Third Circuit Establishes 'Refined' Standard For Determining Whether A Joint Employment Relationship Exists Under The FLSA

In In re Enterprise Rent-A-Car Wage & Hour Employment Practices Litigation, No. 11–2883, 2012 WL 2434747 (3d Cir. June 28, 2012), the United States Court of Appeals for the Third Circuit established a "refined" test for determining whether joint employment exists under the Fair Labor Standards Act ("FLSA"). Applying this new standard, the Third Circuit affirmed the lower court's determination that defendant Enterprise Holdings, Inc. – the stockholder of thirty-eight domestic subsidiaries – was not a joint employer of its subsidiaries' assistant managers under the FLSA. Modifying and supplementing the tests set forth by the lower court and a sister circuit, the Enterprise test (1) establishes a flexible four-factor inquiry, and (2) considers all relevant evidence regarding the economic realities of the work relationship.

Background

The plaintiff Nickolas Hickton – a former assistant branch manager at the Enterprise-Rent-a-Car company of Pittsburgh – filed a nationwide collective class action under the FLSA in the Western District of Pennsylvania. Hickton alleged on behalf of the class that Enterprise Rent-a-Car and its parent company, defendant Enterprise Holdings, failed to pay him and the class members overtime wages. Enterprise Holdings moved for summary judgment on the basis that it was not a "joint employer" of the plaintiffs and, therefore, could not be held liable under the FLSA.

Enterprise Holdings does not directly rent or sell vehicles; rather, these functions fall within the purview of its thirty-eight subsidiaries. Enterprise Holdings, however, directly and indirectly supplies administrative services and support to its subsidiaries. These services include business guidelines, employee benefit plans, rental reservation tools, a central customer contact service, insurance, technology, and legal services. The lower court determined that the use of these services is "optional"; although when services are provided, each of the subsidiaries pays Enterprise Holdings corporate dividends and management fees.

Enterprise Holdings has a human resources department, which also provides various services to subsidiaries, including preparation of job descriptions, establishment of best practices, and preparation and distribution of compensation guides. The H.R. department also negotiates health insurance plans which are offered to employees of Enterprise Holdings, as well as to employees of its subsidiaries. Participation in these plans is not...