Washington Supreme Court Holds Joint Employer Liability Available under Minimum Wage Act | Practical Law

Washington Supreme Court Holds Joint Employer Liability Available under Minimum Wage Act | Practical Law

This wage and hour update discusses Becerra v. Expert Janitorial LLC, in which the Washington Supreme Court held that the joint employer doctrine is available under Washington's Minimum Wage Act (MWA), and that an employer and contractor can each be liable for a subcontractor's minimum wage and overtime violations. The court affirmed the Court of Appeals' reversal of the trial court's order granting summary judgment to the employer and remanded the action.

Washington Supreme Court Holds Joint Employer Liability Available under Minimum Wage Act

by Practical Law Labor & Employment
Published on 12 Aug 2014 • Washington
This wage and hour update discusses Becerra v. Expert Janitorial LLC, in which the Washington Supreme Court held that the joint employer doctrine is available under Washington's Minimum Wage Act (MWA), and that an employer and contractor can each be liable for a subcontractor's minimum wage and overtime violations. The court affirmed the Court of Appeals' reversal of the trial court's order granting summary judgment to the employer and remanded the action.
On August 7, 2014, in Becerra v. Expert Janitorial LLC, the Washington Supreme Court held that the joint employer doctrine is available under Washington's Minimum Wage Act (MWA), and that an employer and contractor can each be liable for a subcontractor's minimum wage and overtime violations. The court affirmed the Court of Appeals' reversal of the trial court's order granting summary judgment to the employer concerning minimum wage and overtime violation claims. The court noted that the trial court did not properly consider all relevant factors in determining whether the company and contractor were joint employers of workers employed by their subcontractors. The court remanded the matter back to the trial court to reconsider its summary judgment orders, based on all relevant factors. (89534-I, (Wash. Aug. 7, 2014).)

Background

After years of employing its own janitorial staff, Fred Meyer grocery stores contracted with Expert Janitorial to provide maintenance workers to work evenings at Fred Meyer stores. Expert Janitorial subcontracted with several independent janitorial companies who supplied the workers to Fred Meyer. The subcontractors failed to comply with Washington's minimum wage and overtime laws in paying the plaintiff maintenance workers.
The workers brought claims against Fred Meyer, Expert Janitorial and the subcontractors, arguing that:
  • They were misclassified as independent contractors.
  • They were employees of Fred Meyer and Expert Janitorial.
  • Both companies knew that the plaintiffs were misclassified and improperly denied overtime pay.
Fred Meyer and Expert Janitorial moved for summary judgment asserting that they were not the plaintiffs' employers. The trial court applied the factor test set forth in Bonnette v. California Health and Welfare Agency, which considers whether the alleged employer:
  • Had the power to hire and fire employees.
  • Supervised and controlled employee work schedules or conditions of employment.
  • Determined the rate and method of payment.
  • Maintained employment records.
(704 F.2d 1465, 1469-70 (9th Cir. 1983).)
The trial court granted summary judgment to Fred Meyer and Expert Janitorial. The plaintiffs appealed the summary judgment orders, which were then reversed by the Washington Court of Appeals.
Fred Meyer and Expert Janitorial petitioned to the Washington Supreme Court for review of the Court of Appeals decision.

Outcome

The Washington Supreme Court affirmed the Court of Appeals' reversal of the trial court's order granting summary judgment to Fred Meyer and Expert Janitorial concerning the minimum wage and overtime violations allegedly committed by their subcontractors. The court noted that the trial court did not properly consider all relevant factors in determining whether Fred Meyer and Expert Janitorial were joint employers of the workers. The court remanded the matter back to the trial court to reconsider its summary judgment orders, using all relevant factors to determine whether a joint employment relationship existed.
Washington courts have looked to the FLSA in interpreting the state's MWA. Under FLSA regulations, if an employee is employed jointly by two or more employers, all of the employee's work for the joint employers is considered one employment, and all of the joint employers are responsible for compliance with the provisions of the act (29 C.F.R. § 791.2). To determine whether a joint employment relationship exists under the minimum wage statutes, the court proposed the application of an economic reality test articulated by the Ninth Circuit in Torres-Lopez v. May. Five regulatory factors, found in Torres-Lopez, and put forth by the court to consider in this matter, were:
  • The nature and degree of control of the workers.
  • The degree of direct or indirect supervision of the work.
  • The power to determine the workers' pay rates or method of paying the workers.
  • The direct or indirect right to hire, fire or modify the workers' employment conditions.
  • The preparation of payroll and wage payment.
(111 F.3d 633, 639-40 (9th Cir. 1997).)
In further assessing whether a joint employment relationship exists, the court also articulated eight functional, common-law factors, from Torres-Lopez, to consider about the employment relationship, such as whether:
  • The work was a specialty production line job.
  • Responsibility under the contracts between a labor contractor and an employer pass from one labor contractor to another without material changes.
  • The premises and equipment of the employer are used for the work.
  • The employees had a business organization that could or did shift as a unit from one work site to another.
  • The work was piecework and not work that required initiative, judgment or foresight.
  • The worker had an opportunity for profit or loss depending on his managerial skill.
  • There was permanence in the working relationship.
  • The service rendered is an integral part of the alleged employer's business.
(Torres-Lopez, 111 F.3d at 640.)
Asserting that the above factors are not exclusive, the court noted that the Court of Appeals in the instant matter considered:
  • Whether the supposed joint employer knew of the wage and hour violation.
  • Whether the supposed joint employer paid a sufficient amount to the subcontractors to allow for lawful wage.
  • Whether the subcontracting arrangement is a subterfuge or sham.
While the Supreme Court did not make a determination on the merits of the minimum wage and overtime violation claims, it suggested that summary judgment was improperly granted, and remanded the case back to the trial court to consider any proper summary judgment motions on the joint employment issue, applying the Torres-Lopez factors.

Practical Implications

Employers in Washington that contract for labor from independent contractors or subcontractors may be held liable for any wage and hour violations committed by those companies. Employers should consider whether, given the economic realities test articulated above, it would be more prudent to take a complete hands-off approach when hiring contractors or take actions ensuring that any contractor it hires complies with all wage and hour laws. Otherwise, an employer may face legal and financial repercussions for wage and hour violations in which it had no direct role.