The Employer's Legal Resource: Court Gives Guidance Under the "Joint Employer" Test
Picerne is a property management company. It manages housing on several military bases around the country including Fort Riley, Kansas. As part of its management services, it employs contractors to do work on the military residences — everything from highly specialized electrical or plumbing work to more general handyman work. At Fort Riley, Picerne had entered into a contract with local handyman contractor Lewis General Contracting, Inc. (LGC).
LGC had its own employees who performed the handyman work, including Ms. Knitter. Knitter worked for LGC from March 2010 to October 2010. During this time, all her work was performed at the properties managed by Picerne. Ultimately, Picerne requested that Knitter no longer be used on its properties. As a result, LGC fired her.
Knitter sued Picerne alleging various violations of Title VII of the Civil Rights Act. Picerne sought to get out of the lawsuit, claiming it was not Knitter's "employer" and, thus, could not be sued under Title VII.
Although there are several tests under which an entity may be considered an employer, the parties agreed that this situation called for the application of the "joint employer" test. In other words, were Picerne and LGC "joint employers" of Knitter such that she could sue either one under Title VII?
Under the joint employer test, two entities are considered joint employers if they "share or co-determine those matters governing the essential terms and conditions of employment." … Both entities are employers if they both "exercise significant control over the same employees." … "An independent entity with sufficient control over the terms and conditions of employment of a worker formally employed by another is a joint employer within the scope of Title VII." …
"Most important to control over the terms and conditions of an employment relationship is the right to terminate it under certain circumstances … Additional factors courts consider for determining control under the joint employer test include the ability to 'promulgate work rules and assignments, and set conditions of employment, including compensation, benefits, and hours; … day-to-day supervision of employees, including employee discipline; and … control of employee records, including payroll, insurance, taxes and the like.'" …
The Tenth Circuit Court of Appeals held that Picerne was not Knitter's employer, so Knitter could not sue it under Title VII.
The Court focused on the following categories in making its determination.
Authority to Discharge. Picerne did not terminate Knitter, but merely instructed LGC not to assign her to Fort Riley. Knitter argued that, by instructing LGC not to use her at Fort Riley, Picerne had in essence fired her because Picerne was LCG's only client at that time.
The court disagreed. The court noted that Picerne did not know that it was LGC's only client. Moreover, at times, LGC had had additional clients. Thus, "Picerne's request to have Ms. Knitter removed from Fort Riley might well have resulted in her reassignment to a different client and not termination."
Tip: If Picerne had required that LGC work exclusively for it, this may have had the opposite outcome.
Payment and Records. The Court held that LGC had "almost exclusive control over Ms. Knitter's personnel records and payment." Picerne paid LGC a flat fee for services rendered based upon a published pay scale provided to all its vendors. LGC took 15% off the top and then paid its employees, less applicable withholdings, and issued appropriate W-2 forms. It maintained all the payroll records.
Authority to Supervise and Discipline. The Court recognized that Picerne did direct much of the day-to-day work: how tasks were to be performed; instructing her to redo unsatisfactory work; making assignments; coordinating work, etc. This issue is very fact-specific. In other cases, this factor can turn a company into a joint employer. In this case and after going through all the facts and nuances, however, the court noted:
In short, the level of supervision was consistent with a client-vendor relationship, not an employer-employee relationship.
With regard to discipline, Knitter argued that Picerne disciplined her. Yet, the facts were undisputed that all discipline was actually administered by LGC. Picerne might have threatened discipline or reported things to LGC, but Picerne never actually took any action.
In today's world companies often work with other companies. Right now, your company may have its employees working off-site or another company's employees working on your worksite. These issues are real.
Tips to Minimize your Risk of Being a Joint Employer:
Keep all Payroll and Records Separate. This is tip number 1, because it is simple. You pay your employees. You issue W-2s to your employees. You keep records on your employees.
Major Interactions with Another Entity's Employee Must Involve that Entity. There will come a day when something happens which will elevate your need to interact with that person. When that happens, call the employer entity! Unless there is an immediate safety issue involved, call the entity before you have that interaction.
Here are the possibilities, in order of preference, when there is a problem with another entity's employee on your worksite:
a. Report it to the other entity and let them handle it.
b. Report it to the other entity and handle it together.
c. Handle it and then report it to the other entity (you are getting into riskier behavior here and you should have a very good reason for acting – such as an imminent safety concern).
d. Handle it and do not report it. (You may be acting as a joint employer in this situation. You should give very, very serious consideration to this action.)
Clarify your Relationship in Advance. Often you will have written agreements with the entities. These agreements can spell out the exact terms of the relationship – who will be responsible for payment, withholdings, supervision, discipline, etc. This will not only make the relationship clearer and avoid misunderstanding, but can also assist in any defense should it be necessary.
By Kristen L. Brightmire, email@example.com