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Third Circuit Establishes Joint Employment Test

By Daniel V. Johns and Kelly T. Kindig

In late June, the U.S. Court of Appeals for the Third Circuit considered the broad definition of “employer” under the Fair Labor Standards Act (FLSA) to determine when two employers jointly employ an employee, an issue that has been arising with increasing frequency as plaintiffs' lawyers seek to file sweeping collective actions encompassing parent corporations, subsidiaries, and affiliated entities.

The decision in In re Enterprise Rent-A-Car, No. 11-2883 (June 28 2012), announces a new test ' which the court dubbed “the Enterprise test” ' for determining joint employment under the FLSA. Drawing on its existing test for joint employment under the National Labor Relations Act (NLRA) and the Ninth Circuit's FLSA joint employment test set forth in Bonnette v. California Health & Welfare Agency, the Third Circuit instructed lower courts to analyze the following factors when considering whether a joint employment relationship exists:

  • Authority to hire and fire.
  • Authority to promulgate work rules and assignments and set employees' conditions of employment (compensation, benefits, and work schedules, including the rate and method of payment).
  • Involvement in day-to-day employee supervision, including employee discipline.
  • Actual control of employee records, such as payroll, insurance, or taxes.

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