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February 11, 2022

The Massachusetts Supreme Judicial Court Adopts Federal FLSA "Joint Employer" Test

On December 13, 2021, the Massachusetts Supreme Judicial Court (SJC) delivered its decision on the issue of whether the Massachusetts Independent Contractor Statute,i  can also be the basis for determining whether an entity qualifies as an individual’s joint employer.ii  The SJC held that the Massachusetts Independent Contractor Statute, which establishes the three-pronged “ABC” test used to classify workers as independent contractors or employees, is not the applicable standard to determine whether an entity is a joint employer. While Jinks likely will have broad applicability, it is especially important for staffing and other similar entities that provide labor to client companies but do not have day-to-day control over the individuals who actually perform the work.

The plaintiffs in Jinks were individuals engaged as independent contractors by DFW Consultants (DFW) for the benefit of a third party, Credico, a broker for independent direct marketing companies. Specifically, these individuals provided Credico sales and marketing services, which included door-to-door and other face-to-face sales services for Credico’s nationally based telecommunications and energy clients. Per the applicable agreement between DFW and Credico, DFW was responsible for compensating the plaintiffs and DFW retained sole control over the “manner and means” of performing the services. However, the agreement also provided that the plaintiffs were required to comply with Credico’s Code of Business Ethics and Conduct. 

The plaintiffs sued Credico, claiming that it was the “joint employer” of the plaintiffs under the strict Massachusetts Independent Contractor Statute and therefore liable for alleged failure to pay minimum wage and overtime in violation of the Massachusetts Wage Act. The threshold and critical issue presented to the SJC was whether the Independent Contractor Statute provided the legal framework at all, versus other tests, to determine joint employer status. Under the Independent Contractor Statute’s ABC test, an employment relationship is presumed unless the alleged employer can prove the worker satisfies all three parts of the test, specifically that: 1) the individual is free from control and direction in connection with the performance of the service, 2) the service is performed outside the usual course of the business of the employer, and 3) the individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed. 

The Jinks plaintiffs argued that the ABC test should apply because the individuals bringing claims were “performing any service” from which the purported joint employer derives an economic benefit. The SJC rejected this, noting that it had rejected that concept in Depianti v. Jan-Pro Franchising Int’l, Inc.,iii holding instead that the entity for whom the individual directly performs services is ordinarily the individual’s employer responsible for compliance with the wage laws. Instead, the SJC determined that the proper standard is that which is provided by the federal Fair Labor Standards Act (FLSA), which looks to the totality of the circumstances to determine whether an alleged employer has the right to control, including whether the alleged employer: 1) had the power to hire and fire the employee, 2) supervised and controlled employee work schedules or conditions of employment, 3) determined the rate and method of payment, and 4) maintained employment records.

Applying these factors to the evidence, the SJC found that the record demonstrated that Credico had no power to hire or fire DFW’s workers, did not supervise or control their work schedules or other conditions of employment, did not and had no power to establish the rate or method for paying DFW’s workers, and did not maintain employment records for those workers. Accordingly, the SJC held that the plaintiffs failed to demonstrate that Credico had the right to control them. As a result, Credico was not their employer for purposes of Massachusetts wage-and-hour laws and thus not liable for misclassification.

Jinks offers direct guidance for employers about joint employment issues under Massachusetts wage-and-hour laws, and potentially other employment laws including nondiscrimination and nonharassment. In the context of wage and hour, the case provides clear direction on applying the multifactor joint employer test under the federal FLSA to determine whether an entity qualifies as a worker’s joint employer for purposes of Massachusetts Wage Act liability.  

These issues are particularly prevalent in staffing relationships. Notably the case does not address the converse situation to that presented in Jinks; that is, whether a staffing firm that primarily provides administrative services in sourcing labor, providing pay (and any benefits) and insurances, but does not have any day-to-day control over the labor, will be deemed a joint employer. Because of this, both staffing firms and client companies are advised to define carefully and clearly in their agreements who is responsible for each element of the relationship and to consider appropriate indemnities relating to various legal obligations. By way of example, a staffing firm responsible for paying the labor is appropriately responsible for all matters relating to pay and benefits. On the other hand, to the extent that the labor is supervised on a day-to-day basis by the client company, responsibility for compliance with nondiscrimination laws is appropriately placed on the client company.

If you have any questions regarding the content of this alert, please contact Siobhan Tolan, counsel, at stolan@barclaydamon.com; Carolyn Marcotte Crowley, partner, at ccrowley@barclaydamon.com; Ken Bello, partner, at kbello@barclaydamon.com; or another member of the firm’s Labor & Employment Practice Area.

                                                    

iG.L. c. 149, § 148B.
iiSee Jinks v. Credico (U.S.) LLC, SJC-13106 (Mass. Dec. 13, 2021).
iiiSee Depianti v. Jan-Pro Franchising Int’l, Inc., 465 Mass. 607 (2013).

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