Relationships with Subcontractors Can Create Joint Employment

Relationships with Subcontractors Can Create Joint Employment

By Christopher A. Gray, Esq.

A recent court case from a Federal Appeals court out of Maryland should cause contractors to re-examine their relationships with subcontractors and their employees. In that case, Salinas v. Commercial Interiors, the employees of a subcontractor sued both the subcontractor and general contractor for violations of the Fair Labor Standards Act and similar state laws. The employees argued the general and the sub were their “joint employers”, meaning both were liable for the acts of the other. Despite the fact that there was a written subcontractor agreement between the general contractor and the subcontractor, the Court of Appeals found the general contractor to be a joint employer with the sub and held the general contractor would be liable for unpaid wages. In doing so, the court issued a new standard on how a joint employer status is determined.

Historically, in determining if a joint employer relationship existed, courts reviewed the relationship between the general contractor and a subcontractor’s employees. Whether a general contractor was a joint employer was determined by how much control the general contractor had over the subcontractor’s employees. The Salinas case rejected those tests. Instead, the court said the test should examine whether the general contractor and subcontractor are “completely disassociated” from one another. The Salinas court asks one essential question: do the parties share responsibility for the essential terms and conditions of employment?

In answering that question, the Salinas court considered several factors, among them, whether the two employers jointly control or supervise the workers. In Salinas, the court found the general contractor to be a joint employer due to several facts, including that the subcontractor worked almost exclusively for the general contractor, the general provided all the tools for the employees, the general required the employees to attend its own safety meetings, the general maintained sign in sheets for the employees, the general determined how many of the subcontractor’s employees would work on any given day, and the general supervised the employees’ work. Based on that, the court found that the general contractor was not “completely disassociated” from the subcontractor, and therefore was a joint employer liable for the unpaid wages.

Although this case is not binding on Ohio courts, there is the possibility the test for the joint employer status is adopted in or around Ohio. Contractors should examine their business practices with their subcontractors to ensure that there is enough separation between themselves and the subcontractors’ employees. Although a general contractor may need to maintain a degree of control over how a project is conducted, the subcontractors should be given a fair degree of control over who they hire and the manner and means in which the subcontractors’ employees perform their work. By implementing additional separation from the subcontractors, general contractors should avoid liability from their subcontractors’ employment disputes.