By John S. Ho
Bond, Schoeneck & King, PLLC
In Zheng v. Liberty Apparel Co., 2003 WL 23028312 (2d Cir. Dec. 30, 2003), the Second Circuit Court of Appeals created a new six factor test for assessing when businesses are liable as “joint employers” under the Fair Labor Standards Act for violations committed by their subcontractors. The Second Circuit held that, depending on the case, the following factors should be reviewed in determining joint employer status: (1) whether or not the workers worked exclusively or predominantly for the purported joint employer; (2) the permanence or duration of the working relationship; (3) whether or not the purported employer’s premises and equipment are used by these workers; (4) the extent of control the putative joint employer imposes over these workers; (5) whether or not the outsourced workers can be considered an integral part of the business; and (6) whether the workers had a business organization that could shift as a unit from one putative joint employer to another. The Court also found that industry custom and historical practice could be considered in order to differentiate between legitimate subcontracting relationships and subterfuges intended to evade the FLSA.
Following a lengthy procedural history, the case went to a jury trial, and the primary issue was whether the Liberty Defendants were plaintiffs’ “joint employer” for purposes of the FLSA and analogous state law claims. The jury returned a verdict in favor of plaintiffs, and following resolution of various post-trial motions, the district court entered judgment accordingly. Liberty appealed that judgment contending that the district court, rather than the jury, should have determined whether it was the plaintiffs’ joint employer. In Zheng v. Liberty Apparel Co., 2d Cir., No. 09-4890, 8/10/10), the Second Circuit affirmed that the trial judge did not err in allowing a jury to decide the mixed question of law and fact as to whether Liberty was the plaintiffs’ joint employer. Although Liberty argued that the lower court should have used a special verdict allowing the judge to apply the six-factor test to the jury’s factual findings, the Second Circuit said “such a rule would distort the jury’s proper role” of applying law to fact.
The recent Second Circuit decision serves as a good reminder for employers who subcontract or outsource a portion of their business that they should carefully review such relationships in order to minimize the risk of potential FLSA liability.