Common-Law Agency Principles, Not DOL Regulations, Dictate Whether Company Is a Joint “Employer”

The Eleventh Circuit considered the meaning of “employer” in the context of the H-2A visa program and declined to apply Chevron deference to a then-prevailing Department of Labor interpretation.  The court instead applied common-law agency principles.  Garcia-Celestino v. Consolidated Citrus Limited Partnership, 2016 WL 7240150 (Dec. 15, 2016), involved claims brought by a group of Mexican nationals who had entered the United States under the H-2A visa program, established by the Immigration Reform and Control Act of 1986 (“IRCA”), which amended the Immigration and Nationality Act (“INA”), to perform seasonal work harvesting Florida citrus groves.  The plaintiffs filed a class action against Consolidated Citrus, the owner of the groves, as well as against Ruiz Harvesting, Inc. (and its owner), a labor contractor that, among other things, recruited the workers and applied for their visas as their employers.  The case arose from a “kickback scheme” allegedly perpetrated by Ruiz and involved claims for, among other things, violation of the Fair Labor Standards Act and breach of contract, seeking to hold Consolidated (which did not know about the kickbacks) liable as a joint employer.

After a settlement by the Ruiz defendants, among other proceedings, the only claims remaining were individual FLSA claims and class breach-of-contract claims against Consolidated.  The central issue was whether Consolidated could be held liable as a joint employer.  On the breach-of-contract claim, for two of the years at issue, the district court applied the expansive “suffer or permit to work” standard from the FLSA—rather than the narrow common-law agency principles urged by Consolidated.  After a bench trial, the district court concluded that Consolidated was a joint employer under that standard and entered judgment in favor of the plaintiffs.

On appeal, Consolidated argued that (1) the district court applied the incorrect standard to the breach-of-contract claims and (2) the evidence did not show that it was a joint employer even under the expansive FLSA standard.  The Eleventh Circuit agreed on the first point but not on the second and remanded for a determination of whether Consolidated could be liable on the breach-of-contract claims under the correct standard.

Because the breach-of-contract claims stemmed from violation of the “clearance order” that an “employer” must submit for certification of workers under the H-2A visa program, Consolidated could be liable for breach only if it was an “employer” under the IRCA amendments to the INA.  The statutes, however, do not define “employer”—or, for that matter, “employ,” “employee,” or “joint employer.”  Relying on Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318 (1992), which considered the meaning of “employee” as used in the Employee Retirement Income Security Act of 1974, Consolidated argued that, when not statutorily defined these terms must be interpreted using common-law agency principles.  Moreover, Consolidated argued, where Congress intends some other definition of “employ,” it has said so—for example, the FLSA uses “suffer or permit to work,” a definition specifically incorporated in the Migrant and Seasonal Agricultural Worker Protection Act (“AWPA”)—and it did not do that in the IRCA.

The wrinkle, however, is that the DOL regulations governing the H-2A visa program from 1987 to 2008 defined employer using the “suffer or permit to work” language from the FLSA.  Although the regulations were amended in 2009 to discard this standard and adopt common-law agency principles as in Darden, the 1987 regulation governed the 2007–08 and 2008–09 harvest seasons, and, so the plaintiffs argued, the broad “suffer or permit to work” standard should apply for those years.

Faced with the question of whether the agency interpretation should govern, the court turned to Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), and asked (1) whether Congress has directly spoken to the precise question at issue and (2) if not, whether the agency interpretation is based on a permissible construction of the statute.  Here, the court, in an opinion authored by Judge Frank Hull,  stopped at the first step—concluding that Congress had directly spoken in the INCA—and therefore gave the DOL regulation no deference.  When the INCA was adopted, Congress had two options for defining employers: common-law agency principles or the FLSA “suffer or permit to work” standard.  When Congress has intended to use the FLSA standard, as in the AWPA, it has explicitly done so, and its failure to do so in the INCA shows intent to rely on the established common-law meaning.  Darden did not create that meaning but merely applied well-settled rules of statutory interpretation: “Where Congress uses terms that have accumulated settled meaning under . . . the common law, a court must infer, unless the statute otherwise dictates, that Congress means to incorporate the established meaning of these terms” (quoting NLRB v. Amax Coal Co., 453 U.S. 322, 329 (1981)).

The court explicitly rejected four further arguments raised by the plaintiffs.  First, the plaintiffs argued that applying common-law principles would thwart the purpose of the H-2A visa program by providing greater protections for domestic workers under the AWPA, making foreign H-2A visa workers more attractive.  Maybe, the court said, but the statutory directive must be followed even if questionable policy results.  Second, the court rejected the argument that Darden applies only to determine whether a worker is an employee or an independent contractor, emphasizing that Darden was based on a generic rule of statutory construction that has been used in other contexts.  Third, the court distinguished NLRB v. Town & Country Elec., Inc., 516 U.S. 85 (1995), in which the Supreme Court declined to follow Darden to interpret “employ” and used the NLRB interpretation.  Finally, the fact that Darden did not involve an agency regulation is immaterial, because the first step of Chevron concerns only the statutory language.

In remanding to the district court to determine whether Consolidated could be liable on the breach-of-contract claims under the proper, common-law agency analysis, the Eleventh Circuit listed twelve factors discussed in Darden and noted that the focus of the analysis is on whether Consolidated had the “right to control the manner and means by which the product is accomplished.”

As to the FLSA claims, the court concluded that the district court properly found that Consolidated was a joint employer under the expansive “suffer or permit to work” standard.  The court reviewed the eight factors identified in Layton v. DHL Express (USA), Inc., 686 F.3d 1172, 1176 (11th Cir. 2012), and the five overarching principles, emphasizing that the key determination is whether the worker is “economically dependent” on the entity in question.

Posted by Stacey Mohr.

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