The Supreme Judicial Court of Massachusetts recently clarified the “joint employment” test for employers, providing specific guidance on the issue. In Jinks v. Credico (USA) LLC, the court reviewed standards for independent contractors and whether those should apply to joint employers.[i]
The central discussion in Jinks focuses on the standards defining employment relationships. G. L. c. 149, § 148B establishes the standard to classify an individual as an employee or an independent contractor for purposes of minimum wage and overtime statutes.[ii] The court reviewed whether the statute also establishes the standard to determine whether an entity is an individual’s joint employer for purposes of those laws.[iii]
Facts in Jinks v. Credico (USA) LLC
Credico worked with marketing companies as a broker. DFW Consultants (“DFW”) and Credico had a contract for provision of door-to-door sales and other direct marketing. DFW was a subcontractor working for Credico and Credico’s clients. DFW hired plaintiffs to provide marketing work for Credico’s clients, classifying one plaintiff as an employee and the others as independent contractors. This classification was done without any input from Credico.
According to the Court, there were two agreements between Credico and DFW that applied during plaintiffs’ tenure at DFW: a 2013 ‘Subcontractor Agreement’ (2013 agreement) and a 2015 ‘Services Agreement’ (2015 agreement), which apparently superseded the 2013 agreement.[iv]
The Court reviewed these agreements and opined:
Relevant to the issues on appeal, the 2013 agreement provided that DFW would comply, and have its employees comply, with Credico’s “Code of Business Ethics and Conduct”; otherwise, “[DFW] retain[ed] sole and absolute discretion, control, and judgment in the manner and means of carrying out the assignment,” including “filing all necessary and required tax filings, reports, payments, and similar obligations,” as well as “any workers’ compensation, Medicare, Medicaid, or other similar deductions or contributions.”[v]
Further, the Court added, the 2013 agreement governed payment schedules and amendments, fraud, and contained rate tables for compensation for different sales. Plaintiffs alleged commission guidelines were included in this agreement as well. However, plaintiffs did not make any showing to support their allegation that Credico’s schedule also included commission guidelines paid by DFW, nor was there any evidence produced that Credico was involved with DFW-employee compensation.
The second agreement kept discretion and control with DFW, further clarifying DFW had:
“exclusive control over its labor and employee relations policies, and its policies relating to wages, hours, or working conditions of its employees,” and had “the exclusive right to hire, transfer, suspend, lay off, recall, promote, assign, discipline, adjust grievances and discharge its employees.”[vi]
However, Credico did require certain things from DFW, including NDAs and background checks.
Plaintiffs operated almost entirely out of office, returning only twice a day at the beginning and end of their work. Further, plaintiffs had no direct contact with Credico. They sued, alleging Credico was their joint employer, and, as such, had violated the independent contractor statute…by misclassifying [two of plaintiffs] as independent contractors rather than employees, and that it violated the wage laws…by failing to pay each of the plaintiffs’ minimum wage and overtime for hours worked in excess of forty hours per week.[vii]
Parties moved for summary judgment. The court granted summary judgment to Credico because it found Credico was not a joint employer. On appeal, the Supreme Judicial Court transferred the case sua sponte. The Court found Credico was not plaintiffs’ employer but noted there were two general exceptions that might still make Credico liable. These exceptions, an alter-ego employer or an end-run employer, were not shown to apply by plaintiffs.
A third exception could also exist, the Court opined. The Court considered “whether an employment relationship exists between company A and company B’s employees when company A is the employees’ joint employer.”[viii] After reviewing the concept of joint employment, the Court decided to discuss the proper factors to consider in determining whether an entity, contracting in good faith with a second entity, has retained for itself sufficient control over the terms and conditions of the second entity’s employees to be considered the joint employer of those employees.[ix]
Plaintiffs requested the ABC test from G. L. c. 149, § 148B be used to assess employment status. Section 148B provides that “an individual performing any service … shall be considered to be an employee unless three factors are established to rebut the presumption of employment:”[x]
1. The individual is free from control and direction in connection with the performance of the service, both under his contract for performance of service and in fact:
2. the service is performed outside the usual course of the business of the employer; and
3. the individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.[xi]
The Court concluded G. L. c. 149, § 148B does not establish joint employer standards. They instead turned to the Fair Labor Standards Act, opining that they should be utilized to determine joint employment status. Based on the Act, the Court identified a totality of the circumstances test, with four main factors: whether the entity (1) had the power to hire and fire the individual, (2) supervised and controlled the individual’s work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.[xii]
The Court determined “the four aforementioned factors provide a framework that … will capture both the nature and structure of the working relationship as well as the putative employer’s control over the economic aspects of the working relationship.”[xiii] The Court also determined “no one factor of the four-prong test is dispositive but rather the Court will look to the totality of the circumstances to determine whether an entity ought to be considered a joint employer.”[xiv]
Now that employers in Massachusetts have more guidance in this arena, employers working with other businesses, such as subcontractors, should draft and review their contracts keeping the totality of the circumstances test discussed above in mind. Employers should also ensure employees work with other businesses in a manner that minimizes liability based on the factors discussed.
[i] Jinks vs. Credico (USA) LLC, Mass., No. SJC-13106 (Dec. 13, 2021).
[iv] Id. at 2.
[v] Id. at 2.
[vi] Id. at 2.
[vii] Id. at 2.
[viii] Id. at 5.
[ix] Id. at 7.
[x] G. L. c. 149, § 148B.
[xiii] Jinks v. Credico (USA) LLC, Mass., No. SJC-13106, 21 (Dec. 13, 2021).