Tuesday, August 29, 2006

Saudi Prince and Security Company are Liable For Overtime as Joint Employers Fourth Circuit Rules

The issues in Schultz v. Capital International Security, were: (1) whether a Saudi Prince and a Security company were joint employers for purposes of the FLSA; and (2) whether the security guards were employees or independent contractors.

According to the Fourth Circuit, because both Prince and the Security Company ("CIS") shared control over the guards, they should be considered a joint employer

Both the Prince and CIS were involved in the hiring of agents.. . CIS advertised for agents and screened responses, which were forwarded to the detail leader. The detail leader, who was on the CIS payroll and reported to [the Prince's representative], interviewed selected applicants; the Prince's representative]had the final word on hiring. [The Prince's representative]generally handled agent work schedules, compensation, discipline, and terminations, but CIS played some role in these matters. CIS maintained the authority to discipline agents and change the terms of their employment.

With respect to the independent contractor issue, the Court easily determined that the guards were employees because the Prince and CIS "exercised nearly complete control over how the agents did their jobs."

This decision, while not creating new law, is important because it clarifies when two entities can be considered a "joint employer" for overtime purposes, even if one entities has no responsibilities for payroll. The Court's reasoning could certainly be applied to a temporary agency/employer relationship.

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