As reported in EmployNews, last month in its Salinas decision, the Fourth Circuit Court of Appeals (which includes North Carolina and South Carolina) adopted a new, broader test for determining when two entities are joint employers liable for wage payment under the Fair Labor Standards Act. On the heels of this decision, another Fourth Circuit panel recently concluded that the Salinas test applies beyond the traditional construction industry context.
In Hall v. DIRECTV, LLC, satellite television installation technicians sued DIRECTV and an intermediary contractor for unpaid overtime. The defendants moved to dismiss the claims on the basis that the plaintiffs (1) were independent contractors not covered under the FLSA; and (2) even if the plaintiffs are considered employees, that the defendants were not their employers as defined under the FLSA. The district court agreed, dismissing the claims.
The Fourth Circuit reversed this decision based on the new six-factor Salinas test. First, the court used a separate test to conclude that the technicians could have been FLSA employees based on their economic dependence on the DIRECTV relationship. They had no other customers, and DIRECTV controlled most aspects of their work, including when and how much they would be compensated.
The court next used the Salinas test to conclude that DIRECTV and the companies who actually employed some of the technicians did not appear to be completely disassociated entities. DIRECTV controlled standards and procedures for the installations. The subcontractors had little if any other business. DIRECTV could essentially fire a subcontractor or its individual technicians by withholding additional assignments. This level of coordination establishes joint employment even if the subcontractors’ business arrangement does not require them to follow every aspect of DIRECTV’s directions.
The court did not conclude that joint employment exists in this case, but said that the plaintiffs had alleged adequate facts to allow the litigation to proceed. By quickly expanding Salinas beyond the traditional construction industry general contractor/subcontractor relationship, the Fourth Circuit opened a wide range of business arrangements to claims by employees that the party contracting for their employer’s services is liable when their W-2 employer fails to pay legally mandated wages.