Employer liability for the actions of their subcontractors varies from state to state. Generally, employers are not liable for the wage violations of subcontractors or independent contractors.
However, most jurisdictions will make employers liable for a subcontractor’s violations if the court finds that the employer should be considered a “joint employer” of the subcontractor. Under the “joint employer” test, the court uses several factors to decide if the employer exercises enough control over the subcontractor’s actions to warrant legal liability for their actions. Some of these factors include:
- The employer and subcontractor jointly determine the power to direct, control, or supervise the worker;
- The employer and subcontractor jointly have the power to hire or fire the worker or modify the terms of the worker's employment; and
- The employer and subcontractor share functions ordinarily carried out by an employer, such as:
- Handling payroll;
- Providing workers compensation insurance;
- Paying payroll taxes; and
- Providing equipment/materials necessary to complete work.
But, the law surrounding the joint employer test is evolving, due to court rulings. Some jurisdictions have a specific type of joint employer test, and others have found the joint employer test to be insufficient.
Local State Exceptions to the Joint Employer Test
While most jurisdictions use the joint employer test to determine if an employer should be liable for a subcontractor’s wage violations, some jurisdictions have passed laws increasing employer liability in some circumstances.
For example, in states with "prevailing wage" laws, employers are often responsible for ensuring that subcontractors follow this law. Prevailing wage laws require contractors in public works projects to pay the standard market wage for a certain type of work.
In addition, some states have passed legislation targeting specific industries due to frequent violations of workers’ rights. For instance, in New York and California, clothing manufacturers are liable for minimum wage violations by contractors and subcontractors.
Fair Labor Standards Act
In addition to facing liability in court, employers may also be subject to legal action by the U.S. Department of Labor under the Fair Labor Standards Act (FLSA) for wage violations committed by a subcontractor.
The FLSA is a federal law and therefore only applies to employers engaging in interstate commerce and exceed $500,000 in annual business. The FLSA requires non-exempt workers receive a minimum wage of $7.25 per hour and overtime pay (minimum of 1 ½ times ordinary pay) for working more than 40 hours in a workweek.
If a subcontractor fails to follow these requirements, the Department of Labor may impose penalties such as a monetary fine, on the employer that violated the law.
Should I Consult an Attorney?
Liability for wage violations committed by a subcontractor is a complicated issue and can have different variations depending on the state. If you have been named in a lawsuit or labor complaint to recover wages, you should talk to an employment law attorney immediately. An experienced attorney can inform you of any possible rights or defenses, gather physical evidence, depose witnesses, and advocate for your interests in any necessary legal proceedings.