Last September, the Washington Court of Appeals held that the “economic reality” test is the proper method to determine whether an entity is a joint employer for purposes of imposing liability under Washington’s Minimum Wage Act (“MWA”).[1]   The Washington Supreme Court has now affirmed.  An earlier blog post about the Court of Appeals decision, Becerra v. Expert Janitorial, is available here.  Becerra involved allegations by a group of janitors that they were underpaid in violation of the MWA for the work they performed at Fred Meyer stores.  Fred Meyer had contracted with Expert Janitorial, which in turn engaged a subcontractor to provide janitorial services to Fred Meyer, which directly employed the plaintiffs.

The trial court dismissed the plaintiffs’ claims against Expert Janitorial and Fred Meyer as alleged joint employers on summary judgment.  On appeal, the court reversed and remanded, instructing the lower court to apply the “economic reality” test articulated by the Ninth Circuit in Torres-Lopez to determine whether Fred Meyer and Expert could be held liable as joint employers.

In August, the Washington Supreme Court agreed that the 13-factor “economic reality” test set forth in Torres-Lopez was most helpful to determine the existence of a joint-employment relationship.[2]  This decision settles that Washington courts must apply the Torres-Lopez/”economic reality” test to determine whether a defendant can be liable under the MWA as a joint employer.

A Washington business that relies on a contractor to supply its labor is arguably at greater risk of being held jointly liable for the labor violations of its contractor in light of this decision.  The risk can be minimized in one of two ways.  One option is to take a hands-off approach with regard to how contractors perform their work, in order to maintain a high level of separation.  Alternatively, a potential joint employer may choose to accept the joint-employer status as a given and actively manage its contractor’s operations to ensure that no labor violations occur.

Steering a middle ground between the two invites the worst of both worlds.  Under any standard, it is uncertain at what point management of a contractor’s operations may result in joint-employer status; this is certainly the case under the “economic reality” test.  If a company is going to risk such vicarious liability, there is an argument for going all in to ensure there is nothing to be liable for.

Decisions like this may discourage the trend toward outsourcing.  For instance, the Court noted that, before 2004, Fred Meyer employed its own janitors.[3]  Although it attempted to outsource this work, the Becerra litigation has the potential to make Fred Meyer liable as an employer of its subcontractor’s employees just the same.  In that case, Fred Meyer may wish that it had retained control over this work and thus been in a better position to prevent the alleged violations.