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Beranbaum Menken Prevails Before the Second Circuit on FLSA Joint Employment

The question of which individuals or entities qualify as the employer or employers of a particular group of workers under the Fair Labor Standards Act (“FLSA”) and associated state wage and hour laws is becoming an increasingly common issue in minimum wage and overtime litigation. As the U.S. Department of Labor observed in its recently-released guidance on the subject, “[t]he growing variety and number of business models and labor arrangements [in the contemporary economy] have made joint employment more common.”

In Grenawalt v. AT&T Mobility, LLC, Beranbaum Menken represents a group of security guards employed by a security contractor that provided retail store security to AT&T. We are excited to announce that the firm recently succeeded in arguing before the United States Court of Appeals for the Second Circuit that a reasonable jury could find that AT&T jointly employed the guards when they worked in the telecommunications giant’s Manhattan retail stores, and thus that AT&T is legally responsible for the guards’ unpaid overtime wages.

Because it reflects the previously-mentioned evolving character of employment arrangements that have historically informed the concept of joint employment, the relevant case law is extensive and complicated. In its recent order in Grenawalt, in which it overturned the lower court’s decision dismissing AT&T from the case, the Second Circuit identified three separate tests for determining whether an entity is a joint employer:

The first test, derived from Carter v. Dutchess Community College, 735 F.2d 8 (2d Cir. 1984), looks to whether a putative employer exercises “formal control” over a worker. … Because Carter defines employment more narrowly than FLSA requires, satisfying this test is sufficient, but not necessary, to show joint employment. … The second test, set out in Brock v. Superior Care, Inc., 840 F.2d 1054 (2d Cir. 1988), focuses on whether “the workers depend upon someone else’s business … or are in business for themselves,” … and thus is “typically more relevant for distinguishing between independent contractors and employees,” Velez v. Sanchez, 693 F.3d 308, 326 (2d Cir. 2012), than for determining by whom workers who are assumed to be employees are employed. Accordingly, this case hinges on a third test, first developed in Zheng v. Liberty Apparel Co., 355 F.3d [61, 72 (2d Cir. 2013).]

The Zheng test turns on the question of whether the potential joint employer – in this case, AT&T – exercised “functional control” over the workers in question – in this case, the security guards working in AT&T stores. Zheng calls for the consideration of six factors in determining whether AT&T jointly employed the guards:

(1) whether [AT&T’s] premises and equipment were used for [the guards’] work;

(2) whether the [security firm] … had a business that could or did shift as a unit from one putative joint employer to another;

(3) the extent to which [the guards] performed a discrete line-job that was integral to [A&T’s] process of production;

(4) whether responsibility under the contracts could pass from one subcontractor to another without material changes;

(5) the degree to which [AT&T] or [its] agents supervised [the guards’] work; and

(6) whether [the guards] worked exclusively or predominantly for [AT&T].

Although, as the Second Circuit noted, joint employment can exist under this flexible test even where as many as three Zheng factors weigh against such a finding as a matter of law, the court ultimately found that here, not even a single Zheng factor weighs against finding that AT&T jointly employed the guards. Accordingly, the matter has been remanded back to the U.S. District Court for the Southern District of New York, where Beranbaum Menken will proceed with the guards’ overtime claims against both the security contractor and AT&T, as joint employers.

This is an exciting decision for the firm and a good one for plaintiffs’ side employment lawyers generally, because a robust and expansive conception of the individuals and entities that qualify as a plaintiff’s employer for purposes of the FLSA and other wage and hour laws is critical to ensuring that plaintiffs are able to collect the unpaid wages they are entitled to from the individuals and entities responsible. Further, an appropriately broad understanding of joint employment incentivizes companies like AT&T to ensure that their contractors pay workers appropriate minimum and overtime wages. Decisions like this one help stop huge, multi-million dollar corporations like AT&T from using contracting arrangements to benefit from underpaid workers while escaping liability for their underpayment.