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Joint employer wage claim fails under ‘Baystate’ factors

Co. hired subcontractors for actual cleaning work

depositphotos_79222772_l-2015A federal judge has ruled that a cleaning company was not a “joint employer” for purposes of a wage claim under the Fair Labor Standards Act and the Rhode Island Minimum Wage Act.

Integral to the summary judgment ruling in favor of Roman’s Commercial Cleaning and Property Maintenance was the fact that the company hired subcontractors to perform the actual cleaning work at its clients’ commercial properties.

U.S. District Court Chief Judge William E. Smith held that the plaintiff workers did not show evidence to satisfy the four factors specified in the 1st U.S. Circuit Court of Appeals’ 1998 ruling in Baystate Alternative Staffing, Inc. v. Herman: that the alleged employer “(1) had the power to hire and fire the employees; (2) supervised and controlled employee work schedules or conditions of employment; (3) determined the rate and method of payment; and (4) maintained employment records.”

While the “economic reality” of the totality of the circumstances is determinative, Smith found that Roman’s was not a “joint employer” with its subcontractor under any of those elements.

“Plaintiffs have not set forth sufficient evidence … either under the First Circuit’s four-factor Bayside test, or the additional factors deemed relevant by other courts, to conclude that Roman’s is plaintiffs’ joint-employer,” Smith wrote.

The 16-page decision is Franco, et al. v. Roman’s Commercial Cleaning and Property Maintenance, Inc., et al.

Future expansion of ‘Baystate’?

Jennifer L. Wood of the Rhode Island Center for Justice, who represented the three plaintiffs, observed that questions of joint employer liability frequently arise in the construction, cleaning/janitorial and landscaping industries.

“We understand the case law and the judge’s decision, but the holding highlights a theme in these types of cases. They present challenges for plaintiffs in terms of proof,” she said. “The employee is in the least favorable position to have access to the evidence necessary to show business relationships and establish joint employer liability.”

Although the 1st Circuit looks to traditional agency principles in analyzing employer/employee relationships, Wood noted that other jurisdictions, such as the 4th Circuit, are broadening their approach to look at the relationship between putative joint employers.

That helps to alleviate a difficult situation, particularly for immigrant workers who may have language barriers and not be in a good position to know who the “big boss” is, Wood said.

“As the case law evolves, relatively marginalized workers in these sectors may have a clearer path to present evidence about the relationship between employers, rather than needing to show a direct employment relationship with an entity that may be one or more links ‘up the chain’ of contractors from the workers,” she said.

Employee-side attorney Thomas J. Enright said joint employer liability is “one of the big employment battles going on today. A lot of employers are trying to insulate themselves from legal requirements such as those under the FLSA by using subcontractors to perform their work.”

Viewing the holding in the context of larger trends in employment law, Enright said when Franco was filed in 2016, the Department of Labor under President Obama had issued informal guidance that expanded the joint employer rule so that it would be more applicable to the gig-based economy.

The Cranston lawyer also pointed to the NLRB’s 2015 Browning-Ferris Industries decision as consistent with the theme at the time of expanding joint employer liability.

However, he noted that, under the new administration, the NLRB in 2017 issued a decision essentially overruling Browning-Ferris, and the DOL withdrew its guidance.

As for the case at hand, Enright wondered what the outcome would have been if the more expansive definitions were still in place.

“An interesting question the court addressed was whether Roman’s supervision was aimed at ‘controlling the employees’ or ‘quality assurance,’” he said. “So where do we draw that line? As an employees’ attorney, I would like to have seen these facts go to a jury.”

Geoffrey M. Aptt of Darrow Everett in Providence offered an employer-side perspective, saying the outcome could not have been different under the facts presented.

But he agreed that the holding is indicative of “hot issues” in employment law, pointing to a split across the border on the question of whether the Massachusetts Wage Act applies to joint employers.

Aptt found it notable that the Franco court did indeed reference a decision from another jurisdiction when it briefly discussed some of the factors that the 2nd Circuit considers in joint-employer cases.

“The fact that the court looked at Zheng v. Liberty Apparel Co. perhaps opens the door to move beyond Baystate and apply a broader test,” he said. “Even if there is no appeal in this case, it could potentially be used to support an expansion of the factors.”

According to Aptt, the takeaway for employers and their counsel is to reanalyze the relationships with subcontractors to ensure compliance and protection under an expanded test should there ever be one.

In general, wage and hour laws do a good job of balancing the interests of employers and employees, Aptt added.

“The whole rationale behind joint employer liability is to have accountability in sham arrangements and to allow redress in wage claims,” he said.

Roman’s attorney, Peter J. Petrarca, declined to be interviewed.

“An interesting question the court addressed was whether Roman’s supervision was aimed at ‘controlling the employees’ or ‘quality assurance.’ So where do we draw that line? As an employees’ attorney, I would like to have seen these facts go to a jury.”

— Thomas J. Enright, Cranston, Rhode Island

Wage claims

Roman’s Commercial Cleaning and Property Maintenance provides cleaning services to retail businesses and restaurants. However, Roman’s maintains only a small office staff to liaise with subcontractors who are brought on to do the actual cleaning work.

One of those subcontractors was Eagle Janitorial Services Corp., owned by Davi Souza. In 2015, Souza hired plaintiffs Maximiliano Franco, Baudilio Navarro and Walter Salazar to handle some of the cleaning that Eagle contracted to do for Roman’s at several Stop & Shop and Savers locations.

The plaintiffs stopped working at those stores when they were not fully compensated for their work by Souza, who was paid by Roman’s. Around the same time, Roman’s lost the contracts to clean the Stop & Shop and Savers stores because of the poor quality of Eagle’s cleaning and the failure of Eagle’s employees to report to work as scheduled.

In May 2016, the plaintiffs brought action against Eagle, Roman’s and their respective owners, asserting claims under federal and state wage laws for the defendants’ failure to pay minimum and overtime wages due. A few days later, Eagle dissolved its business.

While a default was entered against Eagle and Souza a few months later, Roman’s moved for summary judgment under the theory that it was not a “joint employer” for purposes of the plaintiffs’ FLSA action.

‘Economic reality’

Smith began by explaining that whether an employment relationship exists depends on the “‘economic reality’ of the totality of the circumstances bearing on whether the putative employee is economically dependent on the alleged employer.” And when examining the facts through the lens of the four factors spelled out in Baystate to test “economic reality,” he found in favor of Roman’s.

As to the power to hire and fire the plaintiffs, the judge rejected the plaintiffs’ arguments that Eagle was not economically independent but instead relied on Roman’s for all of its work. In the plaintiffs’ eyes, that gave Roman’s an “indirect, joint authority with and through [Davi Souza] … to initiate and terminate their employment” in that it was the source of the cleaning contracts.

But “Eagle’s dependence on Roman’s as its only income source says nothing about Roman’s authority to hire or fire plaintiffs,” Smith wrote.

And while plaintiffs’ argument may find credence in the six “additional factors” articulated by the 2nd Circuit in 2003’s Zheng v. Liberty Apparel Co., including whether the plaintiffs worked “exclusively or predominately” for the putative joint employer, the record was bereft of evidence showing that Eagle worked exclusively for Roman’s, Smith concluded.

Nor did Roman’s supervise or control the plaintiffs’ work schedules or day-to-day aspects of their employment conditions, the judge determined. Even though Roman’s received reports of when Eagle’s employees arrived and left stores or when their cleaning was sub-standard, Smith found that Roman’s never dictated the plaintiffs’ schedules or advised on how to perform cleaning tasks.

“Roman’s supervision and control was entirely aimed at quality assurance, which is substantively distinct from the control and supervision needed to form an employer-employee relationship,” he wrote.

Quickly weighing the remaining Baystate factors in favor of the defendant, Smith saw no evidence showing that Roman’s maintained employment records or determined the rate and method of payment to the plaintiffs.

Smith said that an analysis under the state’s Minimum Wage Act would yield similar results.

“[N]o inference this court could draw from this record rescues plaintiffs from the conclusion that Roman’s is not plaintiffs’ joint-employer within the meaning of the FLSA or RIMWA,” the judge stated.

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