A Local Victory For Outsourcing Businesses

Posted on March 28, 2011

Due to the nature of their affiliations, businesses that outsource particular tasks and functions are often joined as defendants in lawsuits filed by the outsourced entity’s own employees on the theory of “joint employership” found in the Fair Labor Standards Act (FLSA). In a victory for outsourcing companies, however, the U.S. District Court for the Western District of Pennsylvania recently rejected this theory of liability in the local case of Lepkowski v. Telatron Marketing Group, 2011 U.S.Dist. LEXIS 9388 (W.D. Pa. Feb. 1, 2011).

In Lepkowski, the plaintiff was employed as a phone operator in the Erie, Pennsylvania call center of Telatron Marketing Group, Inc., which boasts the banking giant Bank of America as one of its corporate clients. As such, 200 Telatron employees, including the plaintiff, were assigned to work exclusively on Bank of America accounts. The phone operators were paid on an hourly basis, however, the plaintiff alleged that the operators were not being compensated for approximately 15 minutes per day of time spent logging into the computer systems that they used throughout the work day. Consequently, the plaintiff filed suit against Telatron and Bank of America under a joint employer theory, claiming that the pay practices violated the FLSA and the Pennsylvania Minimum Wage Act. In its motion to dismiss, Bank of America, conversely, asserted that it cannot be liable under theFLSA because it was not the plaintiff’s “employer” within the meaning of that statute.

The Western District Court acknowledged that the Third Circuit Court of Appeals (which encompasses Pennsylvania) had not yet ruled on the appropriate legal test to determine joint employer status, but added that “joint employment is to be assessed in light of the totality of the circumstances.” It then applied factors from the tests utilized by the Second and Ninth Circuit Courts of Appeals. Citing the Ninth Circuit case of Bonnette v. Cal. Health & Welfare Agency, 704 F.2d 1465 (9th Cir. 1983), the Western District Court held that Bank of America (1) did not have the power to hire and fire Telatron employees; (2) did not supervise or control employee work schedules or conditions of employment; (3) did not determine the rate or method of payment; and (4) did not maintain employment records. Under the Second Circuit’s test found in Zheng v. Liberty Apparel Co., Inc., 355 F.3d 61 (2nd Cir. 2003), the Western District Court similarly found that the complaint failed to plead sufficient factual allegations to satisfy any of the seven joint employment factors analyzed in that case. Consequently, the Western District Court granted Bank of America’s motion to dismiss the plaintiff’s FLSA claim.

The decision in Lepkowski v. Telatron Marketing Group is a victory for all companies that outsource particular work functions. However, it should be restated that the Third Circuit Court of Appeals has not yet ruled on the appropriate legal test to determine joint employer status. Until it does, the specific circumstances surrounding the provision of services by an individual to an outsourcing company must be analyzed by looking at the “totality of the circumstances” and on a case-by-case basis in order to verify that the outsourcing business is truly independent.

Article written by Joseph V. Balestrino.

Labor & Employment Department Attorneys

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