The Missouri Supreme Court Rules That Parties May Have a Duty as a "Joint Employer" With Its Contractors Pursuant to the Missouri Minimum Wage Law

ABSTRACT: Individuals and businesses relying upon contractors to provide labor services may be exposing themselves to liability if these contractors fail to pay their employees in accordance with the Missouri Minimum Wage Law.

On August 19, 2014, the Missouri Supreme Court overturned a summary judgment in the case of Andro Tolentino v. Starwood Hotels & Resorts Worldwide, et al., No. SC93379, ruling that a hotel chain may be liable to a non-employee plaintiff as a “joint employer” pursuant to the Missouri Minimum Wage Law (MMWL), Missouri Revised Statutes § 290.500, et seq. 2007. This ruling is a potential pitfall to individuals and businesses engaging contractors that do not comply with State and Federal law.

Individuals and businesses in Missouri looking to insulate themselves from the potential burdens of employing labor forces by contracting with other parties for these services need to be aware of their role as a potential “joint employer” for purposes of the MMWL. As the Andro case points out, contractors that do not properly comply with the provisions of the MMWL could expose these individuals and businesses to liability to the contractor’s employees if the contractor does not comply with the MMWL, even when these individuals and businesses may exercise reasonable good faith efforts themselves to comply.

The Missouri Minimum Wage Law

Plaintiff Tolentino argued that, along with his employer, Giant Labor Services Inc. (GLS), Respondents Starwood Hotels & Resorts Worldwide, Inc., and Westin Hotel Management, LP (collectively “Hotels”) were his “joint employers” requiring compliance with the MMWL. Significantly, what constitutes a “joint employer” is not defined by the MMWL. 

The MMWL requires “employers” in Missouri to pay “employees” a minimum wage, all as defined by the statute. “Employers” are defined broadly in the statute as “any person acting directly or indirectly in the interest of an employer in relation to an employee.” § 290.502(4), RSMo 2007. An “employee” is defined in relevant part as any individual employed by an employer. § 290.502(3), RSMo 2007.

Facts

The Hotels contracted GLS to provide one of its hotels with housekeepers. The Hotels paid GLS $5 for every room cleaned by a GLS housekeeper. GLS then paid each of the housekeepers $3.50 per room cleaned.    The contract between Hotels and GLS called for GLS to comply with applicable law.

GLS was subsequently investigated by Federal law enforcement for a number of crimes. Respondent Hotels cooperated with the investigation and subsequently terminated its contract with GLS. Andro Tolentino was one of these housekeepers, working at Respondent’s hotel from February 2008 to the termination of GLS’s contract in April 2008.

During the last two-week period that he worked at the hotel, Tolentino earned $427 prior to deductions. This equaled an hourly rate of $7.76 per hour, an amount in excess of the minimum wage threshold. The decision does not discuss how the hourly rate was calculated. Tolentino’s net pay after deductions was taken by GLS for supposed “visa fees,” zeroing Tolentino’s pay and taking it below the minimum wage threshold. GLS and its principals were subsequently indicted on Federal charges, and GLS’s principals were convicted, in part upon the withholding of wages for “visa fees.” Tolentino was awarded restitution in this action of $3,150.00.

Tolentino subsequently alleged in a class-action against the Hotels filed in Jackson County, Missouri that both the Hotels and GLS were his statutory employers pursuant to the MMWL, and, as his statutory employers, had failed to comply with provisions of the MMWL by paying him based upon the number or rooms cleaned instead of on an hourly basis, and, additionally because the “visa fees” were deducted from his check.

The Hotels moved for and were granted summary judgment. The Hotels argued that the unforeseen criminal acts of GLS in illegally deducting the “visa fees” from Tolentino’s pay were contrary to the purpose of the MMWL, the common law of agency and strict liability. Tolentino argued that the Hotels were not being held responsible for GLS’s criminal acts, but were merely being held to their statutory duty to comply with the MMWL as “joint employers.”

Ruling

The Supreme Court agreed with Tolentino, overturning the summary judgment and remanding the matter back to the trial court for further proceedings. The Supreme Court stated that the facts of the case indicated the Hotels and GLS either directly or indirectly acted in one another’s interest with respect to Tolentino. See § 290.502(4), RSMo 2007. Accordingly, disputed questions of fact existed for determination as to whether hotel Respondents were joint employers of Tolentino with GLS.

The Supreme Court identified five factors for determining whether a particular work relationship qualifies as an employer-employee relationship for purposes of compliance with the MMWL. These factors are outlined in Fields v. Advanced Health Care Mgmt. Servs., LLC, 340 S.W.3d 648, 654 (Mo. App. 2011). These factors include: 1) who has the power to hire and fire the worker, 2) who supervises and controls the worker’s work schedule and conditions of work, 3) who determines the rate and method of payment of the worker, 4) who maintains work records, and 5) whether the alleged employer’s premises and equipment were used for the plaintiff’s work. Id. 

According to the ruling, there were facts in the case that a jury could find satisfied each of the first four factors of the Fields analysis (identified as the “formal factors” derived from the FLSA definition of “employ,” 29 U.S.C. § 203(g)), and, accordingly, summary judgment was not appropriate for this matter. The court pointed out that: 1) the Hotels interviewed housekeepers prior to allowing GLS to assign them to the hotel for work; 2) the Hotels provided quality oversight to work done by the housekeepers and required housekeepers to correct deficient work; 3) the rate and method of pay was determined by the Hotels; and, 4) the Hotels maintained time sheets and productivity records for the housekeepers. Accordingly, there were genuine disputes regarding the material facts necessary and relevant to the analysis of whether Hotels were “joint employers.”

The Court noted in its decision that the MMWL is a remedial statute, intended to level the playing field between employers and employees, and remedial statutes are to be interpreted broadly. The Court addressed the Hotels’ argument that one of the purposes of the MMWL is also to protect employers that exercise reasonable, good faith efforts to comply with the law, but noted that the central purpose of the MMWL is to ensure that “employers” pay a minimum wage and, as a possible “joint employer,” the Hotels may have to act where GLS failed to do so or even acted criminally. The Hotels’ duty to comply with the MMWL is not contingent upon the acts of its “joint employer,” in this case, GLS.

Conclusion

When contracting with parties for labor services, individuals and businesses need to be aware that they are potentially exposing themselves to liability pursuant to the MMWL as a potential “joint employer” should the contractor fail to pay its employees performing the services pursuant to prevailing minimum wage laws.