Sharing of Corporate Payroll and HR Functions May Result in "Joint Employment" -- Castaneda v. The Ensign Group, Inc.

Publicly traded corporations have increasingly adopted a structure in which a main corporate entity acts as a central "holding company" which conducts its operations through a series of wholly owned entities. The Corporation internally designates its workers as being "employed" by these entities.  As often as not, however, the employees have never heard of the specific entity that allegedly employs them.  Moreover, the employment policies and payroll functions for these operating entities typically emanate from a central corporate HR department and a "shared services" entity.  

In Castaneda v. The Ensign Group, Inc., the California Appellate Court held that this structure of common ownership and shared services is likely to create a "joint employment" relationship for purposes of wage and hour liability.  

An entity that controls the business enterprise may be an employer even if it did not directly hire, fire or supervise the employees.  Multiple entities may be employers where they control different aspects of the employment relationship. This occurs, for example, when one entity (such as a temporary employment agency) hires and pays a worker, and another entity supervises the work.

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Here Ensign has more than a contractual relationship with Cabrillo. Ensign owns Cabrillo. It purchased it in 2009 and it owns all of its stock. A trier of fact could infer this evidence refutes Ensign's claims of lack of control and responsibility.

(Internal citations and punctuation omitted).  Moreover, the court noted that the corporate parent could be found to be a joint employment based on evidence that its various subsidiaries shared "centralized information technology, human resources, accounting, payroll, legal, risk management, educational and other key services."  (Emphasis in original).

Thus, while it may make eminent business sense for related entities to share common HR, accounting and payroll functions, these shared functions are also likely to result in shared responsibility for wage and hour obligations.   

 

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