Massachusetts Court of Appeals Broadly Interprets “Joint Employment” to Hold Management Company Liability: 6 Steps to Minimize Your Risk | JD Supra

The Massachusetts Court of Appeals just handed down a decision that significantly expands when an entity can be found to be a “joint employer” of another entity’s employees under state wage laws. The June 13 decision, coupled with guidance from an earlier decision by the Massachusetts Supreme Judicial Court, creates a comprehensive framework you can follow to determine whether you may face a joint employment problem. What does your business need to know about the increasing likelihood that you could be considered a joint employer – and what are the six best practices you can follow to minimize your risk?

How did we get here?

IN Tran v. Jennings Road Management Corp., the Massachusetts Court of Appeals agreed that Jennings Road Management Corp . (JRM) was a joint employer of plaintiff, Sakiroh Tran, a parts consultant at a Boston-area car dealership. The court’s June 13 opinion applied the totality of the circumstances test from a 2021 Supreme Judicial Court opinion we covered here, which considers four key factors:

1. Power to hire and fire employees
2. Supervision and control over working hours or conditions of employment
3. Determination of the fee and method of payment
4. Maintenance of employment records

The court found that JRM exercised substantial control over the terms and economic aspects of Tran’s employment, thus meeting the criteria for joint employment.

The decision of the Supreme Judicial Court 2021 and its implementation in Trans provide a clear message to employers – the Massachusetts Appellate Courts are interpreting the concept of “joint employment” quite broadly:

• Power to hire and fire: IN Trans, the dispositive issue was the fact that JRM drafted the employee handbook used by Tran’s current employer. Thus, even passive involvement in the design (but not the implementation) of employment policies supported the common finding of employment.
• Supervision and control: The manual drafted by JRM also led the Court to conclude that JRM had sufficient supervision and control. Although the JRM was not the entity making decisions affecting the employee, the employer’s actual decisions were made in accordance with the handbook.
• Payment rate and method: Entities involved in determining wage rates or methods, even indirectly, may be considered joint employers. The court concluded that JRM’s review of wage schedules, influence over payroll decisions, and uniformity in other markets managed by JRM contributed to this factor weighing in favor of joint employment.
• Data maintenance: JRM’s management of the payroll and employment documentation systems also reinforced the Court’s finding of joint employer status.

6 Best Practices for Avoiding Shared Employment Findings

You can take some proactive steps to minimize the risk of being classified as a joint employer:

1. Clearly define contractual relationships

• Draft contracts that expressly state the independent nature of subcontractors, staffing agencies or any related entities. Clearly describe the scope of services and responsibilities.
• Avoid clauses that suggest joint control over employment, supervision, or terms of employment.

2. Limit direct control over subcontractor employees

• Ensure that subcontractors, staffing agencies and related entities retain primary control over the hiring, firing and day-to-day management of their employees.
• Avoid involvement in direct supervision or scheduling of subcontractor employees.
• Avoid uniform employment policies between related entities and subcontractors.

3. Preservation of Operational Independence

• Maintain separate business operations and avoid sharing managerial or administrative functions with subcontractors.
• Ensure that any training or policy enforcement is carried out by the subcontractor or agency, not the primary employer.

4. Implementation of Compliance Audits

• Conduct regular audits of subcontractor agreements and practices to ensure compliance with independent contractor guidelines.
• Document compliance efforts and corrective actions taken to address any issues.

5. Management and staff education

• Train managers and supervisors on the importance of maintaining the independence of subcontractors and their employees.
• Develop policies that reinforce the specific roles and responsibilities of subcontractors.

6. Consult legal counsel

• Regularly review subcontractor relationships and practices with legal counsel to ensure they comply with current laws and regulations.
• Seek legal advice when drafting or revising contracts to mitigate the risks of joint employment.

CONCLUSION

Recent decisions from the Court of Appeals and the SJC underscore the importance of understanding and correctly applying the joint employment test under Massachusetts law. By adopting best practices and maintaining clear boundaries in dealing with subcontractors, employers can better navigate the complexities of joint employment and avoid unintended liabilities.