Ling Nan ZHENG, Ren Zhu Yang, Yun Zhen Huang, Wen Qin Lin, Sai Bing Wang, Ye Biao Yang, Cui Zhen Lin, Rong Yun Zheng, Hui Fang Lin, Xiu Ying Zheng, Jin Ping Lin, Hui Ming Dong, Yu Bing Luo, Sau Chi Kwok, Sai Xian Tang, Yi Zhen Lin, Rui Fang Zhang, Mei Juan Yu, Mei Ying Li, Qin Fang Qiu, Yi Mei Lin, Mei Zhu Dong, Fung Lam, Xiu Zhu Ye, Sing Kei Lam, and Xue Jin Lin, Plaintiffs-Appellants,
v.
LIBERTY APPAREL COMPANY INC., Albert Nigri, and Hagai Laniado, Defendants-Cross-Claimants-Appellees,
Ngon Fong Yuen, 88 Fashion Inc., Top Five Sportswear, Inc., S.P.R. Sportswear, Inc. and 91 Fashion, Inc., Defendants,
Lai Huen Yam, a/k/a Steven Yam, 998 Fashions, Inc. and 103 Fashion Inc., Defendants-Cross-Defendants.
No. 02-7826.
United States Court of Appeals, Second Circuit.
Argued: January 16, 2003.
Decided: December 30, 2003.
Appeal from the United States District Court for the Southern District of New York, Richard Conway Casey, J. COPYRIGHT MATERIAL OMITTED James Reif (Margaret A. Malloy, of counsel), Gladstein, Reif & Meginniss, LLP, New York, NY, for Plaintiffs-Appellants.
Michael H. Klein, Kestenbaum, Dannenberg & Klein, LLP, New York, NY, for Defendants-Appellees.
Jennifer S. Brand, Assistant Attorney General (M. Patricia Smith, Assistant Attorney General, Daniel J. Chepaitis, Assistant Solicitor General, of counsel, Eliot Spitzer, Attorney General of the State of New York, on the brief), Office of the Attorney General of the State of New York, New York, NY, for amicus curiae Eliot Spitzer, Attorney General of the State of New York.
Catherine K. Ruckelshaus (Laurence E. Norton, II, Amy Sugimori, of counsel), National Employment Law Project, Inc., New York, NY, for amici curiae Asian-American Legal Defense and Education Fund and National Employment Lawyers' Association.
Before: WINTER, LEVAL, and CABRANES, Circuit Judges.
JOSÉ A. CABRANES, Circuit Judge.
This case asks us to decide whether garment manufacturers who hired contractors to stitch and finish pieces of clothing were "joint employers" within the meaning of the Fair Labor Standards Act of 1938 ("FLSA"), 29 U.S.C. § 201 et seq., and New York law. Plaintiffs, garment workers in New York City who were directly employed by the contractors, claim that the manufacturers were their joint employers because they worked predominantly on the manufacturers' garments, they performed a line-job that was integral to the production of the manufacturer's product, and their work was frequently and directly supervised by the manufacturers' agents. The manufacturers respond that the contractors, who, among other things, hired and paid plaintiffs to assemble clothing for numerous manufacturers, were plaintiffs' sole employers. Both plaintiffs and the manufacturers moved for summary judgment on the issue of joint employment.
The United States District Court for the Southern District of New York (Richard Conway Casey, Judge), applying the four-factor test set forth in Carter v. Dutchess Community College,
We conclude that the District Court erred when it limited its analysis to the four factors identified in Carter. Accordingly, we vacate the judgment of the District Court and remand the cause to the District Court with instructions concerning further proceedings.
BACKGROUND
The relevant facts are laid out in Judge Casey's opinion, Zheng v. Liberty Apparel Co.,
Plaintiffs-Appellants are 26 non-English-speaking adult garment workers who worked in a factory at 103 Broadway in New York's Chinatown. They brought this action against both (1) their immediate employers, six contractors doing business at 103 Broadway ("Contractor Corporations") and their principals (collectively, "Contractor Defendants"), and (2) Liberty Apparel Company, Inc. ("Liberty") and its principals, Albert Nigri and Hagai Laniado (collectively, "Liberty Defendants"). Because the Contractor Defendants either could not be located or have ceased doing business, plaintiffs have voluntarily dismissed their claims against those defendants with prejudice. Accordingly, plaintiffs now seek damages only from the Liberty Defendants.
Liberty, a "jobber" in the parlance of the garment industry, is a manufacturing company that contracts out the last phase of its production process. That process, in broad terms, worked as follows: First, Liberty employees developed a pattern for a garment, cut a sample from the pattern, and sent the sample to a customer for approval. Once the customer approved the pattern, Liberty purchased the necessary fabric from a vendor, and the vendor delivered the fabric to Liberty's warehouse. There, the fabric was graded and marked, spread out on tables, and, finally, cut by Liberty employees.
After the fabric was cut, Liberty did not complete the production process on its own premises. Instead, Liberty delivered the cut fabric, along with other essential materials, to various contractors for assembly. The assemblers, in turn, employed workers to stitch and finish the pieces, a process that included sewing the fabrics, buttons, and labels into the garments, cuffing and hemming the garments, and, finally, hanging the garments. The workers, including plaintiffs, were paid at a piece rate for their labor.
From March 1997 through April 1999, Liberty entered into agreements with the Contractor Corporations under which the Contractor Corporations would assemble garments to meet Liberty's specifications. During that time period, Liberty utilized as many as thirty to forty assemblers, including the Contractor Corporations. Liberty did not seek out assemblers; instead, assemblers came to Liberty's warehouse looking for assembly work. In order to obtain such work, a prospective assembler was required by Liberty to sign a form agreement.
Plaintiffs claim that approximately 70-75% of their work during the time period at issue was for Liberty. They explain that they knew they were working for Liberty based on both the labels that were sewn into the garments and the specific lot numbers that came with the garments. Liberty's co-owner, Albert Nigri, asserts that the percentage of the Contractor Corporations' work performed for Liberty was closer to 10-15%. He derives that figure from individual plaintiffs' handwritten notes and records.
The parties do not dispute that Liberty employed people to monitor Liberty's garments while they were being assembled. However, the parties dispute the extent to which Liberty oversaw the assembly process. Various plaintiffs presented affidavits to the District Court stating that two Liberty representatives — a man named Ah Sen and "a Taiwanese woman" — visited the factory approximately two to four times a week for up to three hours a day, and exhorted the plaintiffs to work harder and faster. In their affidavits, these plaintiffs claim further that, when they finished working on garments, Liberty representatives — as opposed to employees of the Contractor Corporations — inspected their work and gave instructions directly to the workers if corrections needed to be made. One of the plaintiffs also asserts that she informed the "Taiwanese woman" that the workers were not being paid for their work at the factory.
Albert Nigri, on the other hand, avers that Liberty's quality control person made brief visits to assemblers' factories and was instructed to speak only with Lai Huen Yam, a co-owner of the Contractor Corporations, or with his wife. Furthermore, Nigri asserts in his affidavit that Liberty representatives were expected to spend just thirty minutes at each of the assemblers' work sites. Finally, Nigri states that Liberty did not employ two quality control persons simultaneously; did not employ a quality control person during some of the relevant time period; and did not employ a man as a quality control person.
In their complaint, plaintiffs alleged that both the Liberty Defendants and the Contractor Defendants violated 29 U.S.C. § 206 and N.Y. Lab. Law § 652(1) ("§ 652(1)"), which require an employer to pay employees a legally mandated minimum wage. Plaintiffs alleged further that all of the defendants, including Liberty and its principals, violated 29 U.S.C. § 207 and N.Y. Comp.Codes R. & Regs. tit. 12, § 142-2.2 ("§ 142-2"), which require employers to compensate employees at one-and-one-half times the regular rate when an employee works in excess of 40 hours per week. Additionally, plaintiffs alleged that defendants violated N.Y. Lab. Law § 191, which requires employers to pay manual workers on a weekly basis, and N.Y. Lab. Law § 193, which prevents employers from making unauthorized deductions from employees' wages. Finally, plaintiffs alleged that, in violation of N.Y. Lab. Law § 345-a ("§ 345-a") — a statutory provision that applies to the apparel industry only — Liberty Defendants entered into contracts with the Contractor Corporations even though they knew, or should have known, that the Contractor Corporations failed to comply with the provisions of New York law that govern the payment of wages.
Liberty Defendants moved for summary judgment on all claims against them on the ground that plaintiffs were not their employees. Plaintiffs cross-moved for summary judgment, seeking a determination that they were employed by Liberty. In a March 13, 2002 Opinion and Order, the District Court granted Liberty Defendants' motion for summary judgment and dismissed every federal and state claim in the complaint on the merits except the claim arising under N.Y. Lab. Law § 345-a, which does not require an employment relationship. See Zheng,
Plaintiffs appeal (1) the District Court's grant of summary judgment dismissing the FLSA claims; (2) the dismissal on the merits of plaintiffs' claims under New York's statutory analogues to the FLSA, i.e., the § 652(a) and § 142-2 claims; and (3) the District Court's refusal to exercise pendent jurisdiction over the § 345-a claim.1
DISCUSSION
I. FLSA Claims
A. Competing Economic Reality Tests
The FLSA defines "employee" as "any individual employed by an employer." 29 U.S.C. § 203(e)(1). An entity "employs" an individual under the FLSA if it "suffer[s] or permit[s]" that individual to work. 29 U.S.C. § 203(g). This definition is necessarily a broad one, in accordance with the remedial purpose of the FLSA. See United States v. Rosenwasser,
An entity "suffers or permits" an individual to work if, as a matter of "economic reality," the entity functions as the individual's employer. See Goldberg v. Whitaker House Coop., Inc.,
In previous cases, we have applied two different tests to determine whether an employment relationship exists in light of the Supreme Court's admonition that "economic reality" govern our application of the FLSA. In Carter v. Dutchess Community College,
(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.
See Carter,
More recently, we applied the same four-factor test in Herman v. RSR Security Services Ltd.,
Four years after deciding Carter but more than ten years before deciding Herman, we decided Brock v. Superior Care, Inc.,
(1) the degree of control exercised by the employer over the workers, (2) the workers' opportunity for profit or loss and their investment in the business, (3) the degree of skill and independent initiative required to perform the work, (4) the permanence or duration of the working relationship, and (5) the extent to which the work is an integral part of the employer's business.
See Superior Care,
We have stated that "[t]he [four-factor] Bonnette test," borrowed by us from the Ninth Circuit in Carter, "is useful largely in cases involving claims of joint employment[,]" Danneskjold v. Hausrath,
Despite this distinction between joint employment cases and independent contractor cases, we have never suggested that, in analyzing joint employment, the four Carter factors alone are relevant, and that other factors that bear on the relationship between workers and potential joint employers should be ignored. Thus, in Lopez v. Silverman,
(1) the extent to which the workers perform a discrete line-job forming an integral part of the putative joint employer's integrated process of production or overall business objective;
(2) whether the putative joint employer's premises and equipment were used for the work;
(3) the extent of the putative employees' work for the putative joint employer;
(4) the permanence or duration of the working relationship between the workers and the putative joint employer;
(5) the degree of control exercised by the putative joint employer over the workers;
(6) whether responsibility under the contract with the putative joint employer passed "without material changes" from one group of potential joint employees to another; and
(7) whether the workers had a "business organization" that could or did shift as a unit from one putative joint employer to another.
See Lopez
The District Court in this case expressly declined to follow Lopez. Citing Herman,
B. Need for Remand
We conclude, for the reasons set forth below, that the District Court erred when, based exclusively on the four factors mentioned in Carter, it determined that the Liberty Defendants were not, as a matter of law, joint employers under the FLSA. In our view, the broad language of the FLSA, as interpreted by the Supreme Court in Rutherford, demands that a district court look beyond an entity's formal right to control the physical performance of another's work before declaring that the entity is not an employer under the FLSA. Moreover, as explained below, neither Carter nor Herman supports the application of a rigid four-part test in the instant case. In those cases, we held only that the four factors applied by the District Court in this case can be sufficient to establish employer status. We did not hold, nor under Rutherford could we have held, that a positive finding on those four factors is necessary to establish an employment relationship. Accordingly, the District Court's judgment in favor of the Liberty Defendants must be vacated.
1. The Language of the Statute
As noted above, the relevant provision of the FLSA, 29 U.S.C. § 203(g), defines "employ" as including "to suffer or permit to work." This is "`the broadest definition [of `employ'] that has ever been included in any one act,'" United States v. Rosenwasser,
Measured against the expansive language of the FLSA, the four-part test employed by the District Court is unduly narrow, as it focuses solely on the formal right to control the physical performance of another's work. That right is central to the common-law employment relationship, see Restatement of Agency § 220(1) (1933) ("A servant is a person employed to perform service for another in his affairs and who, with respect to his physical conduct in the performance of the service, is subject to the other's control or right to control."), and, therefore, the four-factor test may approximate the common-law test for identifying joint employers. However, the four-factor test cannot be reconciled with the "suffer or permit" language in the statute, which necessarily reaches beyond traditional agency law. See Nationwide Mut. Ins. Co. v. Darden,
2. Rutherford
Rutherford confirmed that the definition of "employ" in the FLSA cannot be reduced to formal control over the physical performance of another's work. In Rutherford, the Supreme Court held that a slaughterhouse jointly employed workers who de-boned meat on its premises, despite the fact that a boning supervisor — with whom the slaughterhouse had entered into a contract — directly controlled the terms and conditions of the meat boners' employment. Specifically, the supervisor, rather than the slaughterhouse, (i) hired and fired the boners, (ii) set their hours, and, (iii) after being paid a set amount by the slaughterhouse for each one hundred pounds of de-boned meat, paid the boners for their work. Rutherford,
In determining that the meat boners were employees of the slaughterhouse notwithstanding the role played by the boning supervisor, the Court examined the "circumstances of the whole activity," id. at 730,
Like the case at bar, Rutherford was a joint employment case, as it is apparent from the Supreme Court's opinion that the boners were, first and foremost, employed by the boning supervisor who had entered into a contract with the slaughterhouse. See id. at 724-25 (explaining that the boning supervisor exercised the prerogatives of an employer, including hiring workers, managing their work, and paying them). Rutherford thus held that, in certain circumstances, an entity can be a joint employer under the FLSA even when it does not hire and fire its joint employees, directly dictate their hours, or pay them.7
3. Carter and Herman
Carter and Herman are consistent with Rutherford, and neither case supports the application of the test used by the District Court in the circumstances presented in the instant case to negate employer liability. The question before us in Carter was whether prisoners who performed work for an educational institution could be considered employees of that institution under the FLSA. Carter,
In our more recent decision in Herman, moreover, we affirmed the District Court's determination after a bench trial that a company chairman jointly employed the company's employees where the chairman exercised three of the four employer prerogatives identified in Carter. In doing so, we reiterated that "economic reality is determined based upon all the circumstances, [and] any relevant evidence may be examined so as to avoid having the test confined to a narrow legalistic definition." Herman,
Because the District Court in the instant case interpreted our precedents to demand an exclusive four-factor test, we vacate its judgment and remand for further proceedings.
C. Instructions on Remand
1. Factors to Be Applied
On remand, the District Court must determine whether the Liberty Defendants should be deemed to have been the plaintiffs' joint employer. This determination is to be based on "the circumstances of the whole activity," Rutherford,
The factors we find pertinent in these circumstances, listed in no particular order, are (1) whether Liberty's premises and equipment were used for the plaintiffs' work; (2) whether the Contractor Corporations had a business that could or did shift as a unit from one putative joint employer to another; (3) the extent to which plaintiffs performed a discrete line-job that was integral to Liberty'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 the Liberty Defendants or their agents supervised plaintiffs' work; and (6) whether plaintiffs worked exclusively or predominantly for the Liberty Defendants. See Rutherford,
These particular factors are relevant because, when they weigh in plaintiffs' favor, they indicate that an entity has functional control over workers even in the absence of the formal control measured by the Carter factors. Thus, in Rutherford, by looking beyond the boning supervisor's formal prerogatives, the Supreme Court determined, based principally on the factors listed above, that the slaughterhouse dictated the terms and conditions of the boners' employment. First, although it did not literally pay the workers, the slaughterhouse de facto set the workers' wages, because the boners did no meat boning for any other firm and shared equally in the funds paid to the boning supervisor. See Rutherford,
The first two factors derived from Rutherford require minimal discussion. The first factor — namely, whether a putative joint employer's premises and equipment are used by its putative joint employees — is relevant because the shared use of premises and equipment may support the inference that a putative joint employer has functional control over the plaintiffs' work. Similarly, the second factor — namely, whether the putative joint employees are part of a business organization that shifts as a unit from one putative joint employer to another — is relevant because a subcontractor that seeks business from a variety of contractors is less likely to be part of a subterfuge arrangement than a subcontractor that serves a single client. Although neither shared premises nor the absence of a broad client base is anything close to a perfect proxy for joint employment (because they are both perfectly consistent with a legitimate subcontracting relationship), the factfinder can use these readily verifiable facts as a starting point in uncovering the economic realities of a business relationship.
The other factors we have pointed out are less straightforward. Rutherford considered the extent to which plaintiffs performed a line-job that is integral to the putative joint employer's process of production. Interpreted broadly, this factor could be said to be implicated in every subcontracting relationship, because all subcontractors perform a function that a general contractor deems "integral" to a product or a service. However, we do not interpret the factor quite so broadly. The factor is derived from the Rutherford Court's statement that the boners at the slaughterhouse should be considered joint employees because, inter alia, "[they] did a specialty job on the production line." Rutherford,
Rutherford, however, offers no firm guidance as to how to distinguish work that "in its essence, follows the usual path of an employee," id., from work that can be outsourced without attracting increased scrutiny under the FLSA. In our view, there is no bright-line distinction between these two categories of work. On one end of the spectrum lies the type of work performed by the boners in Rutherford — i.e., piecework on a producer's premises that requires minimal training or equipment, and which constitutes an essential step in the producer's integrated manufacturing process. On the other end of the spectrum lies work that is not part of an integrated production unit, that is not performed on a predictable schedule, and that requires specialized skills or expensive technology. In classifying business relationships that fall in between these two poles, we are mindful of the substantial and valuable place that outsourcing, along with the subcontracting relationships that follow from outsourcing, have come to occupy in the American economy. See, e.g., The Outing of Outsourcing, The Economist, Nov. 25, 1995, at 57, 57 (noting that outsourcing "is part and parcel of the way American companies of all sizes do business"). We are also mindful that manufacturers, and especially manufacturers of relatively sophisticated products that require multiple components, may choose to outsource the production of some of those components in order to increase efficiency. See, e.g., Ravi Venkatesan, Strategic Sourcing: To Make or Not to Make, Harv. Bus. Rev., Nov./Dec.1992, at 98 (arguing that manufacturers should outsource the production of components to maximize efficiency). Accordingly, we resist the temptation to say that any work on a so-called production line — no matter what product is being manufactured — should attract heightened scrutiny. Instead, in determining the weight and degree of factor (3), we believe that both industry custom and historical practice should be consulted. Industry custom may be relevant because, insofar as the practice of using subcontractors to complete a particular task is widespread, it is unlikely to be a mere subterfuge to avoid complying with labor laws. At the same time, historical practice may also be relevant, because, if plaintiffs can prove that, as a historical matter, a contracting device has developed in response to and as a means to avoid applicable labor laws, the prevalence of that device may, in particular circumstances, be attributable to widespread evasion of labor laws. Ultimately, this factor, like the other factors derived from Rutherford, is not independently determinative of a defendant's status, because the mere fact that a manufacturing job is not typically outsourced does not necessarily mean that there is no substantial economic reason to outsource it in a particular case. However, as Rutherford indicates, the type of work performed by plaintiffs can bear on the overall determination as to whether a defendant may be held liable for an FLSA violation.10
The fourth factor the Court considered in Rutherford is whether responsibility under the contracts could pass from one subcontractor to another without material changes. That factor is derived from the Rutherford Court's observation that "[t]he responsibility under the boning contracts without material changes passed from one boner to another." Rutherford,
The fifth factor listed above — namely, the degree to which the defendants supervise the plaintiffs' work — also requires some comment, as it too can be misinterpreted to encompass run-of-the-mill subcontracting relationships. Although Rutherford indicates that a defendant's extensive supervision of a plaintiff's work is indicative of an employment relationship, see Rutherford,
Finally, the Rutherford Court considered whether the purported joint employees worked exclusively or predominantly for the putative joint employer. In describing that factor, we use the words "exclusively or predominantly" on purpose. As noted in Lopez, the extent of work performed for a putative joint employer is "not described in any decision ... as a separate factor for consideration." Id. at 417. However, it has "implicitly [been] a factor," id., in cases in which the purported joint employees worked exclusively or predominantly for the purported joint employer. See Rutherford,
In sum, by looking beyond a defendant's formal control over the physical performance of a plaintiff's work, the "economic reality" test — which has been distilled into a nonexclusive and overlapping set of factors — gives content to the broad "suffer or permit" language in the statute. See 29 U.S.C. § 203(g) (stating that an entity "employs" an individual for purposes of the FLSA if it "suffer[s] or permit[s]" that individual to work). However, by limiting FLSA liability to cases in which defendants, based on the totality of the circumstances, function as employers of the plaintiffs rather than mere business partners of plaintiffs' direct employer, the test also ensures that the statute is not interpreted to subsume typical outsourcing relationships. The "economic reality" test, therefore, is intended to expose outsourcing relationships that lack a substantial economic purpose, but it is manifestly not intended to bring normal, strategically-oriented contracting schemes within the ambit of the FLSA.
2. Application of the Factors on Remand
We intimate no view as to whether plaintiffs, under a proper application of the economic reality test derived from Rutherford, will have presented sufficient evidence to survive a renewed motion for summary judgment on remand. We note, however, that under our existing precedents, the inquiry as to whether an entity is an employer for purposes of the FLSA involves three types of determinations. First, there are historical findings of fact that underlie each of the relevant factors. Second, there are findings as to the existence and degree of each factor. Finally, there is the conclusion of law to be drawn from applying the factors, i.e., whether an entity is a joint employer. See Superior Care,
The first two determinations — the findings of historical fact and the findings as to the existence and degree of each factor — are findings of fact that must be accepted on appeal unless clearly erroneous.13 See Superior Care,
In order to grant summary judgment for defendants, the District Court would have to conclude that, even where both the historical facts and the relevant factors are interpreted in the light most favorable to plaintiffs, defendants are still entitled to judgment as a matter of law.14 To reach this conclusion, the Court need not decide that every factor weighs against joint employment. The Ninth Circuit, for example, recently concluded — in affirming a grant of summary judgment — that Air France did not jointly employ ground maintenance workers at the airline's San Francisco terminal for the purposes of the Family and Medical Leave Act ("FMLA"),15 despite the fact that Air France representatives directly supervised many of the workers, and even trained some of them. See Moreau,
Although summary judgment might also be granted to plaintiffs even when isolated factors point against imposing joint liability, see, e.g., Antenor,
II. State Law Claims
The District Court specifically addressed just two of plaintiffs' five state law claims. First, the District Court dismissed plaintiffs' overtime compensation claim under N.Y. Comp.Codes R. & Regs. tit. 12, § 142-2.2 — which is analogous to the overtime compensation claim brought under 29 U.S.C. § 207 — based on "the same analysis" it applied to the FLSA claims. Zheng,
The District Court did not refer to plaintiffs' claims under N.Y. Labor Law §§ 191, 193, and 652(1). Section 652(1) is analogous to 19 U.S.C. § 206, and requires an employer to pay the minimum wage. Section 191 requires employers to pay manual workers on a weekly basis, and section 193 forbids unauthorized deductions from employees' wages. Like the § 142-2 claim and unlike the § 345-a claim, each of these claims is dependent on a finding of joint employment. Compare N.Y. Labor Law § 191 ("Every employer shall pay wages."), N.Y. Labor Law § 193 ("No employer shall make any deduction...."), and § 652(1) ("Every employer shall pay...."), with § 345-a (imposing liability on any "manufacturer ... who contracts ... with ... [a] contractor ... who knew or should have known ... of [the] contractor's failure to comply with article six or nineteen of this chapter ...."). Thus, the District Court's analysis of the § 142-2 claim applies to these three claims, and we assume the Court intended to dismiss these claims on the merits.
For the same reasons that we vacate so much of the District Court's judgment as dismissed the FLSA claims, we also vacate so much of the District Court's judgment as dismissed the analogous New York claims — that is, those claims brought under § 142-2 and § 652(1). The overtime compensation claim under § 142-2 is governed by the definitions in 12 NYCRR § 142-2.16, and the minimum wage claim under § 652(1) is governed by the definitions in New York Labor Law § 651. Like the FLSA, the former covers "any individual employed, suffered or permitted to work by an employer," 12 NYCRR § 142-2.16(a), and the latter covers "any individual employed or permitted to work by an employer in any occupation," N.Y. Lab. Law § 651(5).
Just as federal courts interpreting the "suffer or permit" language have looked beyond common-law agency principles in analyzing joint employment relationships, so too have New York courts. See, e.g., People ex rel. Price v. Sheffield Farms-Slawson-Decker Co.,
Plaintiffs' § 345-a claim, over which the District Court declined to exercise pendent jurisdiction, is likewise reinstated. It appears that the District Court did not exercise jurisdiction over the § 345-a claim principally because the FLSA claims were dismissed before trial. See Zheng,
As a final matter, we reiterate that plaintiffs have not challenged the dismissal of their claims under N.Y. Labor Law §§ 191 and 193, which are governed by a narrower definition of employment applicable to Article 6 of New York's labor statute. See N.Y. Lab. Law § 190 (defining "employer" and "employee" without using the "suffer or permit" language). Accordingly, we need not address those claims, the disposition of which remains undisturbed.
CONCLUSION
To summarize, we hold that the District Court erred when, based exclusively on the four factors identified in Carter v. Dutchess Community College,
For the same reasons, we also hold that the District Court erred when it concluded, based exclusively on the four Carter factors, that Liberty and its principals were not joint employers within the meaning of New York's statutory analogues to the FLSA.
The District Court's judgment dismissing the FLSA claims, the New York statutory analogues to those claims, and the N.Y. Labor Law § 345-a claim is therefore vacated, and the cause is remanded to the District Court for further proceedings consistent with this opinion and our instructions.
Notes:
Notes
Plaintiffs do not appeal the dismissal of the claims brought under N.Y. Lab. Law § 191 (payment on a weekly basis) and N.Y. Lab. Law § 193 (unauthorized deductions)
Other courts of appeals have made the same observationSee Morgan v. MacDonald,
Rutherford is analyzed in detail at pp. 70-71, post.
Judge Cote also considered factors that were specific to the factual record before her, namely the family ties between the manufacturer and the contractor and the manufacturers' acceptance of substandard work from the contractorId. at 422-23.
Senator Black introduced the bill that would become the Fair Labor Standards Act of 1938See John S. Forsythe, Legislative History of the Fair Labor Standards Act, 6 Law & Contemp. Probs. 464, 466 (1939).
At common law, factors other than those identified by the District Court can be considered in determining whether the requisite control exists to establish an employment relationshipSee Restatement of Agency § 220(2) (explaining that, inter alia, the skill required in a particular occupation and the length of time that an individual is employed are relevant in determining if a worker is an employee or an independent contractor); cf. Restatement of Agency § 220, cmt. b ("The relationship of master and servant is one not capable of exact definition.").
There is no discussion in the Supreme Court's opinion inRutherford about whether the slaughterhouse kept employment records for the workers in the de-boning operation, but the Tenth Circuit's earlier decision in the case indicates that it did not. See Walling v. Rutherford Food Corp.,
Although it dealt with the distinction between an independent contractor and an employee rather than with joint employment,Superior Care likewise counsels against a rigid approach. In Superior Care, we stated that "[t]he factors that have been identified by various courts in applying the economic reality test are not exclusive." Superior Care,
In the course of its opinion, theRutherford Court noted also that the boners' work constituted "part of the integrated unit of production," id. at 729,
It bears noting that this factor does not simply measure the amount of initiative or judgment required for a job. We agree with the view of Judge Cote inLopez that the amount of initiative or judgment required for a job, which we considered in Superior Care,
The district court inLopez appears to have concluded that this factor weighs in favor of joint employment when a general contractor uses numerous subcontractors who compete for work and have different employees. See Lopez,
Factor (2) listed above —i.e., whether the Contractor Corporations had a business that could or did shift as a unit from one putative joint employer to another — overlaps substantially with the factor discussed here — i.e., whether all or nearly all of the Contractor Corporations' work was performed for the Liberty Defendants. The factors are not identical, however, and capture different aspects of a business relationship's "economic reality." For example, factor (2), but not factor (6), would weigh in favor of joint employment if a subcontractor were to work exclusively for two or three general contractors on those contractors' premises without the resources to work for any other contractor. By contrast, factor (6), but not factor (2), would weigh in favor of joint employment if a subcontractor worked solely for a single client but had the ability to seek out other clients at any time. Together, these two factors help the factfinder determine if a subcontractor's apparent dependence on particular contractors translates into functional control by those contractors over the subcontractor's employees.
The fact-intensive character of the joint employment inquiry is highlighted by the fact that two of the three leading cases in this circuit were appeals from judgments following bench trialsSee Herman,
The Supreme Court has specifically cautioned courts of appeals not to engage in independent fact-finding after concluding that a district court has applied the wrong factors in classifying an individual or an entity under the FLSASee Icicle,
Because the process of isolating and then applying the relevant factors, even at the summary judgment stage, is closely akin to the District Court's fact-finding function under Fed.R.Civ.P. 52(a), we do not think it is advisable to apply the Rutherford factors in the first instance on appeal.
The definition of "employ" in the FMLA is the same as the definition of "employ" in the FLSASee 29 U.S.C. § 2611(3) ("The terms `employ', `employee', and `State' have the same meanings given such terms in subsections (c), (e), and (g) of section 203 of this title."). Thus, in determining whether a joint employment relationship existed under the FMLA, the Moreau Court borrowed directly from the FLSA's joint employment case law. See Moreau,
Notably, although the Ninth Circuit doubted whether "many of the functions, such as food service or cargo transport, are actually `integral' to a passenger airline," and also whether "this factor translates well outside of the production line employment situation,"id. at *27, the Court assumed, for the purposes of Air France's summary judgment motion, that the various services are "integral" to the airline, id. Nevertheless, the Court concluded that "this factor (even if coupled with Air France's `indirect' supervision of employees) does not outweigh the numerous significant factors discussed above." Id.
To the extent it conflicts with this analysis, we disagree with the District Court's decision inLopez to grant summary judgment in plaintiffs' favor. However, we note that Lopez was different from this case in several ways: First, the "historical facts" in Lopez were largely undisputed, see Lopez
The District Court's exact rationale for declining jurisdiction over the § 345-a claim is somewhat unclear. After noting that a district court may retain jurisdiction over a state law claim even after all federal claims have been dismissed, the Court quotedUnited Mine Workers of America v. Gibbs,