CWS 3.0: August 1, 2012

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Joint-Employment Ruling Puts Spotlight on “Control”

In a case involving Enterprise Rent-a-Car, the Third Circuit ruled expanded the test for joint-employer status under the Fair Labor Standards Act (FLSA) in the context of a parent company providing shared services to its subsidiaries. The case: Enterprise Holdings Inc. is the parent company of 38 subsidiaries operating rental car agencies. Plaintiff Nickolas Hickton filed a nationwide collective action alleging that he and other similarly situated managers were misclassified as exempt and were owed back wages for overtime, liquidated damages and attorneys’ fees under the FLSA. Hickton sued both the subsidiary and Enterprise Holdings, alleging that Enterprise Holdings was liable as a joint employer. On appeal, Hickton argued that he could establish joint employer status because Enterprise Holdings provided shared services (including offering employee benefit plans, business guidelines and human resources services) to each of its subsidiaries.

The court held that joint-employer analysis must consider whether the alleged employer has or exercises: authority to hire and fire employees; authority to promulgate work rules and assignments, and set conditions of employment, including compensation, benefits and hours; day-to-day supervision, including employee discipline; or control of employee records, including payroll, insurance, taxes and the like.

While the court found in favor of Enterprise in this case, it said courts should consider “real world” indications of “significant control.” It did not further define those terms, though, leaving significant ambiguity on how much control is significant control for the purposes of finding a joint employer relationship.

While this case involved a subsidiary relationship, buyers of staffing services should still take note and avoid exerting day-to-day control over the essential terms and conditions of employment of the employees of the recipient of the shared services.

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