When a worker is employed by two or more separate employers, this normally presents no special problems under the Fair Labor Standards Act. But even where the employee works for an entirely separate employer, there may still be a question of whether two employers are so entangled as to create a “joint employment” relationship where the two employers are treated as one entity.
Such a case arose in Pennsylvania in In re: Enterprise Rent-A-Car Wage & Hour Employment Practices Litigation, where a class of employees sued an Enterprise Rent-a-Car branch and the branch’s parent company, Enterprise Holdings. The complaint alleged that Enterprise Rent-a-Car had unlawfully classified them as exempt from the FLSA’s overtime provisions. The employees also claimed Enterprise Holdings was a joint employer alongside the Rent-a-Car Branch, and was therefore liable for the branch’s failure to pay overtime under the FLSA.
Thus, the 3rd Circuit had to decide whether Enterprise Holdings, simply because it was the parent company of Enterprise-Rent-a-Car Co., was a joint employer of Enterprise-Rent-a-Car’s branch managers.
The FLSA’s three-prong test for joint employment is whether:
(1) two employers are sharing employees’ services so as to interchange employees;
(2) one employer is acting in the direct interest of the other employer; and
(3) the employers are so close to one another that they are under common control and share employees.
While determining who is an employer is a case-by-case, fact-specific inquiry, the most important part of the inquiry is “Prong 3”: Control. Under an FLSA analysis, the entity or individual who controls the employee is considered the employer.
Control is most frequently decided by asking whether the alleged employer has:
(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 and taxes.
The 3rd Circuit found that the parent company was not a joint employer, because it exercised little or no control over the branch employees. Indeed, although Enterprise Holdings provided the branches with suggested policies and practices, using those suggestions was discretionary on the part of the subsidiaries. Thus, because Enterprise Holdings exercised no control over the managers, it was not liable for its branch’s FLSA violations, the circuit concluded.