Subcontracting Trouble: Can Your Subcontractors' Employees Be Considered Your Employees for Wage and Hour Purposes?
If a company subcontracts some of its functions, can that company be liable for its contractor’s violations of labor law? In a word—yes. Especially when those functions are provided on-site and the companies are found to be a joint employers.
We blogged about this situation back in 2009 when Partners HealthCare Systems agreed to pay $2.7 million in a case in which employees who were shared between affiliated health care companies were not properly paid overtime wages. The issue was whether there was a “joint employment relationship” between the entities such that all the hours an employee worked counted towards potential overtime pay—rather than splitting their hours among the entities.
The same “joint employer” principal can apply between a company and its contractors. That’s what Google is finding out. The search giant was sued by a facilities coordinator for hundreds of hours of allegedly unpaid overtime wages. It’s not clear, however, that the plaintiff actually worked for Google. She claims to have been hired by Google, and worked at a Google facility, but was apparently on the payroll of two different contractors hired by Google to provide facilities-related services. Thus, according to Google, she was not their employee.
However, regardless of whose name was on her paystubs, if she “really” worked for Google—that is, if looking at all the facts of the situation, she was a Google employee, and her “employment” by one or another contractor was just an accounting and administrative convenience—then Google would be liable for any unpaid overtime . . . or jointly liable if it is found to be a joint employer of the individual it thought was employed by its subcontractor.
Of course, the plaintiff and her attorneys named the other two companies, too, so they can recover from them if a court concludes that Google was not actually her employer—or that they were all joint employers. Better safe than sorry, when litigating.
The lesson for employers, especially given that it’s common now for a company to focus on its “core competencies” and subcontract maintenance, accounting, mail room, etc., is to make sure that your contractors obey labor and employment laws. If not, you may be contracting for liability as well as for services.
