This is the era of the gig economy and temporary work. Employers hire contractors instead of employees, who may farm the work out to sub-contractors. A business may have many workers who, on paper, aren’t their employees. But the law is more important than paper and you may have more than one employer under the law.

This can come up in a number of situations but commonly issues they arise if a person is working for a company through a temporary agency or working for a business that owns a local franchise. If things are going well, you’re getting paid and having no issues, you may not think twice about this. But if things aren’t going well, you lose that position, you get hurt at work but neither company takes responsibility, you need benefits or you’re not getting paid overtime that’s due you, the fact you may, under the law, have more than one employer may make a big difference in your case.

Instead of trying to hold one business owner legally responsible for problems you suffered, you may be able to hold two business owners responsible. This could be critical if one has little or no assets and the other is doing well financially.

Temporary Agencies

If you’re hired through a temporary service or employment agency you may be told, and you may sign paperwork to the effect that, the agency is your employer, not the company where you do the actual work. Depending on the facts, not the paperwork, that may, legally, be true or not.

An example of this is a case involving a staffing agency and its client, a hospital. The agency supplied nurses and other medical professionals to the hospital. Under an agreement between the parties these workers were to be considered the agency’s employees, not employees of the hospital. One of these workers was a nurse who was named as a defendant in a medical malpractice case.

The claim was presented to the hospital’s insurance company (Dimensions Assurance Ltd.), which denied coverage because the nurse wasn’t the hospital’s employee. The claim next was filed with the agency’s insurance company (Interstate Fire & Casualty Company), who defended the claim. Defense costs were close to $500,000 and the case settled for $2.5 million.

Interstate later sued Dimensions to recoup its losses, claiming the worker, under the law, was a hospital employee and covered by its insurance policy, so Dimensions should be the one paying the costs. Dimensions successfully argued to the trial court the nurse was not a hospital employee and not covered by its policy and the case was dismissed. Interstate appealed to the U.S. Court of Appeals, Fourth Circuit, which overturned the dismissal.

In the decision, the court stated:

• The term “employee” in the policy was unambiguous and the court turned to what’s known as the “right to control test” in which an employer is determined on whether or not it has a right to control the details of the work. Under this test, the alleged employer doesn’t actually have to exercise that control, only that it has the right to exercise control if it wants to.
• “There can be no question that Nurse Cryer qualifies as an employee of the Hospital under the right-to-control test.” The court found the hospital instructed her on the tasks that needed to be performed, supervised her work, could reassign her to any other duties and if her work was unsatisfactory, the hospital was free to dismiss her and request another nurse.
• Since Nurse Cryer was a hospital employee, she fell within Dimensions’ coverage. The dismissal was vacated and the case sent back to the trial court.

Even though there was contract language stating Nurse Cryer was an employee of the staffing agency, not the hospital, the appeals court looked past that and instead into the facts as to how she, and her work, was treated by the hospital and found it was her employer.

Franchises

Franchises come in all shapes and sizes. Though they are most famously restaurants, (such as McDonald’s) can be virtually any kind of business including printers, auto body shops, and dog groomers. They involve a local business owner (the franchisee) contracting with another company (the franchisor). The franchisee agrees to a long list of rules and requirements in exchange for using the franchisor’s business model, name and logo.

The list of rules and requirements often cover employees and could, arguably, include enough potential and actual control over the details of the work done at the business that, under the law, both the franchisee and franchisor could be considered the employer of those performing work.

The New Jersey Supreme Court looked at whether three men, supposedly independent contractors for Sleepy’s, LLC, who delivered mattresses were actually employees of the company under state wage and hour and unemployment compensation laws. Though a franchise wasn’t at issue in the case, how the court decided this case could be used if a worker at a franchise claims a franchisor is his or her employer.

The court stated that:

• It would decide the issue based on the “ABC test” proposed by the state’s Department of Labor (DOL). The test is based on subsections (A), (B), and (C) of New Jersey’s unemployment compensation law, which distinguishes independent contractors from employees.
• The test, unlike the right to control test, presumes a worker is an employee and puts the burden of proof on the alleged employer to show,
  • The worker has been and will continue to be free from control or direction over the performance of his or her service, under terms of any contract of service and in actual fact,
  • The service provided is outside the usual course of its business or the service is performed outside of all its places of business
  • The individual is customarily engaged in an independently established trade, occupation, profession or business.
• If a business can’t satisfy any one of the three criteria, the person would be classified as an employee.
• The decision states that the ABC test was chosen from many others that were proposed because it provides for greater income security for workers, which is the purpose of both state laws at issue.

If a restaurant franchisor were accused of being an employer, failing to live up to its legal obligations by a worker, the company may have a hard time proving its case under the first and third parts of the ABC test.

• A franchise agreement may include standards as to how food is prepared, how it’s presented, how clean a location is supposed to be, how patrons should be greeted and spoken to and the uniforms workers need to wear.
• Restaurant workers such as cooks and those involved with customer service are not normally independent contractors, they’re normally employees. They’re not like plumbers or accountants who sell their services to many customers and clients.

Facts over forms

These cases show that whatever paperwork and forms may have been filled out by the parties claiming a worker is employed by one entity but not another are not given much importance by the courts. Though the courts will look at difference situations, applying different laws in different ways, it will boil down to the facts and how a law applies to them.

If you believe your legal rights have been violated and think that you might have more than one employer at the same time contact our office to arrange a consultation. We accept credit cards and offer general appointments from 9 a.m. to 5:30 p.m., Monday to Friday, plus evening appointments during the week by pre-arrangement only.