The overlap between tests to determine employment status and joint employer status can be confusing. But two recent court cases — one from California and the other from Massachusetts — drew clear lines distinguishing between joint employer versus independent contractor classification analysis, and contingent workforce program managers will want to take note.
California — Williams v. Costco. The Ninth Circuit Court of Appeals in California recently dismissed a claim from a temporary worker who alleged that her staffing firm’s client, Costco, was a joint employer.
In Williams v. Costco Wholesale Corp. [1], Sigrid Williams argued that Costco was liable as a joint employer under California Labor Code § 2810.3 [2] because the staffing firms that hired her — Nichols and Flair — provided workers to perform labor on Costco’s premises.
Williams claimed that although she was hired and paid by the staffing firms, Costco shared their liability for wage and hour violations as a joint employer. The authority for determining joint employment in California is the 2010 case of Martinez v. Combs [3].
Martinez establishes three alternative definitions for determining whether an entity “employs” an individual. The entity must (1) “exercise control” over the individual’s “wages, hours, or working conditions”; (2) “suffer or permit” the individual to work; or (3) “engage” the individual, creating a common law employment relationship. The district court concluded that Costco was not Williams’ employer under any of these definitions.
On appeal, Williams challenged the court’s conclusions as to the first two definitions.
On the first point, the district court concluded that Costco did not control Williams’ wages, hours, or working conditions. The record showed that the staffing firms hired and paid Williams, scheduled her work on road shows, set the length of her shifts, trained her, and set her sales targets. Williams argued that Costco exercised control over her work, by imposing dress code guidelines, requiring the booth to be staffed at all times, and in one incident in which a Costco manager told her that she could not leave until the last customer had exited the store.
The district court considered, and the Ninth Circuit Court of Appeals agreed, that Williams’ evidence consisted entirely of “activities in the areas of quality control and contract compliance” insufficient to establish that entity as a joint employer. The fact that Williams interacted directly with Costco staff without any of the staffing firms’ managers present does not alone establish that Costco controlled Williams’ work.
On the second point, the district court correctly concluded that Costco did not “suffer or permit” Williams to work. Williams argues that Costco employed her under this definition because it could stop her from working by barring her from a Costco warehouse. However, Nichols and Flair indisputably retained the exclusive contractual power to fire Williams, and her evidence did not raise a triable issue as to whether Costco had the practical authority to cause her to be fired.
Williams’ claim that Costco knew of and “permitted” the alleged wage and hour violations also failed because the suffer-or-permit test relates only to “responsibility for the fact of employment itself,” not responsibility for causing the labor code violations.
Accordingly, the Ninth Circuit Court of Appeals rejected Williams appeal against the district court ruling.
This was a case alleging joint employment, not independent contractor misclassification, so the “ABC” test established in Dynamex Operations West Inc. v. Superior Court did not apply to Williams’ claims. The “ABC” test relates to the question of whether someone was an employee or an independent contractor and not the issue of joint employment.
Massachusetts — Jinks v. Credico. Another recent case in Massachusetts, Jinks v. Credico (U.S.) LLC [4], came to a similar conclusion regarding the appropriate standard governing joint employer liability under the Massachusetts Wage Act. In that case, Credico contracted with DFW to provide regional door-to-door sales. DFW in turn hired the plaintiffs as independent contractors to perform sales services for Credico.
Plaintiffs argued that the ABC test set forth in the state’s independent contractor statute [5] should govern the joint employer analysis. The court disagreed, noting that the ABC test asks “who, if anyone, controls the work other than the worker herself,” which is not the appropriate question in joint employer analysis. Rather, the appropriate question is whether an individual, whose work is controlled by one entity, is also subject to the control of another entity.
Takeaways
Together, the Williams and Jinks cases clarify the boundaries of the two different standards applied to joint employment and independent contractor misclassification claims.
Williams v. Costco also illustrates the parameters of the “usual course of the business of the employer.” It is a necessary requirement of the California Labor Code for a client employer to be liable for wages and workers compensation, jointly with the labor contractor, that the employer obtains or is provided workers to perform labor within its “usual course of business” from a labor contractor.
Williams claimed that her work selling suppliers’ products at road show events fell within Costco’s “usual course of business.” Costco presented declarations showing that road shows are discrete events; account for no more than 0.5% of Costco’s warehouse sales in California; and, most importantly, operate through a different economic model than Costco’s other lines of business. While most Costco products are purchased in bulk and re-sold to customers, road show merchandise is sold on consignment by sales representatives engaged by the supplier. Although Costco sold the products Williams was selling, the court did not consider the roadshows to be sufficiently similar to Costco’s other selling activities to fall within its usual course of business.
This is a much finer distinction than the typical examples of work that is considered to be in the usual course of an employer’s business and should give some hope to enterprise buyers of staffing services facing claims where the work is not comparable to that of an existing employee but is within the scope of their business.
Finally, instructions given directly to Williams by Costco regarding dress code and attendance at the booth and within the store, were “activities in the areas of quality control and contract compliance” and not evidence that Costco controlled Williams’ wages, hours, or working conditions. Ensuring that the workers adhere to the standards of the client employer does not amount to joint employment.