Client Alert

The Second Circuits New 6-Factor Test For Analyzing Joint Employer Liability Under the FLSA And Its Potential Impact on Legitimate Outsourcing Agreements

January 26, 2004

Carla R. Walworth and Neil B. Stekloff

In Zheng v. Liberty Apparel Co., the Second Circuit Court of Appeals created a new six factor test for assessing when businesses are liable as “joint employers” for Fair Labor Standards Act violations committed by their subcontractors. Zheng is particularly noteworthy in that the Court expressly recognized that literal application of its newly-formulated, six factor test might suggest joint employer liability under many legitimate outsourcing and subcontracting relationships. Although the Zheng Court went out of its way to say that this was not its intention, and that “normal” outsourcing agreements would not give rise to joint employer liability under the FLSA, its new test seemingly opens the door wide for aggrieved employees to argue that any legitimate outsourcing relationship is a “mere subterfuge” to avoid FLSA obligations and, therefore, creates joint employer liability.