The Third Circuit Expands the Test Applied to Determine a Joint Employer Under the FLSA


On June 28, 2012, in Hickton v. Enterprise Holdings, Inc., the United States Court of Appeals for the Third Circuit announced a test that it will apply to determine whether a company is a joint employer under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. 201, et seq., an issue of first impression in the Circuit. The Third Circuit’s new test modified the three-part measure used by the district court in making this determination which originally was set forth in Lewis v. Vollmer of America, No. 05-1632, 2008 WL 355607 (W.D. Pa. Feb. 7, 2008). The court fashioned its new standard for the Circuit after finding that the Lewis test was overly limited by focusing only on instances where an alleged joint employer exhibited direct control over employees. In the Third Circuit’s view, a parent’s indirect control over employees could, in an appropriate case, lead to its liability to employees of its subsidiaries. That proposition expands the risk to parent companies that joint employer status will be found.

Hickton, the lead plaintiff in a collective action, was an assistant branch manager employed at Enterprise-Rent-A-Car Company of Pittsburgh. Enterprise of Pittsburgh was one of a group of subsidiaries of Enterprise Holdings, Inc. (“Enterprise Holdings”), which supplied corporate and human resources services to its affiliates, charging them a fee for those services. In Hickton’s lawsuit, a group of employees comprised of “assistant branch managers” unsuccessfully claimed they were owed overtime wages and penalties, arguing that they were unlawfully misclassified as exempt employees. The employees sued both their respective direct employers — the local rental agency subsidiaries like Enterprise of Pittsburgh — and Enterprise Holdings, identifying Enterprise Holdings as a joint employer along with the local rental agency that directly employed them.

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