Upstate Federal Court Holds Fiscal Intermediary a Joint Employer of Personal Assistants

Executive Summary. Until last week, no New York court had ruled on the question of whether a fiscal intermediary (FI) participating in New York’s consumer directed personal assistant program (CDPAP) was a joint employer of a consumer’s personal assistants (PAs). New York’s CDPAP regulations made FIs responsible for certain administrative and compliance functions, but it also prohibited FIs from recruiting, hiring, firing, training, supervising and scheduling PAs or managing the consumer’s care. Though the U.S. Department of Labor (USDOL) and states other than New York have recognized that FIs could choose to operate under the “vendor fiscal/employer agent model,” where the consumer is the sole employer of the PAs, New York had left this issue for decision by the courts. The decision in Hardgers-Powell v. Angels In Your Home LLC, 2019 U.S. Dist. LEXIS 16315 (W.D.N.Y. Jan. 30, 2019, No. 16-CV-6612-FPG) is the first to hold that an FI is a joint employer of personal assistants. Its rationale and logic is troubling. If the decision’s holding is adopted by other courts, FIs will face serious exposure on multiple fronts, as we explain below.

What does this Decision Hold?

The federal court in Hardgers-Powell held that David Wegman, the owner of the D/B/A Angels In Your Home LLC was the joint employer with consumers of their PAs for purposes of wage and hour laws. This holding was based in large part on the court’s interpretation of New York’s CDPAP “regulatory regime,” which, said the court, requires that an FI “processes each (PAs) wages and benefits, processes all taxes and wage withholdings, complies with worker’s compensation, disability, and unemployment insurance requirements, and maintains personnel records.” Most importantly, said the court, “the fiscal intermediary is responsible for ‘establishing the amount of each (PA’s) wages.’” (Emphasis in the court’s decision). This was a “substantial factor” in the court’s determination, distinguishing David Wegman from “a mere payroll company.” Also mentioned as important was the fact that David Wegman “in many circumstances identified himself and his D/B/A as the employer of record of (PAs)” and “as the employer on NYLL wage notices” under the State’s Wage Theft Protection Act.

The court acknowledged that “the division of responsibilities under the (CDPAP) program makes the employer determination anything but clearcut,” and quoted from the USDOL’s published guidance, which acknowledges that FIs are not in all instances the PA’s joint employer. For example, the court noted the USDOL’s guidance that where a consumer arranges for an FI to perform tasks similar to payroll agents, but the FI was uninvolved in supervision, scheduling, or direction of the employee, and the consumer, not the FI, had the authority to allocate funds, negotiate wage rates, manage the worker’s assignments, and had power to hire and fire, the fiscal intermediary likely would not be deemed the worker’s employer.

However, “after reviewing the statutory and regulatory underpinnings of the (CDPAP) program and considering the undisputed facts” before it, the court concluded, “David Wegman is the employer of CDPAP workers.”

What is this Decision’s Impact?

Because this decision involved an upstate FI, there was no mention of the Wage Parity Act (WPA) or who determined “Total Compensation,” the consumer or the FI. Moreover, the case concerned a period of time before the WPA applied to downstate CDPAP PAs. Where an FI does not set the Total Compensation package but requires its consumer to negotiate with its own PAs over the wage rates and benefits, would a court reach the same conclusion as in this decision? Or where the FI did not name itself on Wage Theft Protection Act notices or name itself as the “employer of record” on government filings? Or is the Hardgers court’s suggestion that the FI’s compliance obligations imposed by law under the CDPAP program alone are sufficient to render the FI an “employer?” It is only a matter of time before these issues are posed to a court.

What Exposure Does the Decision Create?

Where an FI is the joint employer with a consumer of the consumer’s personal assistants, the FI faces the following legal exposures:

  1. The FI may be held liable for wages for hours worked beyond a consumer’s authorized hours, such as “informal support” hours, shopping errands before or after scheduled hours, “on call,” or “engaged to wait” hours, or hours spent driving the consumer to a destination.
  2. The FI may be held liable for penalties for not providing compliant health insurance under the Affordable Care Act to personal assistants or for not including the PAs in its 401(k) or other retirement plan.
  3. The FI may be held liable if a consumer, a member of the consumer’s family, or a guest is injured or illegally harassed by a personal assistant; if a workplace safety violation occurs; or if the PA and consumer are involved in a car accident, particularly if there is inadequate insurance coverage.
  4. The FI may be liable to a union claim that PAs can be added to an existing bargaining unit of other employees or organized anew by a union, and a union’s claim that contributions are due to, and audits can be conducted by, the union’s labor-management trust funds.

Bottom Line: Hardgers-Powell sounds a warning to all FIs that the threat of being considered a joint employer is real. It is up to every FI to do whatever it can to protect itself against such a finding and the legal exposures it will face if this finding is made.

If you have any questions regarding this Legal Alert, please contact one of the authors, Stephen Zweig at szweig@fordharrison.com or Philip Davidoff at pdavidoff@fordharrison.com, in our New York City Office at (212) 453-5900.