Who is Your Employer?

Do you know who your employer is? Enterprise Holdings, Inc. was the parent company and sole stockholder of 38 corporate subsidiaries that operated many of their rental car agencies. Nickolas Hickton, an assistant manager of one of those agencies sued his subsidiary, as well as Enterprise Holdings, Inc., for overtime wages on behalf of himself and all other similarly situated employees. Enterprise Holdings Inc. argued that it could not be liable, because it was not technically the employer of Mr. Hickton.

Mr. Hickton pressed that Enterprise Holdings should be considered his employer along with the subsidiary under a well-established legal principal known as “the joint employer doctrine.” In support of his assertion, Mr. Hickton noted that that the same three people who served on the Board of Directors for Enterprise Holdings, Inc., were the only members on the Boards of Directors for each subsidiary. The subsidiaries shared significant resources with the parent, including centralized reservations, customer service, human resource functions (including handbooks, job descriptions and employee benefit plans) and purchasing. And, the subsidiary’s decision to deny overtime to assistant managers came from a 2005 recommendation of Enterprise Holdings.

Yet, in an unusual decision, the Third Circuit Court of Appeals disagreed, while it set forth a test for that circuit.

The Fair Labor Standards Act defines employer as “any person acting directly or indirectly in the interest of an employer in relation to an employee.” 29 U.S.C. 203(d). The Code of Federal Regulations further defines an employer to include those entities, “Where the employers are not completely disassociated with respect to the employment of a particular employee and may be deemed to share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or I sunder common control with the other employer.” 29 C.F.R. s. 791.2(b). The degree of control is important.

The Court noted correctly that, “where two or more employers exert significant control over the same employees – [if] from the evidence it can be shown that they share or co-determine those matters governing essential terms and conditions of employment – they constitute ‘joint employers’ under the FLSA.”
The Court then set forth a test – by the court’s definition, broader that the one used under Title VII and the Age Discrimination in Employment Act – to be used in determining the sufficient level of control for a joint employer determination. That test asks whether the organization has the authority to hire and fire, supervise and discipline employees, control employee records and human resource functions, and make rules.

After analyzing the factors, the Court found that that policies promulgated by the parent company were merely suggestions for the subsidiaries, and ruled in favor of Enterprise Holdings.

Many defense lawyers now hope that ruling spreads.

If you’re working for a company buried in corporate overlays, call us.