Massachusetts Supreme Judicial Court Clarifies Joint Employer Analysis Under the Massachusetts Wage Act 

The Massachusetts Supreme Judicial Court has issued an opinion in Jinks v. Credico (USA), LLC setting forth the appropriate standard governing joint employer liability under the Massachusetts Wage Act.

The opinion can be found here.

At issue in the case was whether the “ABC” misclassification test under the Massachusetts independent contractor statute should be utilized to determine whether an entity is a joint employer for purposes of the Wage Act. The SJC determined that the ABC Test did not apply, and the appropriate test is set forth by the Fair Labor Standards Act (FLSA).

Background 

Credico contracted with DFW to provide regional door-to-door sales. DFW in turn hired the plaintiffs as independent contractors to perform sales services for Credico. Under the agreement between DFW and Credico, DFW retained (i) control over the manner and means of carrying out the service, and (ii) exclusive control over its labor and employment practices, such as hiring, firing, transferring, and suspending workers. Credico required DFW to certify that its workers had passed background checks and signed nondisclosure agreements. The workers reported to the DFW office at the beginning and end of the workday, but spent the day making sales calls, and never visited the Credico offices.

Three DFW workers filed a complaint against Credico, DFW, and DFW’s owner and operator, Jason Ward, alleging, in part, that Credico was their joint employer, and that it, along with DFW, violated the independent contractor statute by misclassifying them as independent contractors and the Wage Act (MGL c. 149, § 148) by failing to pay minimum wage and overtime. Credico moved for summary judgment, arguing that it was not a joint employer of the workers.

Analysis

In its ruling, the Court noted that ordinarily, the entity for whom the individual directly performs services is the sole “employer” responsible for compliance with the wage laws. This is because the direct employer is the entity presumed to have made the misclassification decision. However, there are exceptions to this general rule. One such exception is when two entities act as joint employers. Joint employer status is generally found when one employer contracts in good faith with an otherwise independent company, but retains sufficient control of the terms and conditions of employment of the employees who are employed by the other employer.

Plaintiffs argued that the ABC Test set forth in the independent contractor statute, MGL c. 149, § 148B, should govern the joint employer analysis. The ABC Test provides that a worker is an employee unless each of the following is true:

• The individual is free from control and direction in connection with the performance of the service, both under the contract for service and, in fact,
• The service is performed outside the usual course of business of the employer, and
• 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.

The Court disagreed, noting that the ABC test asks “who, if anyone, controls the work other than the worker herself,” which is not the appropriate question. Rather, a joint employer analysis should address whether an individual, whose work is controlled by one entity, is also subject to the control of another entity. The Court flatly rejected the use of the ABC test, equating it to “using a hammer to drive in a screw.”

The appropriate test, according to the SJC, is the more flexible framework set forth under the FLSA, which employs a “totality of the circumstances” test. The FLSA framework considers four factors: whether the entity (1) has the power to hire and fire the individual, (2) supervised and controlled the individual’s work schedules or condition of employment, (3) determined the rate and method of payment, and (4) maintained employment records. No one factor is dispositive, but the factors together provide a framework that captures the nature and structure of the working relationship, as well as the level of control exercised by the putative employer.

In the case of Credico and DFW, the plaintiffs presented no evidence that Credico had the power to hire or fire DFW employees or to control hours or working conditions. Although Credico exercised quality control measures, such as requiring background checks and drug tests, this alone did not constitute supervision or control of working conditions. Moreover, nothing in the record supported a conclusion that Credico determined the rate or method of payment for the DFW employees or maintained employment records. The contract between Credico and DFW, which set forth the schedule of payments between the parties, was not sufficient evidence to show control over the rate of pay to individual employees. After considering these factors, the Court determined that the plaintiffs had no reasonable expectation of proving that Credico was a joint employer, and granted summary judgment.

Takeaway 

Given the mandatory treble damages and recovery of attorneys’ fees available to employees who prevail under the Wage Act, the SJC’s decision should be welcome news to companies contracting with others for the provisions of services. The decision not only offers clear guidance on the factors to be considered in the joint employer analysis, but also aligns state law with federal law on the topic. Companies should carefully craft their agreements and business relationships with the FLSA factors as a guide.