Now that courts have begun to use this rule to classify management companies as joint employers, dealer groups that operate under a common management company must be aware that their liability exposure is significantly increased.
August 15, 2024
By Barrie Charapp Beaty
Charapp & Weiss, LLP
bbeaty@cwattorneys.com
On June 13, 2024, the Appeals Court of Massachusetts issued a decision in Tran v. Jennings Road Management Corp, demonstrating the effects of the National Labor Relations Act’s revised joint-employer rule, which became effective on December 26, 2023.
The previous rule required that joint-employers had to both (1) possess and (2) exercise “substantial direct and immediate control” over essential terms and conditions of employment. Under the new rule, someone is considered a joint-employer if an entity has the right to control an employee’s essential terms and conditions of employment, regardless of whether such control is exercised. Essentially, under the new rule, even if no action is taken to exercise control over any essential terms and conditions of employment, if the ability to do so is reserved, the entity meets the standard as joint employer.
Sakiroh Tran claimed that Massachusetts wage laws were violated against both the car dealership she worked for as well as the company that had a management contract with the dealership. Although both parties agreed that Tran was an employee of the dealership, they disagreed on whether the management company, JRM, was a joint employer. The Appeals Court of Massachusetts found that because JRM can exercise control over the terms and conditions of the employees who work at the dealership, they are therefore a joint employer. Because JRM is considered a joint employer, they become exposed to liability for any violations of the wage laws that are proven in court. The court’s holding was aided by the new rule determining joint-employer status under the National Labor Relations Act.
Why this matters to your dealership. Now that courts have begun to use this rule to classify management companies as joint employers, dealer groups that operate under a common management company must be aware that their exposure to liability is greatly increased due to the passage of a broader standard encompassing joint employers. It is important that dealerships analyze whether the management companies have any of the powers and responsibilities (even if not exercised) that would qualify as “essential terms and conditions of employment.”
Essential terms and conditions include:
- Wages, benefits, and other compensation,
- Hours of work and scheduling,
- The assignment of duties to be performed,
- The supervision of performance of those duties,
- Issuing work rules and directions governing the manner, means, and methods of the performance of duties and the grounds for discipline,
- The tenure of employment, including hiring and termination, and
- Working conditions related to the safety and health of employees
Due to dealer management companies typically being involved in codetermining many of the essential terms and conditions of employment, there exists a greater possibility of these management companies being exposed to liability. For best practices, each dealership should be the only identifying employer for employment handbooks, procedures, and pay plans. For example, for Best Dealer Auto Group with 25 dealerships, the employee handbook should state “Best Dealer Acura Employment Handbook” instead of “Best Dealer Auto Group Employment Handbook.” Dealers should seek advice from counsel to best protect the dealership and management company from being joint-employers.