Tag: ABC Test

Massachusetts Supreme Judicial Court Rejects "A.B.C." Test for Determining Joint Employer Relationships The Massachusetts Supreme Judicial Court has recently confirmed that the Fair Labor Standards Act (FLSA) provides the correct framework for determining joint-employer status in wage law cases rather than the A.B.C. test, which is set forth in Massachusetts own "Independent Contractor Statute" G.L. c. 149, § 148B. In this case, a nationwide client-broker for independent direct marketing companies contracted with an outside consulting agency to provide regional sales and marketing services for its nationally based clients. In turn, this consulting agency chose to hire outside sales agents, which are classified as independent contractors, to perform direct sales services on behalf of the client-broker company. These independent contractors signed a subcontractor agreement with this company as well. These sales agents sued both the consulting agency which hired them as well as the client-broker with whom they had signed a sub-contracting agreement alleging that their classification as independent contractors was incorrect and that they had been denied minimum wages and overtime. Due to the fact that they had been hired by the consulting agency and not the client-broker, the plaintiffs argued that both should be held accountable for the violation as joint employers. The first thing which the Supreme Judicial Court noted about this case is that the relevant wage statutes do not provide a definition for an employer or expressly provide for the concept of "joint employers." Regardless, the court found that the issue of joint employment is still one to be considered under the state's law, which presented the question of what standard should be used to determine if such a relationship existed in this case. The plaintiffs urged the court to use the "A.B.C." test set out in the Massachusetts Independent Contractor Statute, which presumes that an individual is an employee unless its three separate tests are satisfied. This would greatly favor the plaintiff's case that they were employees of both companies. However, the court rejected this test due to its function. According to the court, the function of the A.B.C. test is to determine whether or not an individual's work is controlled by an entity or individual other than themselves. In contrast, the function of the joint employer test is to determine whether an individual that is subject to one entity may also be subject to the control of another. As such, using the first test as the exclusive tool in determining whether or not an entity is a joint employer would be inappropriate and opined that it would be like driving a screw with a hammer. The court instead found that based on the fact that the Massachusetts wage laws are modeled after the FLSA, the framework that is used in determining joint-employer status under the FLSA is more appropriate. Under the FLSA, courts consider the totality of the circumstances, including the analysis of four factors. These are: Whether an entity has the power to hire or fire a worker. Whether the entity controlled the worker's schedule, conditions of employment, or supervised the worker. Whether the entity sets the rate or method of payment. Whether the entity kept employment records. These factors are not dispositive but are simply tools for the court to help determine the nature of the relationship between a worker and entity. However, after considering them, the court found that the client-broker was not, in fact, a joint employer and, as such, was not responsible for the plaintiff's misclassification. Employer Takeaways This decision to apply the FLSA rather than the A.B.C. test is certainly causing relief. However, this case should remind Massachusetts employers of the significant penalties associated with misclassification. It is important to review independent contractors and external staffing agreements carefully to ensure that they make clear what the relationship is and that all involved understand. Did you know that Pre-employ offers resources to help employers stay compliant and incorporate fair chance hiring practices? Learn more by downloading our free resource guide on 5 Tips To Avoid FCRA Non-Compliance. STAY COMPLIANT WITH YOUR BACKGROUND CHECKS

Tag: ABC Test

Massachusetts Supreme Judicial Court Rejects “A.B.C.” Test for Determining Joint Employer Relationships

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