Unmasking the Charade of the Global Supply Contract: A Novel Theory of Corporate Liability in Human Trafficking and Forced Labor Cases

By Bang, Naomi Jiyoung | Houston Journal of International Law, Spring 2013 | Go to article overview

Unmasking the Charade of the Global Supply Contract: A Novel Theory of Corporate Liability in Human Trafficking and Forced Labor Cases


Bang, Naomi Jiyoung, Houston Journal of International Law


3. Problematic issues with the economic realities test

Despite the strong origins of the economic realities test, (215) different viewpoints, conflicting applications, and even different tests arose among the courts and circuits. (216) Some courts watered down the pure strand of economic realities test by expanding the analysis to a "totality of circumstances" test. (217) Many followed Silk's five-pronged test, yet ended up with disparate results under similar facts. (218) Others invented and applied tests that were completely different. (219) These varying applications created tension.

First, in some cases, there is tension between the common law test and the economic realities test. (220) This ambivalence is seen in the undertones of various court opinions that spout out "dependency of worker" sound bites, voicing a willingness to throw out the common law test as outdated and ineffective, but are unable to let go of the common law test. (221) Naturally, this ambivalence results in decisions that contravene the purpose of the relevant statute and add to the confusion. (222) For example, in Bartels, the court appeared to give lip service to the economic realities test and ultimately ruled in favor of the employer. (223) Here, the issue was whether band members were employed by the dance hall where they performed or their bandleader, who contracted with the dance hall. (224) In rejecting the dance hall as an employer or a joint employer with the band leader, the Court emphasized typical physical "control" facts such as the band leader's having organized, trained, and selected the band members, and other more immediate indicia of control such as who bore maintenance costs as well as the loss or gains after payment of wages and expenses. (225) Although the court stated that it would not focus on the "idea of control of the employer over details of the service rendered to his business," and intended to apply "social legislation [viewing] employees [as] those who as a matter of economic reality are dependent upon the business to which they render service," the court ended up according more weight to common law factors of control. (226) In one sense, the court conducted a hybrid common law analysis. [227] The conflict in the analysis and holding in Bartels was visibly exemplified by the dissenting opinion of three members of the Court, who pointed out that alternatively, the dance hall owner could also be considered the employer because "he has all of the conventional earmarks of the entrepreneur--ownership, profit, loss, and control," and that "the requirements of the Social Security Acts [were] satisfied," since "hold[ing] the dance hall proprietor liable for the tax is not to contract the coverage contemplated by the statutory scheme." (228)

In Goldberg, the court appeared to split the baby and conducted both an economic reality analysis and a common law control test even though it ultimately concluded that home-based workers who sewed, knitted and embroidered products for a co-op were employees of the co-op. (229) On one hand, it focused on dependency factors and found significant the fact that workers were "regimented under one organization, manufacturing what the organization desires and receiving the compensation the organization dictates. (230)

However, it also balanced classic common law factors of managerial control such as the fact that "[t]he management fixe[d] the piece rates at which they work" and could "expel [the worker] for substandard work or for failure to obey the regulations," essentially, the power to "hire or fire the ... workers." (231) The Court also made a passing reference to the "suffer to work" language of the FLSA statute, another test for which scholars have advocated in lieu of the "economic realities test." (232)

Even within the economic realities test, there is disagreement as to which factors should be used, leading to some unpredictability. (233) Some courts have expanded the number of factors to include such things as:

(1) the degree of the alleged employer's right to control the manner in which the work is to be performed;

(2) the alleged employee's opportunity for profit or loss depending upon his managerial skill;

(3) the alleged employee's investment in equipment or materials required for his task, or his employment of helpers;

(4) whether the service rendered requires a special skill;

(5) the degree of permanence of the working relationship;

(6) and whether the service rendered is an integral part of the alleged employer's business.

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Unmasking the Charade of the Global Supply Contract: A Novel Theory of Corporate Liability in Human Trafficking and Forced Labor Cases
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