Under the Fair Labor Standards Act (FLSA) and state wage payment laws, employers are responsible for compliance with wage payment requirements. Plaintiffs cannot sue non-employers claiming overtime or minimum wage violations. However in some circumstances, two or more companies can be deemed joint employers, with each company individually liable for wage payment violations. Last month, the Fourth Circuit Court of Appeals (which includes North Carolina and South Carolina) concluded that a construction general contractor was responsible as a joint employer for its subcontractor’s failure to pay its own employees.

In Salinas v. Commercial Interiors, Inc., the plaintiffs were employed by a drywall installer. Their employer provided services almost exclusively to the defendant. Although paid by their employer, the general contractor set working schedules and assigned the subcontractor’s employees to particular worksites during the week. They attended meetings run by the general contractor, and filled out paperwork for the defendant showing time worked on each project. Most importantly, the plaintiffs alleged that the general contractor’s foremen regularly supervised the plaintiffs’ work and provided them with tools and other equipment.

The district court dismissed the claim against the general contractor, but the Fourth Circuit reversed this decision, finding the defendant liable for the wage violations. In reaching this conclusion, the court adopted a new expansive six factor test for determining when joint employment exists. Instead of focusing on the relationship between the plaintiffs and the general contractor, including their economic dependence on the defendant, the Fourth Circuit concentrated on the relationship between the two companies. If they are not “completely disassociated” with one another, they can be deemed joint employers for FLSA liability purposes.

In this case, the Fourth Circuit concluded that the virtually exclusive relationship between the two companies and the degree of control and direction over the subcontractor’s work by the general contractor met the new test for joint employment. The court rejected the defendant’s argument that they were not joint employers because the working arrangement was standard for their industry.

This result means that general contractors and other businesses that subcontract parts of their work stand a greater chance of being found liable for wage payment violations involving the subcontractor’s employees. The more supervision over and involvement with the subcontractor’s work, the more likely that the general contractor will be deemed a joint employer. Contracts and working arrangements should be structured with these risks in mind.