Third Circuit Decides Two Precedential Employment Cases to Close Out November 2015

Over a span of two weeks at the end of last month, the Third Circuit Court of Appeals issued two key opinions concerning oft-scrutinized areas of employment law — rights attendant to employer-employee relationships and application of the Fair Labor Standards Act (“FLSA”).

In the first of those cases, Fausch v. Tuesday Morning, Inc., the Third Circuit adopted and utilized the Darden test to assess whether a temporary employee, who was hired, paid and assigned to work at a certain retailer through a temporary staffing agency, had an employment relationship with the defendant-retailer that could give rise to the employee asserting Title VII discrimination claims.  In a 2-1 decision, the Court vacated a lower court denial of the plaintiff-temporary employee’s Title VII discrimination claims and remanded the matter, ruling that there was sufficient evidence in the record to conclude that the defendant-retailer was the plaintiff’s “joint employer” along with the staffing agency.  In reaching this conclusion, the Court analyzed the relationship between the parties under common-law agency principles, an analysis commonly referred to as the “Darden test.” The Darden test, first set forth by the United States Supreme Court in Nationwide Mutual Insurance Co. v. Darden, demands that courts generally assess the level of control and supervision that an employer exercises over the employees in question through a multi-factor, fact-intensive inquiry. For example, as the Court of Appeals noted in Fausch, the most important factors of the Darden test include “which entity paid the [employees’] salaries, hired and fired them, and had control over their daily employment activities.”  In applying the Darden test to the facts at hand, the Court concluded that while the plaintiff was paid by the staffing agency, “he worked under the direct supervision and control” of the defendant-retailer who indirectly paid the plaintiff’s wages, had the power to “eject” the plaintiff from its store and provided the plaintiff’s “assignments, directly supervised him, provided site-specific training, furnished any equipment and materials necessary and verified the number of hours he worked on a daily basis.” Such “joint employer” status subjected the defendant-retailer to discrimination claims from the plaintiff-temporary employee in the same way as a traditional employee, thereby equipping temporary employees in the Third Circuit with an expanded set of legal rights in the workplace.

Less than one week after the Fausch ruling, in another split decision in Babcock v. Butler County, the Third Circuit adopted the “predominate benefit test” to determine whether an employer must compensate a prison guard for 15 minutes of unpaid time during his/her one hour meal break. In affirming the lower court’s dismissal of the plaintiff’s FLSA claims, the Court ruled that, notwithstanding minor restrictions on the plaintiff’s meal break, such as requirements that the employee obtain permission before leaving the premises, remain in uniform, remain “in close proximity to emergency response equipment” and otherwise remain “on call to respond to emergencies,” the employer was not obligated under the FLSA to compensate the plaintiff for the unpaid time.  In so holding, the Court applied the predominate benefit test and assessed, by weighing the benefits each party received from the meal break, whether the employee’s time during the meal break “is spent predominately for the employer’s benefit or for the employee’s.”  The Court compared the restrictions on the plaintiff’s meal break to a number of other considerations, including that the plaintiff could leave the premises with permission, could eat away from his/her post, and, most compellingly, that the existence of a collective bargaining agreement between the parties provided for “a partially-compensated mealtime and mandatory overtime pay if the mealtime is interrupted by work.” Weighing these factors, the Court concluded that, on balance, the plaintiff was the primary beneficiary of the break and the 15 minutes of unpaid time was therefore not compensable time under the law.

Employers and employees should take note of these recent developments as these decisions will certainly impact employer-employee relationships throughout the Third Circuit going forward.