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Third Circuit Court of Appeals Determines if Two or More Employers are Joint Employers Under the FLSA

In In re Enterprise Rent-A-Car, the Third Circuit Court of Appeals has determined a test to decide when two enterprises have joint employment under the Fair Labor Standards Act (FLSA).

Nickolas Hickton worked as an assistant branch manager for Enterprise-Rent-a-Car Company. In 2007, Hickton filed a nationwide collective class action under the FLSA against Enterprise Holdings, Inc., the parent company of Enterprise-Rent-a-Car Company of Pittsburgh, for violating the FLSA by failing to pay required overtime wages to its branch managers and assistant managers, later amended to just the assistant managers, by misclassifying them as exempt.

Enterprise Holdings supplied administrative services, including business guidelines, and support to its subsidiaries who rented and sold vehicles. Though the use of the services was optional, subsidiaries did pay corporate dividends and management fees to Enterprise Holdings. Additionally, the Board of Directors for every subsidiary was composed of three C-level executives with Enterprise Holdings who “recommended” several business guidelines to its subsidiaries. For instance, at a 2005 meeting attended by representatives of Enterprise Holdings and its subsidiaries, Enterprise Holdings “recommended” that the subsidiaries not pay overtime wages to “Assistant Managers” and “Assistant Branch Managers” who were employed by subsidiaries other than the California subsidiaries.

The District Court first looked to the FLSA. Under the FLSA, an employee who worked in excess of 40 hours in a workweek shall be compensated for the excess hours at not less than one and one-half times the regular rate at which he or she is employed. The FLSA also defined an employer as “any person acting directly or indirectly in the interest of an employer in relation to an employee.” 29 U.S.C. ยง 203(d).

Furthermore, an employee could have two or more employers if the employers shared or co-determined those matters governing essential terms and conditions of employment. N.L.R.B. v. Browning-Ferris Indus.of PA. Looking at the Ninth Circuit’s Bonnette v. California Health & Welfare Agency, which created a test for determining whether an employer was a joint employer under the FLSA, the District Court fashioned their own test. The employer was a joint employer if the employer had:

1. the authority to hire and fire employees, promulgate work rules and assignments, and set conditions of employment, including compensation, benefits, and hours;
2. day-to-day supervision of employees, including employee discipline; and 3. control of employee records, including payroll, insurance, taxes and the like.

Enterprise Holdings had no authority to hire or fire assistant managers, no authority to promulgate work rules or assignments, and no authority to set compensation, benefits, schedules, or rates or methods of payment. Furthermore, Enterprise Holdings, Inc. was not involved in employee supervision or employee discipline, nor did it exercise or maintain any control over employee records.

The Third Circuit Court of Appeals upheld the District Court’s finding that Enterprise Holding was not an employer of the plaintiffs and therefore not liable for any alleged overtime under the FLSA.

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