Case: Hall v. DIRECTV, LLC., No. 15-1857 (4th Cir. 2017)

Issues: Joint Employers, W-2 vs. 1099 Independent Contractor, FLSA Overtime

Court Holding: The 4th circuit court reversed the district court’s dismissal of Plaintiffs’ FLSA claim holding that, for the pleading stage, the plaintiffs adequately established that they were jointly employed by defendants. Moreover, the plaintiffs also provided sufficient evidence to establish uncompensated overtime work.

Employment Counsel: For FLSA purposes, two employers are joint employers if they codetermine the key terms and conditions of an employee’s job. Workers are properly classified as “employees” (instead of “independent contractors”) when they are economically dependent on their employer. To proceed with a claim for uncompensated overtime, a plaintiff must submit “sufficient factual allegations to support a reasonable inference” that she worked uncompensated overtime hours.

Case Summary:  DIRECTV hires several technicians through a pyramid structured network where it contracts with intermediary entities that then contract directly with individual technicians. Plaintiffs included intermediary providers, individual technicians or some combination of these. DIRECTV controlled nearly every aspect of Plaintiff’s work. It established hiring standards, required DIRECTV logos on technicians’ uniform and vehicles, assigned work to technicians through DIRECTV’s centralized system, and was the principal source of each provider’s income.

Plaintiffs alleged that they were regularly deprived of overtime pay while jointly employed by DIRECTV and DirectSat (collectively “Defendants”) in violation of the FLSA. The 4th circuit reversed the district court’s dismissal of plaintiffs’ complaint holding that the plaintiffs demonstrated that they were (1) jointly employed by defendants and (2) were employees, not independent contractors. Moreover, they provided sufficient evidence that they worked uncompensated overtime hours.

1. Employment Relationship: The district court erroneously approached this case by first determining whether the plaintiffs were employees or independent contractors with respect to each defendant individually, and then analyzing whether the plaintiffs were jointly employed by the defendants. The circuit court rejected this approach and determined that the proper analysis was to first determine whether the plaintiffs were jointly employed by the defendants, and then to determine whether the plaintiffs were employees or independent contractors.

(1) Joint-Employment Determination: To determine whether a plaintiff is jointly employed by two or more defendant entities, a court must determine whether the entities in question “codetermined the key terms and conditions” of the plaintiff’s job. The circuit court identified six factors to help lower courts determine this question: (1) whether putative joint employers share ability to direct or control workers (2) whether putative joint employers jointly determine the hiring or firing of workers or modify the terms or conditions of their employment (3) the “degree of permanency and duration of the relationship” between the two employers (4) whether one putative joint employer is controlled by another putative joint employer (5) ownership of premises that work is performed on (6) whether putative joint employers jointly determine “functions ordinarily carried out by an employer,” i.e, paying payroll taxes, providing materials to complete work, offering worker’s compensation insurance.  

Since the defendants codetermined essential elements of the plaintiffs’ work (such as hiring and firing standards, compensation, uniform, and work assignment) the circuit court determined that the defendants were not “completely disassociated” from one another.

(2) Independent Contractor vs. Employee Determination: If two entities codetermined a plaintiff’s work, the next question to consider is whether “the two entities’ combined influence…render the worker an employee as opposed to an independent contractor.” If the two entities are not joint employers, then the employee vs. independent contractor relationship of the plaintiff to each defendant must be assessed separately. The circuit court concluded that the plaintiffs could be classified as employees because they were “economically dependent” on defendants as opposed to being “in business for themselves.”

1. Overtime Pay: The defendants argued that the plaintiffs’ FLSA claims should be dismissed due to a failure to provide sufficiently detailed documentation of their uncompensated work hours. After reviewing different courts’ approach to this problem, the circuit court decided that in order to present a successful overtime claim, a plaintiff must do more than merely allege uncompensated overtime; they must also submit “sufficient factual allegations to support a reasonable inference” that she worked uncompensated overtime hours. However, the court emphasized that the plaintiff need not provide such detailed information that, for example, she would be able to identify the particular week in which she accrued the uncompensated overtime.

Applying this standard, the circuit court concluded that it would be inappropriate to grant a motion to dismiss in this case because the plaintiffs had offered a sufficient “level of granularity,” in describing their uncompensated overtime i.e., their regular work schedule, pay rate, and approximation of overtime hours regularly worked each week.

For additional information about this case or other employment law matters, please contact Merritt Green at mgreen@gcpc.com or (703)556-6505.  Mr. Green leads General Counsel, P.C.’s Employment Law Practice and has been representing employers (and occasionally employees) for over 18 years.