Opinion ID: 784757
Heading Depth: 3
Heading Rank: 2

Heading: Need for Remand

Text: 35 We conclude, for the reasons set forth below, that the District Court erred when, based exclusively on the four factors mentioned in Carter, it determined that the Liberty Defendants were not, as a matter of law, joint employers under the FLSA. In our view, the broad language of the FLSA, as interpreted by the Supreme Court in Rutherford, demands that a district court look beyond an entity's formal right to control the physical performance of another's work before declaring that the entity is not an employer under the FLSA. Moreover, as explained below, neither Carter nor Herman supports the application of a rigid four-part test in the instant case. In those cases, we held only that the four factors applied by the District Court in this case can be sufficient to establish employer status. We did not hold, nor under Rutherford could we have held, that a positive finding on those four factors is necessary to establish an employment relationship. Accordingly, the District Court's judgment in favor of the Liberty Defendants must be vacated.
36 As noted above, the relevant provision of the FLSA, 29 U.S.C. § 203(g), defines employ as including to suffer or permit to work. This is `the broadest definition [of `employ'] that has ever been included in any one act,' United States v. Rosenwasser, 323 U.S. 360, 363 n. 3, 65 S.Ct. 295, 89 L.Ed. 301 (1945) (quoting 81 Cong. Rec. 7657 (1937) (statement of Sen. Hugo L. Black)), 5 and it encompasses working relationships, which prior to [the FLSA], were not deemed to fall within an employer-employee category, Walling v. Portland Terminal Co., 330 U.S. 148, 150-51, 67 S.Ct. 639, 91 L.Ed. 809 (1947). 37 Measured against the expansive language of the FLSA, the four-part test employed by the District Court is unduly narrow, as it focuses solely on the formal right to control the physical performance of another's work. That right is central to the common-law employment relationship, see Restatement of Agency § 220(1) (1933) (A servant is a person employed to perform service for another in his affairs and who, with respect to his physical conduct in the performance of the service, is subject to the other's control or right to control.), and, therefore, the four-factor test may approximate the common-law test for identifying joint employers. However, the four-factor test cannot be reconciled with the suffer or permit language in the statute, which necessarily reaches beyond traditional agency law. See Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 326, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992) (noting that the suffer or permit to work formulation stretches the meaning of `employee' to cover some parties who might not qualify as such under a strict application of traditional agency law principles); Bartels v. Birmingham, 332 U.S. 126, 130, 67 S.Ct. 1547, 91 L.Ed. 1947 (1947) (explaining that, under the economic reality test, employees are not limited to those who are subject to the physical control of an employer). Indeed, the narrow approach used by the District Court may be more rigid than the common-law approach. 6
38 Rutherford confirmed that the definition of employ in the FLSA cannot be reduced to formal control over the physical performance of another's work. In Rutherford, the Supreme Court held that a slaughterhouse jointly employed workers who de-boned meat on its premises, despite the fact that a boning supervisor — with whom the slaughterhouse had entered into a contract — directly controlled the terms and conditions of the meat boners' employment. Specifically, the supervisor, rather than the slaughterhouse, (i) hired and fired the boners, (ii) set their hours, and, (iii) after being paid a set amount by the slaughterhouse for each one hundred pounds of de-boned meat, paid the boners for their work. Rutherford, 331 U.S. at 726, 730, 67 S.Ct. 1473. 39 In determining that the meat boners were employees of the slaughterhouse notwithstanding the role played by the boning supervisor, the Court examined the circumstances of the whole activity, id. at 730, 67 S.Ct. 1473, but also isolated specific relevant factors that help distinguish a legitimate contractor from an entity that suffers or permit[s] its subcontractor's employees to work. First, the Court noted that the boners did a specialty job on the production line; that is, their work was a part of the integrated unit of production at the slaughterhouse. Id. at 729-30, 67 S.Ct. 1473. The Court noted also that responsibility under the boning contracts passed from one boning supervisor to another without material changes in the work performed at the slaughterhouse; that the slaughterhouse's premises and equipment were used for the boners' work; that the group of boners had no business organization that could or did shift as a unit from one slaughterhouse to another; and that the managing official of the slaughterhouse, in addition to the boners' purported employer, closely monitored the boners' performance and productivity. Id. Based on its analysis of these factors, the Court imposed FLSA liability on the slaughterhouse. 40 Like the case at bar, Rutherford was a joint employment case, as it is apparent from the Supreme Court's opinion that the boners were, first and foremost, employed by the boning supervisor who had entered into a contract with the slaughterhouse. See id. at 724-25 (explaining that the boning supervisor exercised the prerogatives of an employer, including hiring workers, managing their work, and paying them). Rutherford thus held that, in certain circumstances, an entity can be a joint employer under the FLSA even when it does not hire and fire its joint employees, directly dictate their hours, or pay them. 7
41 Carter and Herman are consistent with Rutherford, and neither case supports the application of the test used by the District Court in the circumstances presented in the instant case to negate employer liability. The question before us in Carter was whether prisoners who performed work for an educational institution could be considered employees of that institution under the FLSA. Carter, 735 F.2d at 12. In rejecting the district court's conclusion that they could not be considered employees as a matter of law, we did not purport to identify all factors that could bear on the employer status question. Instead, we stated that the economic reality test  include[s]  an inquiry into the four factors. Id. (emphasis added). We then determined that summary judgment in favor of the defendant was inappropriate considering that the defendant exercised most of the typical employer prerogatives encompassed by the four factors. Id. at 14-15. Carter thus stands solely for the proposition that the four factors applied by the District Court in the instant case can be sufficient to establish employer status. Carter did not hold, nor could it have held in light of Rutherford, that those factors are necessary to establish an employment relationship. 8 42 In our more recent decision in Herman, moreover, we affirmed the District Court's determination after a bench trial that a company chairman jointly employed the company's employees where the chairman exercised three of the four employer prerogatives identified in Carter. In doing so, we reiterated that economic reality is determined based upon all the circumstances, [and] any relevant evidence may be examined so as to avoid having the test confined to a narrow legalistic definition. Herman, 172 F.3d at 139 (emphasis in original). Thus, as in Carter, we indicated in Herman that where the four factors weigh in favor of a district court's finding of joint employment, that finding will not be disturbed on appeal. We did not suggest — indeed, we expressly denied — that the four factors borrowed from the Ninth Circuit in Carter are the exclusive touchstone of the joint employment inquiry under the FLSA. 43 Because the District Court in the instant case interpreted our precedents to demand an exclusive four-factor test, we vacate its judgment and remand for further proceedings.