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Due to inclement weather conditions, the Raleigh office will be closed today, Jan. 21, 2022.

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February 15, 2022

FinTech and Special Purpose Acquisition Companies (SPACs)

Continuing the FinTech University series, join chair of Nelson Mullins FinTech and Regulation Practice and moderator, Richard Levin, and attorneys Jon Talcott, Andy Tucker, and Peter Strand for this one-hour session, "FinTech and SPACs." Continuing Legal Education (CLE) credit will be sought for all attorneys requesting. Certificates of attendance are available upon request for CPE purposes. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit.

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The HR Minute

Jan. 12, 2022

Massachusetts SJC Adopts Federal Standard in Determining Joint Employer Status

By Bret A. Cohen, Robert O. Sheridan, Daniel Curran

In a December 13, 2021 decision, the Massachusetts Supreme Judicial Court adopted a standard heretofore applied in federal court for determining joint employer status.  In Jinks v. Credico (USA) LLC, four plaintiff employees alleged violations of the Massachusetts Independent Contractor Statute, G.L. c. 149, § 148B, as well as provisions of the applicable wage laws, G.L. c. 151.

Credico (USA) LLC (“Credico”), “a client broker for independent direct marketing companies”, maintained a longstanding relationship with DFW Consultants, Inc. (“DFW”).  DFW retained salespersons to work on Credico’s clients’ behalf.[1]  A 2015 agreement between Credico and DFW provided that DFW would maintain primary control over the individuals whom it hired.  DFW’s control extended to matters of compensation, taxes, benefits, and the manner and means of performing assignments.  While Credico required DFW to guarantee compliance with regulatory requirements and other quality control measures, DFW had the ultimate authority to hire or terminate employees.  The plaintiff employees had no meaningful direct contacts with Credico.

The SJC transferred the case sua sponte from the Appeals Court after Plaintiffs appealed the lower court’s decision to grant summary judgment in Credico’s favor.  In determining whether Credico constituted plaintiffs’ employer for the purposes of the statutes, the SJC discussed several exceptions to the traditional, direct employer-employee relationship.

One such exception is the concept of joint employment.  “The basis of the [joint employer] finding is simply that one employer while contracting in good faith with an otherwise independent company, has retained for itself sufficient control of the terms and conditions of employment of the employees who are employed by the other employer.”[2]  While the statutes at issue do not explicitly contemplate joint employment, the SJC interpreted the statutory meaning of “employer” to include joint employment based on the concept’s well-established existence at common law.

In deciding the appropriate standard for determining joint employment, the SJC rejected Plaintiffs’ argument that the “ABC” test should govern.  The “ABC” test, which is used to distinguish employees from independent contractors for the purposes of G.L. c. 149 and c. 151, inquiries into the nature of the employer-employee relationship.  The SJC dismissed this approach as inappropriate in the joint employment context.

Instead, the SJC reasoned that it would determine joint employer status using a four-factor framework applied by federal courts interpreting the Fair Labor Standards Act (“FLSA”).  The SJC noted that the application of a standard normally utilized in the context of federal law was appropriate here because the Massachusetts legislature fashioned its wage laws after the FLSA.  The four-factor framework asks “whether 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.”[3]

Applying the four factors, the SJC determined that Credico did not exercise substantial control over the structure or economic aspects of the working relationship.  Importantly, the SJC emphasized that Credico’s imposition of quality control requirements with respect to training, fraud prevention, and records maintenance was not sufficient to render it a joint employer.  For these reasons, the SJC affirmed summary judgment in favor of Credico.

Massachusetts employers that outsource recruiting and staffing to third parties should familiarize themselves with the four factors set out above.  A decision such as this reinforces the importance of establishing a clear delineation of control and responsibility amongst employers and staffing agencies in order to minimize complicated questions of liability under Massachusetts law.

While this decision’s full reach remains to be seen, it may have broad implications in other areas of employment law where employer control is a material factor.  The SJC’s willingness to adopt standards previously confined to federal law or other statutory regimes evidences a flexibility that employers and practitioners alike should continue to monitor.

 

[1] Jinks v. Credico (USA) LLC, No. SJC-13106, at *1 (Mass. Dec. 13, 2021).

[2] Id. at 5 (quoting Swallows v. Barnes & Noble Book Stores, Inc., 128 F.3d 990, 993 n.4 (6th Cir. 1997)).

[3] Id. at 7.



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