Washington Court of Appeals Expands Potential “Joint-Employer” Liability Under the Wage and Hour Laws

Washington Court of Appeals Expands Potential “Joint-Employer” Liability Under the Wage and Hour Laws

Addressing a question of first impression, the Washington Court of Appeals held last month that the “economic reality” test is the proper method to determine if an entity is a joint employer for purposes of imposing liability under Washington’s Minimum Wage Act (“MWA”).[1]  The case involved Fred Meyer’s use of a contractor for janitorial work at its retail stores.  Fred Meyer contracted with Expert Janitorial, who in turn contracted with All Janitorial, to provide janitors.  A number of janitors filed suit against Fred Meyer, Expert Janitorial, and All Janitorial for minimum-wage, overtime and rest/meal break violations.  Fred Meyer and Expert Janitorial asserted that they could not be liable because they did not actually employ the janitors—All Janitorial did.  The trial court agreed and dismissed the claims against these defendants on summary judgment.

On review, the Washington Court of Appeals imported and applied the “economic reality” test from the federal Fair Labor Standards Act (“FLSA”) to determine whether Fred Meyer and Expert Janitorial were liable as joint employers.  The court concluded that, under this test, there were genuine issues of material fact as to the joint-employer status of these defendants and that the trial court had incorrectly applied the test.  In particular, the trial court erred in considering only the four factors set forth by the Ninth Circuit in Bonnette v. California Health & Welfare Agency, 704 F.2d 1465 (9th Cir. 1983), instead of the thirteen factors articulated in Torres-Lopez v. May, 111 F.3d 633 (9th Cir. 1997).[2]

Applying the Torres-Lopez factors, the Court of Appeals held that the fact that the janitors worked on Fred Meyer’s premises using its equipment weighed in favor of joint employment.  There also were genuine issues of material fact as to Fred Meyer’s direct supervision and control of the janitors’ work and its control of their employment.[3]  Though Fred Meyer did not supervise the janitors’ work as it was being performed and Fred Meyer’s employees could only communicate with the janitors through rudimentary gestures due to language barriers, the court determined that there was evidence of supervision because janitors were not excused from their shifts until a Fred Meyer manager approved their work.[4]  There was also evidence that Fred Meyer indirectly controlled firing and employment modification decisions.[5]

Becerra signals that Washington courts will use the FLSA’s expansive “economic reality” test in determining whether a defendant is liable as a joint employer under the MWA.  This case may cause some Washington businesses to re-evaluate whether to outsource labor and re-examine their relationship with the employees of third-party contractors.  Many businesses may find that they must either make efforts to maintain the high level of separation dictated by the “economic reality” test, or embrace their potential joint-employer status and take affirmative steps to ensure MWA compliance by their contractors.

–Sarah Gohmann Bigelow

[1] Becerra v. Expert Janitorial, LLC, Case No. 68528-7-1, 2013 WL 5230660 (Sept. 16, 2013); http://www.courts.wa.gov/opinions/pdf/685287.pdf).

[2] The factors are: (1) The nature and degree of control of the workers; (2) The degree of supervision, direct or indirect, of the work; (3) The power to determine the pay rates or the methods of payment of the workers; (4) The right, directly or indirectly, to hire, fire, or modify the employment conditions of the workers; (5) Preparation of payroll and the payment of wages; (6) Whether the work was a specialty job on the production line; (7) Whether responsibility between a labor contractor and an employer pass from one labor contractor to another without material changes; (8) Whether the premises and equipment of the employer are used for the work; (9) Whether the employees had a business organization that could or did shift as a unit from one worksite to another; (10) Whether the work was piecework as opposed to work that required initiative, judgment or foresight; (11) Whether the employee had an opportunity for profit or loss depending upon the employee’s managerial skill; (12) Whether there was permanence in the working relationship; and (13) whether the service rendered is an integral part of the alleged employer’s business.  Becerra, 2013 WL 5230660, at *5-7.

[3] Id. at *8.

[4] Id. at *10.

[5] Id. at *9.