A Matter of Control

In the contingent workforce arena, courts often “barrow” precedent from other areas of the law regarding responsibilities and liabilities for employment law compliance. In two recent decisions, two different courts came to different conclusions along different paths regarding joint employment liability tests, and their application to specific facts. These cases will have application in the contingent labor context.

In the first, Patterson v. Domino’s Pizza LLC, an employee sued her supervisor, a Domino’s Pizza franchise, and Domino’s corporate entity for sexual harassment and assault. The issue in the case was whether Domino’s corporate was her joint employer. Domino’s corporate won the case, with the trial court holding that there really were no issues in dispute — the franchise had all of the control over hiring, firing, and managing employees, and was therefore the sole “employer.” The Court of Appeals, however, sent the case back to the trial court for more proceedings, holding that there was at least some dispute as to the evidence (there was some evidence that Domino’s corporate actually exercised day-to-day control over the work of employees, and actually had control over hiring and firing employees). In fact, there was testimony that Domino’s corporate actually directed the franchise to fire the plaintiff in that case. Thus, while the franchise of agreement was very clear, it was alleged that Domino’s corporate overstepped its contractual authority and actually exercised day-to-day control over employees at a franchise (or, at least, there was enough evidence to let the plaintiff’s case go forward on the issue).

Going the opposite direction is the recent Federal Court of Appeals decision in Hickton, et al v. Enterprise Holdings Inc., et al. In this case, the plaintiffs alleged that the parent company of various Enterprise Rent-A-Car subsidiaries exercised enough control over the subsidiaries and their employees to be an considered an employer. The Court of Appeals disagreed, and held that there was no issue that merited a trial. Although Enterprise corporate was heavily involved in personnel policies, and supplied HR, legal and compliance support, and although there was overlap in the board of directors of Enterprise corporate and its subsidiaries, there was not enough evidence of control by Enterprise corporate for the case to go to trial. The Court of Appeals created its own (new) standard for joint employer liability, directing trial courts to look at any relevant factor applying to bearing on the total employment situation and the economic realities of the work relationship, but focusing on: (1) authority to hire and fire employees; (2) authority to promulgate work rules and assignments, and set conditions of employment, including compensation, benefits and hours; (3) day-to-day supervision, including employee discipline; and (4) control of employee records, including payroll, insurance, taxes and the like. While Enterprise corporate made many suggestions regarding personnel matters, and although the Board of Directors of the Enterprise subsidiaries was comprised of Enterprise corporate Board members, this was not enough to make Enterprise corporate a joint employer of subsidiary employees.

In the contingent labor setting, it is often the case that two, three, four or more entities have an effect on talent; and one, two, or more of them may legally qualify as employers of the talent for various legal purposes. These cases show that the law continues to evolve in this area; and that the focus continues to be on control. The greater the extent to which workers are controlled by an entity on a day-to-day basis, the greater extent to which that entity might qualify as a employer for various legal purposes. In the contingent labor setting, this plays out in thousands of different ways each day; and as the contingent labor world continues to evolve, and as courts continue to issue decisions, there is no end in sight to the evolution of this area

Eric Rumbaugh

Eric Rumbaugh
Eric H. Rumbaugh is a partner with the law firm of Michael Best & Friedrich LLP, headquartered in Milwaukee. He represents employers in labor, employment and employee benefits law matters.

Eric Rumbaugh

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