even when the different locations are owned by different individuals. In this scenario, the managers of the two locations may coordinate the employee’s hours between the two locations and share supervisory authority. The employee may be paid through one payroll processor.
Identifying Joint Employment in South Carolina
The Fourth Circuit Court of Appeals heard a case involving an unpaid drywall worker’s claims for wages from the general contractor and the drywall company. The court had to determine whether the two employers were “entirely independent” and “completely disassociated” from one another regarding the drywall worker’s employment. The court examined the facts at hand and created a non-exclusive list of factors to consider when evaluating a joint employer issue:
- Whether and how two companies “direct, control, or supervise the worker,” formally or in practice.
- Whether and how the companies hire, fire and modify the terms and conditions of employment.
- The degree of permanency and duration of the relationship between the companies.
- Whether one of the companies controls the other.
- Whether the work is performed on premises owned or controlled by one of the companies.
- Whether and how the two companies control functions ordinarily carried out by the employer, like payroll, workers’ compensation insurance, and providing materials for work.
In addition to these items, the court said that any one of these factors or facts not on the list can point to a joint employer status if it appears one company shares or codetermines terms and conditions of the employee’s employment. The court appeared to make it difficult for companies to protect against this determination, even if the companies have a legitimate contractor/subcontractor relationship.
Are You a Joint Employer?
The Fourth Circuit’s ruling has created a climate where virtually any company using contractors or sharing employees with other companies is at risk for creating a joint-employment relationship. In short, joint employment exists “when (1) two or more persons or entities share, agree to allocate responsibility for, or otherwise codetermine—formally or informally, directly or indirectly—the essential terms and conditions of a worker’s employment and (2) the two entities’ combined influence over the essential terms and conditions of the worker’s employment render the worker an employee as opposed to an independent contractor.”
Determining whether a company in South Carolina is a joint employer has changed since the Fourth Circuit’s ruling. Determining whether a company is a joint employer is essential to evaluating the duties and responsibilities of the company and will provide guidance as to how the company handles varying scenarios regarding relationships with employees and other companies. If you are concerned about your company’s relationships and obligations as a joint employer, contact an experienced employment law attorney at Gignilliat, Savitz & Bettis, LLP for a consultation today.