A recent $22.4 million tentative settlement entered into by three California grocery chains and 2,100 illegal alien contract janitors is another example of the success plaintiffs are having with the record number of Fair Labor Standards Act (FLSA) collective actions being filed against employers. The settlement suggests that courts are willing to look past an employee’s independent contractor status and find that a company is a "joint employer" and liable for the FLSA violations of its contractor. It also signals that employers cannot avoid liability in an FLSA collective action just because the plaintiffs are illegal immigrants.

In Flores v. Albertsons, Inc., No. CV 01-00515 (C.D. Cal. 2002), a cleaning services company contracted with Albertsons, Ralph’s and Vons to provide nighttime janitorial services. The 2,100 janitors who serviced the grocery stores, primarily undocumented workers from Mexico, were designated "independent contractors." The janitors disputed their independent contractor status and claimed that the grocery stores were "joint employers" who violated the FLSA by failing to pay them overtime even though they worked on average over 70 hours a week. The janitors also claimed that they were paid an average of $3.50 an hour, in cash with no taxes withheld, and were not given vacation days or health insurance.

Under the FLSA, a joint employer is individually responsible for complying with the FLSA. 29 C.F.R. § 791.2(a). In determining whether an entity is a joint employer the courts consider whether it directly or indirectly hires and fires employees, controls or modifies schedules and working conditions, determines pay rates or methods of payment, and maintains employment records. Courts also look at whether the "premises and equipment" of the entity are used for the work, whether the employees’ work is integral to the entity’s business, and the permanence of the working relationship. In Flores, whether the grocery chains were joint employers was critical for the plaintiffs because the janitorial services company had declared bankruptcy, leaving the grocery chains as the only "deep pockets."

The grocery chains filed motions for summary judgment, arguing that they were not joint employers because the janitors were independent contractors employed and controlled by the janitorial services company. The motions were denied because the court found that merely designating employees independent contractors is not dispositive, and because there were significant questions about whether the grocery chains had control over the janitors while they were in the stores. Although the stores lacked authority to hire or fire, dayto- day supervision over the janitors came principally from the grocery store managers. The court also found that equipment of the grocers was often used to perform janitorial tasks, and that there was some permanence in the working relationship as janitors worked at the same stores for extended periods of time. While not integral to the business of running a grocery store, the court noted the "practical necessity" of keeping a store clean.

Denial of summary judgment, which likely motivated the large settlement, may cause problems for other employers and their lawyers as they confront similar suits. Wal-Mart is currently defending against a RICO (Racketeering Influenced Corrupt Organization) action filed by undocumented janitors from Brazil, Czech Republic, Mexico, Mongolia and Poland, who claim that Wal-Mart and its janitorial contractors are "joint employers" and that both are liable for violating overtime laws. As did the grocery chains in Flores, Wal-Mart claims that it did not employ the janitors and is not a joint employer.

Flores serves as a warning that employers may not rely on contracting agencies as a shield against claimed FLSA violations. Employers should examine their relationships with contractors to ensure that the contractors comply with state and federal wage and hour laws, and that they solely control hiring and firing decisions, working conditions, pay rates, methods of payment, administration of pay, and completion of the job. If these responsibilities reside in or are shared by the employer, joint-employer status may follow.

The Flores settlement also is a reminder that illegal immigrant status does not preclude a worker from successfully pursuing an FLSA collective action. In Flores, the court made clear that "the protections of the FLSA are available to citizens and undocumented workers alike." Relying on the U.S. Supreme Court decision in Hoffman Plastics, Inc. v. National Labor Relations Board, 535 U.S. 137 (2002), the grocery chains argued that the janitors’ status as illegal immigrants was relevant to the lawsuit because it limited back pay liability. In Hoffman, the Supreme Court had held that the NLRB could not award back pay to undocumented workers unlawfully terminated due to participation in a union organizing campaign, reasoning that federal immigration policy as expressed by Congress in the Immigration Reform & Control Act foreclosed "backpay to an illegal alien for years of work not performed, for wages that could not have been earned, and for a job obtained in the first instance by a criminal fraud."

The Flores court distinguished Hoffman because the janitors had not been terminated and were not seeking back pay for work not actually performed.

The Flores settlement teaches that employers should not cut corners in their arrangements with contract agencies and contract employees. Employers must be proactive in ensuring that their own practices and policies comply with the FLSA and immigration laws and that their contracting employers also comply with such laws.

Vedder Price is highly experienced in defending against FLSA collective actions and has successfully challenged such actions at all stages of litigation. If you have questions about the FLSA, have received notice that an employee is pursuing a collective action, or have questions about collective or class actions generally, please contact Joe Mulherin, Dick Schnadig, Mike Cleveland, or any other Vedder Price attorney with whom you have worked. For questions related to immigration and the IRCA, please call Gabrielle Buckley who chairs our Business Immigration practice.

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