The Massachusetts Appeals Court recently found that a car dealership and its contracted management company were joint employers of the plaintiff, a “parts advisor” who worked in the dealership’s parts department.  The dealership and the management company jointly appealed this decision to determine whether the management company was a joint employer alongside the car dealership.

This ruling is significant for Massachusetts employers because it clarifies the criteria for joint employment, potentially impacting how companies structure their relationships with contracted entities and manage their employees.

Joint Employment

The issue of joint employment arises in many contexts and has been a particularly contentious in recent years (see, e.g., court strikes down NLRB joint employer rule). It appears in many different contexts at the federal level, but there is little consensus on the definition of joint employment. The US Department of Labor (DOL) adopted a final rule defining joint employment for purposes of the Fair Labor Standards Act (FLSA) in 2020.

Massachusetts Adopts the “Totality of the Circumstances” Test

The Massachusetts Supreme Judicial Court in 2021 adopted the “totality of the circumstances” test in a decision to determine whether two or more entities are joint employers. This test uses the following four factors as a framework:

Whether the alleged employer (in this case, the management company)…

1. Had the power to hire and fire 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.

The greater the control exhibited by the alleged employer in these areas, the more likely it will be considered a joint employer.

Case Details and Court Decision

The case before the Appeals Court involved two related companies; the car dealer himself was the president of both companies.  That aspect of their relationship was not a factor considered by the court in reaching its decision.  Instead, the court cited certain activities of the parties that rendered them joint employers:

1. The dealership issued the same handbook to its employees and to those of the management company.
2. The management company handled the human resources function of the dealership.
3. The management company handled certain aspects of payroll and benefits for the dealership and maintained its personnel records.

The court found that the management company exercised significant control over the dealership employees’ terms and conditions, thus qualifying as a joint employer.

The Appeals Court did not decide the wage claim brought by the employee and others, who were paid in whole or in part on a commission basis. A lower court will determine their claim for unpaid overtime and premium pay on Sundays, with the management company and the dealership as defendants.

This case serves as a cautionary tale for employers with complex organizational structures or those contracting closely with another employer. Blending functions, while efficient, can create joint employment risks.

More Resources

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