Meaghan E. Murphy

Massachusetts’ highest court recently eased a burden on businesses by limiting their exposure to claims they are joint employers under state law. The Supreme Judicial Court (SJC) decided the test governing the joint employer inquiry is the multifactor standard of the federal Fair Labor Standards Act (FLSA) and not the “ABC” test of the state’s independent contractor law. In doing so, the SJC (1) confirmed the more employer-friendly FLSA standard applies in Massachusetts and (2) provided important guidance to businesses in structuring their relationships with other firms, contractors, and vendors.

Facts

Credico (USA) LLC contracted with DFW Consultants, Inc., to provide door-to-door and other sales services for Credico’s clients. DFW in turn hired three individuals as salespersons to work on various marketing campaigns in Massachusetts. The company classified them as independent contractors instead of employees, apparently without consulting Credico.

The trio sued DFW, as well as Credico, for their alleged misclassification as independent contractors and related violations of Massachusetts’ wage and hour laws. They claimed Credico should be held liable because it was their joint employer as a result of the influence it had over their employment status and the fact it was profiting from their work.

The trial court disagreed and ruled in Credico’s favor, dismissing the case. The three salespersons appealed the decision to the appeals court. As permitted by the applicable rules of procedure, the SJC on its own initiative transferred the case from the appeals court to itself.

Which Standard Should Apply?

The issue presented in the case was whether Massachusetts’ independent contractor law, which sets forth the standard to classify an individual as an employee or an independent contractor for minimum wage and overtime pay purposes, should be applied to the three salespeople to determine whether Credico is their joint employer for purposes of those laws.

The trio argued the state independent contractor law should apply because it’s more favorable to individuals. That is, businesses are more likely to be considered joint employers that could be held liable for minimum wage and overtime pay claims to employees of other companies with which they have working relationships (e.g., Credico could be liable for DFW employees’ claims).

The SJC disagreed. Instead, it decided the applicable test to determine joint employer status is found in the FLSA, which the court acknowledged Massachusetts has tracked closely in establishing its own wage laws. Under the test, whether a business is a joint employer is determined by considering the totality of the circumstances of the relationship between the individual and the business, guided by whether the company:

• Had the power to hire and fire the individual;
• Supervised and controlled the person’s work schedules or conditions of employment;
• Determined the rate and method of payment; and
• Maintained employment records.

Ordinarily, only the employing business is liable for misclassification under the Massachusetts’ wage and hour laws, but the SJC made clear an exception exists when another business is determined to be a joint employer under the FLSA’s test.

In applying the FLSA multifactor test to the facts of the present case, the SJC held the salespeople couldn’t show Credico exercised sufficient control over the employment terms to qualify as a joint employer. Importantly, the service agreements between the two businesses noted DFW employees would comply with Credico’s “Code of Business Ethics and Conduct,” but DFW otherwise retained sole discretion with respect to carrying out assignments, labor and employee relations policies, policies relating to wages, hours, and working conditions, and all personnel decisions. Also, there was no evidence Credico had any involvement in DFW’s policies on compensation paid to the latter’s salespersons. Jinks v. Credico (USA) LLC (2021).

Bottom Line

The Jinks decision provides helpful guidance to businesses looking to maintain contracts with third parties, such as contractors and vendors, while reducing their exposure to claims from those third parties’ employees. Nevertheless, Massachusetts businesses should continue to evaluate their relationships with any third parties (including as the relationships evolve) to ensure compliance with the ruling.

Meaghan E. Murphy is an associate at the firm of Skoler, Abbott & Presser, P.C., in Springfield, Massachusetts. Murphy regularly advises clients on various workplace issues, including discipline and performance issues, policy development and implementation, and compliance with local, state, and federal laws and regulations. You can reach her at 413-737-4753 or mmurphy@skoler-abbott.com.