Monday, February 27, 2017
The Fair Labor Standards Act of 1938 (FLSA) (29 U.S.C. §§ 201 et seq.) as originally enacted, was intended to raise the wages and shorten the working hours of the nation's workers. The FLSA is very complex, and not all of it is pertinent to agriculture and agricultural processing, but the aspect of it that concerns “joint employment” is of major relevance to agriculture.
Most courts that have considered the issue have utilized an “economic realities” or “control” test to determine if one company’s workers are attributable to another employer for purposes of the FLSA. But, in Salinas v. Commercial Interiors, Inc., No 15-1915, 2017 U.S. App. LEXIS 1321 (4th Cir. Jan. 25, 2017), rev’g, No. JFM-12-1973, 2014 U.S. Dist. LEXIS 160956 (D. Md. Nov. 17, 2014), the court reversed the trial court and created a new test for joint employment under the FLSA. This new decision appears to expand the definition of “joint employment” and may create a split of authority in the Circuit Courts of Appeal on the issue. It’s a big issue for certain aspects of agricultural employment and is the focus of today’s post.
FLSA Wage Requirements
One area where the joint employment issue is particularly relevant involves the FLSA wage requirements. The FLSA requires that agricultural employers who use 500 “man-days” or more of agricultural labor in any calendar quarter of a particular year must pay the agricultural minimum wage to certain agricultural employees in the following calendar year. Man-days are those days during which an employee performs any agricultural labor for not less than one hour. The man-days of all agricultural employees count in the 500 man-days test, except those generated by members of an incorporated employer's immediate family. 29 U.S.C. § 203(e)(3). Five hundred man-days is roughly equivalent to seven workers working five and one-half days per week for thirteen weeks (5.5 x 7 x 13 = 501 man-days). Under the FLSA, “agriculture” is defined to include “among other things (1) the cultivation and tillage of the soil, dairying, the production, cultivation, growing and harvesting of any agricultural or horticultural commodities; (2) the raising of livestock, bees, fur-bearing animals, or poultry; and (3) any practices (including any forestry or lumbering operations) performed by a farmer or on a farm as an incident to or in conjunction with such farming operations, including preparation for market, delivery to storage or to market or to carriers for transportation to market.” 29 U.S.C. § 203(f).
The minimum wage must be paid to all agricultural employees except: (1) members of the employer's immediate family, unless the farm is incorporated; (2) local hand-harvest, piece-rate workers who come to the farm from their permanent residences each day, but only if such workers were employed less than 13 weeks in agriculture in the preceding year; (3) children, age 16 and under, whose parents are migrant workers, and who are employed as hand-harvest piece-rate workers on the same farm as their parents, provided that they receive the same piece-rate as other workers; and (4) employees engaged in range production of livestock. 29 U.S.C. § 213(a)(6). A higher monthly wage rate applies to a “ranch hand” who does not work in a remote location and works regular hours. See, e.g., Mencia v. Allred, 808 F.3d 463 (10th Cir. 2015). Where the agricultural minimum wage must be paid to piece-rate employees, the rate of pay for piece-rate work must be sufficient to allow a worker reasonably to generate that rate of hourly income.
A common scenario in many agricultural settings is that a farmer will have crops harvested by an independent contractor. In this situation, the farmer is considered to be a joint employer with the contractor who supplies the harvest hands if the farmer has the power to direct, control, or supervise the work, or to determine the pay rates or method of payment for the harvest hands. 29 C.F.R. § 780.305(c). See also, Gonzalez-Sanchez v. Int’l. Paper Co., 346 F.3d 1017 (11th Cir. 2003). In such event, each employer must include the contractor's employees in the man-day count in determining whether each one's man-day test is met. Each employer is considered responsible for compliance with the minimum wage and child labor requirements of the FLSA with respect to the employees who are jointly employed. A big issue in this realm is, for example, whether a particular crew leader was an independent contractor or an employee of the farmer. In Castillo v. Givens, 704 F.2d 181 (5th Cir. 1983), the crew leader involved was a registered farm labor contractor who recruited and transported an unskilled crew, supervised cotton chopping, kept minimal records and disbursed the crew's pay. In spite of those activities, the crew leader was characterized as an employee of the farmer rather than an independent contractor. The court found it persuasive that the crew leader supplied crews to no other farmer, had no business of his own, did not set crew wages, had no meaningful investment in his “business”, and was dependent economically on the farmer's operation. For purposes of the FLSA, the crew members were considered to be employees of the farmer rather than employees of the crew leader.
The new test. In both Gonzalez-Sanchez and Castillo referenced above, both the Eleventh Circuit and the Fifth Circuit determined whether joint employment existed based on the economics of the relationship of the parties and who controlled the employment situation. Most recently, the Fourth Circuit in Salinas, determined whether joint employment existed under the FLSA based on a two-step process. The case did not involve ag employment, but the principles involved could easily spill-over to cases involving ag employment under the FLSA. In Salinas, a drywall installer was a subcontractor that employed the plaintiffs. The subcontractor employed the plaintiffs on the behalf of a general contractor. The general contractor specified how the employees of the subcontractor would dress while working on a job and also provided all of the tools and equipment for the subcontractor’s employees to use. The general contractor required the subcontractor’s employees to sign in and sign out, and also supervised the subcontractor’s employees’ work every day. The general contractor also told the subcontractor’s employees to tell people that they worked for the general contractor. The employees sued for unpaid overtime under the FLSA based on the joint employment of the subcontractor and the general contractor.
While it seems obvious that joint employment would have existed under the economic realities or control test, the court reached that result but under a different rationale. The court held that the test under the FLSA for joint employment involved two steps. The first step involved a determination as to whether two or more persons or entities share or agree to allocate responsibility for, whether formally or informally, directly or indirectly, the essential terms and conditions of a worker’s employment. The second step involves a determination of whether the combined influence of the parties over the essential terms and conditions of the employment made the worker an employee rather than an independent contractor. If, under this standard, the multiple employers were not completely disassociated, a joint employment situation existed. The court also said that it was immaterial that the subcontractor and general contractor engaged in a traditional business relationship. In other words, the fact that general contractors and subcontractor typically structure their business relationship in this manner didn’t matter. The Salinas court then went on to reason that separate employment exists only where the employers are “acting entirely independent of each other and are completely disassociated with respect to” the employees.
The “complete disassociation” test of the Fourth Circuit appears that it could result in a greater likelihood that joint employment will result in the FLSA context than would be the case under the “economic realities” or “control” test. While the control issue is part of the “complete disassociation” test, joint determination in hiring or firing, the duration of the relationship between the employers, where the work is performed and responsibility over work functions are key factors that are also to be considered. To me, that looks as if joint employment could be found in the Fourth Circuit but perhaps not in a similar situation elsewhere.
Employers (including ag employers) beware in Maryland, North Carolina, South Carolina, Virginia and West Virginia.