By Barry J. Miller, a partner with Seyfarth Shaw LLP in the firm’s Boston, MA office.
In its recent landmark decision, Jinks v. Credico (USA) LLC, the Massachusetts Supreme Judicial Court set the standard for joint employer status in the context of the Commonwealth’s notoriously stringent wage laws. By adopting the joint employer standard from the federal Fair Labor Standards Act (FLSA), the court provided a relatively clear and limiting standard for determining whether a defendant can be liable for wage violations asserted by individuals that the defendant did not hire, supervise, or pay. In aligning Massachusetts with the federal standard, the SJC also rejected an expansive interpretation that would have enabled a flood of joint employer litigation against a wide range of potential defendants.
The primary defendant in the case, Credico, is a broker of face-to-face marketing services that connects national companies like utility providers, cell phone providers, and a host of other large, national companies to local, independent sales companies that sell the products offered by Credico’s national clients, often through door-to-door sales campaigns or in kiosks in big-box retail stores. The plaintiffs were each hired by an independent sales office known as DFW, Inc., which recruited, hired, trained, supervised, and paid them. The plaintiffs asserted that they were improperly classified as outside sales personnel, and as such, had been denied minimum wage and overtime pay due under Massachusetts law. Instead of filing their claims against their direct employer, the plaintiffs sued both DFW and Credico, contending that Credico was their joint employer, notwithstanding their limited interactions with Credico.
Rejecting the Expansive ABC Test as a Standard for Joint Employment
The basis of the plaintiffs’ claims against Credico was a theory that the standard for joint employment in the Commonwealth should be the three-factor ABC test found in the Commonwealth’s independent contractor statute, Mass. Gen. Laws ch. 149, § 148B. That uniquely stringent test deems a worker to be an employee of any entity for which the worker performs services, unless the putative employer can show: (A) the individual is free from direction and control in performing the services; (B) the individual’s services are outside the usual course of business of the putative employer; and (C) that the individual is engaged in an independently established trade or profession. A defendant bears the burden to establish each of these elements, and a failure to prove any one of them results in a finding of joint employer status. Athol Daily News v. Board of Review of Div. of Employment and Training, 439 Mass. 171, 175-76 (2003).
Prong B is often the most difficult showing for a defendant to make because its “usual course of business” requirement tends to sweep in any individuals over whom the defendant is able to exercise control (as is relevant for Prong A), and it tends to raise many of the same considerations as to whether an individual is engaged in an independent occupation (as is relevant for Prong C). As such, whether a worker is an employee under this test very often becomes distilled down to a question of whether the worker is providing services in the defendant’s usual course of business. This test is onerous by design and typically results in a finding of employee status.1
Credico argued that the ABC test is unworkable as a standard for joint employment because such a rule would massively expand the number and nature of entities that may be responsible for an asserted wage violation. For example, under that test, a bakery delivery driver would become an employee of every sandwich shop that he serviced on his route, even though none of the shops hired him, oversaw his work, or assumed any responsibility for his pay. Considering the radical nature of such consequences, two other potential standards emerged from the case law as possible tests for joint employer status. One standard, sometimes dubbed the “paycheck test,” would limit liability for wage-related violations to only the entity that retained a worker and thus entered into at least an implied agreement to pay the worker’s wages. The third alternative was a version of the test for joint employment under the FLSA, which is derived from common law principles and focused on the extent to which a putative joint employer exercises control over the worker’s terms and conditions of employment.2
In assessing these competing standards, the Supreme Judicial Court recognized the problems presented by the ABC test as a standard for joint employer status. One of the first questions at oral argument came from Justice Wendlandt, the eventual author of the Jinks opinion, who was quick to ask the plaintiffs’ counsel why his proposed standard would not reach beyond Credico and to Verizon or Credico’s other corporate clients, which had an even more attenuated relationship with the plaintiffs. In light of the expansive nature of the ABC test, the court found it was unsuitable for determining joint employer status.3
After rejecting the ABC test, the SJC expressly adopted the federal standard for joint employment. Jinks, Slip Op. at 20 (“. . . we are persuaded that whether an entity is a joint employer under the [Massachusetts] wage laws, which are modeled after the FLSA, should be determined (as it is done under the FLSA) by examining the totality of the circumstances . . . guided by a useful framework of four factors . . .”). In addition to adopting this more limited standard, the court provided helpful guidance by enumerating several categories of steps that an entity can take to protect its brand or ensure the quality of its product or services, without being deemed responsible for paying the wages of its commercial business partners. The court specified that such measures as “ensuring that subcontractors and salespersons receive proper training, monitoring against fraudulent activity, and maintaining records of salespersons’ background checks and drug tests” do “not constitute supervising and controlling working conditions” in the sense relevant to joint employer status. Jinks, Slip Op. at 24. The court also recognized that Credico’s use of a “data portal . . . capable of tracking the number of salespersons working on a particular campaign on a particular day” was insufficient to confer joint employer status. Id. at 5. This list of permissible activities should provide something of a safe harbor for businesses with commercial connections to Massachusetts that seek to avoid joint employer liability.
The Massachusetts court’s adoption of the federal joint employer standard will also promote a degree of certainty for employers seeking to structure their businesses to avoid liability for wage claims from workers employed by other entities. While litigation regarding joint employment under the Commonwealth’s wage laws has been relatively scant, the FLSA provides a body of regulations and a vast trove of prior decisions applying that standard to a host of circumstances over a period of several decades.4 Given that the SJC adopted the FLSA’s joint employment standard without apparent modification, these authorities will help employers avoid unintentionally or unwittingly being held responsible for the payment of workers outside their own, immediate workforces.
Ramifications for Other States on the Vanguard of Joint Employment Litigation
The Massachusetts’ court’s rejection of the ABC test for joint employment may have ramifications that are much broader than the Commonwealth. One salient jurisdiction is California, which recently borrowed the ABC test as the standard for independent contractor classification from Massachusetts. See Dynamex v. Superior Court, 4 Cal. 5th 903, 956 (2018) (adopting Massachusetts version of ABC test for independent contractor status). During the pendency of the Jinks litigation in Massachusetts, plaintiffs’ attorneys in California pressed the same argument that the ABC test should be adopted as the standard for joint employment in California as a corollary to the holding in Dynamex. The results of the decisions from courts in California on this issue has thus far been somewhat mixed, though the weight of authority favors rejecting the ABC test as the standard for joint employment.5 On the other coast, courts in New Jersey have also rejected the ABC test as a standard for joint employer status.6
The clear ruling in Jinks that categorically rejects the ABC test as the standard for joint employment and aligns Massachusetts with federal law on that point may provide some guidance to courts in other states, as the issue continues to make its way toward other state appellate courts.
A Subtle Added Burden for FLSA Plaintiffs and Their Attorneys
Another aspect of the decision could have significant ramifications for plaintiffs who join federal wage/hour litigation and the lawyers who bring collective-action lawsuits under the FLSA. The Jinks decision was not the first lawsuit asserting that Credico was a joint employer of the workers retained by the independent sales offices to which it brokers business. The same lawyers who brought the Jinks case in Massachusetts had previously prosecuted (and lost) two FLSA collective actions in the U.S. District Court for the Southern District of New York (SDNY). When the SDNY granted summary judgment to Credico in the New York cases, the plaintiffs’ attorneys filed the Jinks case in Massachusetts, presumably hoping for a more favorable outcome. In addition to arguing that Credico was not a joint employer of those plaintiffs, Credico argued that individuals who had participated in the New York actions could not bring new claims under Massachusetts law, invoking the doctrine of claim preclusion and the rule against claim-splitting, which require a plaintiff to bring all claims they may have against a defendant based on the same subject matter in one lawsuit.
In attempting to resist this argument, the plaintiffs’ counsel contended that it would be impractical and very burdensome for an attorney prosecuting an FLSA collective action to vet the individual circumstances of each person who may opt into a federal minimum wage or overtime action to determine whether such individuals may have other claims against the defendant employer. The plaintiffs’ attorneys also argued that it would be difficult to amend a complaint in federal court to add the various and potentially numerous state-law claims that opt-ins may bring with them to a collective action. But the Supreme Judicial Court rejected these appeals to convenience, recognizing that in a collective action, “each FLSA claimant has the right to be present in court and advance his or her own claims,” Jinks, Slip Op. at 32, and that because a participant in the collective action “could have brought his State law claims against Credico in [that proceeding], his claims are barred by the doctrine of claim preclusion.” Id. at 33.
This holding puts a material ethical burden on plaintiffs’ attorneys who pursue FLSA collective actions to either (1) vet and pursue the various collateral claims of many individual plaintiffs, potentially from several different states, or (2) expressly disclaim any such undertaking on behalf of opt-in plaintiffs, which may also require advising such individuals to seek their own, independent attorney to provide advice on whether they should join a collective action. See Mass. R. Prof. C. 1.2(c) (requiring that a client give “informed consent” to any limitation on the scope of a lawyer’s representation). This puts plaintiffs’ counsel to the choice of doing more work in assessing the claims and circumstances of each opt-in or providing disclaimers that may result in fewer individuals opting into a collective action out of concerns about claims they may forgo because of joining such a case.
In view of this ruling, which appears to be the first direct analysis of the concept of claim preclusion in the context of FLSA collective actions, defense attorneys will likely begin to press for information regarding the potential preclusive effect of joining a collective action to be included on court-ordered notices that are disseminated in such cases. They will argue that both the governing ethical rules and considerations of basic fairness require that prospective opt-ins be advised that they may forfeit other claims against their employer before deciding to join such a case.
- Athol Daily News, 439 Mass. at 180 n.13 (“[i]t is hardly remarkable that courts applying the [ABC test] almost invariably conclude that the employer has failed to carry its burden under part (c) of the ABC test.”); Boston Bicycle Couriers, Inc. v. Deputy Director of Div. of Employment and Training, 56 Mass. App. Ct. 473, 478 n. 11 (2002) (characterizing the ABC test as stricter than the common-law standards for an employer-employee relationship); Chaves v. King Arthur’s Lounge, 2009 WL 3198948, at *1 (Mass. Super. July 30, 2009) (recognizing that “Massachusetts’s independent contractor statute is stringent” compared to other jurisdictions’ standards).
- See 29 C.F.R. § 791.2(a) (providing four-factor test for joint employer status based on hiring/firing, supervision and control of conditions of employment, determining a rate and method of payment, and maintaining employment records); 29 C.F.R. § 791.2(b) (“[a]dditional factors may be relevant . . . but only if they are indicia of whether the potential joint employer exercises significant control over the terms and conditions of an employee’s work”).
- Jinks, Slip. Op. at 20. (“using the independent-contractor test . . . to answer the joint-employer question would be rather like using a hammer to drive in a screw: it only roughly assists the task because the hammer is designed for a different purpose”) (citation omitted).
- See e.g., 29 C.F.R. § 791.2; Bonnette v. California Health & Welfare Agency, 704 F.2d 1465 (9th Cir. 1981) (setting forth four-factor economic realities test for joint employment); Baystate Alt. Staffing, Inc. v. Herman, 163 F.3d 668 (1st Cir. 1998) (adopting and applying Bonnette test); Barfield v. New York City Health & Hosp. Corp., 537 F.3d 132 (2d Cir. 2008) (same); In re Enterprise Rent-A-Car Wage & Hour Employment Practices Litig., 683 F.3d 462 (3d Cir. 2012) (adopting Bonnette test and noting that determinations must be based on the ”total employment situation” of the employer); Gray v. Powers, 673 F.3d 352 (5th Cir. 2012) (applying Bonnette test).
- See, e.g., Salazar v. McDonald’s Corp., 939 F.3d 1051, 1058 (9th Cir. 2019) (the “test for distinguishing employees from independent contractors . . . has no bearing here, because no party argues that Plaintiffs are independent contractors. Plaintiffs are [franchisee’s] employees; the relevant question is whether they are also [franchisor’s] employees”); Henderson v. Equilon Enters., LLC, 40 Cal. App. 5th 1111, 1125 (2019) (“the ABC test . . . does not fit analytically with and was not intended to apply to claims of joint employer liability.”).
- Echavarria v. Williams Sonoma, Inc., 2016 WL 3566986, at *2 (D.N.J. June 30, 2016) (“in misclassification suits with multiple alleged employers, the Court must utilize a threshold test to determine who employed the plaintiffs before applying the ABC test . . . It is illogical to hold a defendant liable for an employee’s misclassification under the ABC test if a defendant only had a tangential relationship to a plaintiff”) (internal citations omitted); Perez v. Access Bio, Inc., 2019 WL 3297297, at *6 (N.J. Super. Ct. App. Div. July 23, 2019) (declining to apply ABC test to joint employment inquiry).