Staffing firms doing business in Massachusetts have long awaited clarification on when they could be held liable for wage act violations as a joint employer when placing independent contractors with clients located in the state. Would the stringent ABC test under the state’s independent contractor law apply, or the more employerfriendly standard under the Fair Labor Standards Act? Wage act violations include payment for overtime wages and benefits and come with hefty attorneys’ fee awards. In Massachusetts, treble damages also apply.
The tests. Under the ABC standard, staffing firms could be held liable as a joint employer when the placed worker performed work within the entity’s “usual course of business,” regardless of whether the staffing firm had any direct contact with or control over those employees. Typically, staffing agencies do not have the day-to-day control; workers who work on-site with clients are instead subject to the client’s directions on how to perform the work.
The FLSA standard, meanwhile, comprises a four-prong “totality of the circumstances” test that focuses on who has “control over the economic aspects of the working relationship” to better capture both the nature and structure of the working relationship. That test asks whether the putative employer: had the power to hire and fire the employees; supervised and controlled employee work schedules or conditions of employment; determined the rate and method of payment; and maintained employment records.
The ruling. The Massachusetts Supreme Judicial Court in Jinks v. Credico (USA) LLC said the FLSA standard would apply to such situations.
In most cases, staffing firms do not exercise or meet any of the criteria above and can avoid being held liable as a joint employer. For instance, frequently the client determines whom to hire and when to terminate a placed worker on the job. In almost all situations, the client provides the supervision and sets work schedules for workers and determines where and how the actual work is performed, not the staffing firm. Similarly, clients determine the rate of pay and if by commission, project work or by the hour. Although a staffing firm may have records of work performed, clients themselves generally keep track of hours worked and/or commissions made and earned, so even this element of the test would not be attributed to the staffing firm.
Most importantly, the court noted that other tasks generally within the purview of a staffing firm — compliance with regulatory requirements; requiring workers receive proper training and monitoring them to prevent fraudulent activity; providing the workers with hardware or access to software for purposes of processing transactions or maintaining records of workers’ background checks and drug tests — are insufficient to establish joint employment.
Background. In Jinks, Credico contracted with DFW Consultants Inc., which provided workers to perform door-to-door sales for Credico’s telecommunications and energy clients in Massachusetts. Under Credico and DFW’s agreement, DFW retained “exclusive control over its labor and employee relations policies, and its policies relating to wages, hours or working conditions” of its workers. DFW had the sole right “to hire, transfer, suspend, lay off, recall, promote, assign, discipline, adjust grievances and discharge” the workers.
Credico’s oversight was limited to a requirement that DFW workers comply with certain regulatory requirements, undergo a background check, and execute nondisclosure agreements. Several DFW workers filed a class action alleging that Credico had misclassified them as independent contractors and alleged that Credico was in fact their joint employer — and liable for extensive overtime and other damages. In applying the FLSA test, the court found that Credico was not a joint employer even though it exercised some control by requiring background checks and ensuring DFW employees were properly trained. These steps, however, did not rise to a level of control to make Credico a joint employer under the FLSA.
The holding in Jinks is critical for staffing agencies nationwide that do business with clients that have operations in Massachusetts. The decision provides long-awaited clarity around the circumstances where a staffing agency could be on the hook for the wages and/or benefits owed for workers placed with a client, and how to minimize the potential for joint-employer liability.
