Did you know that a company can be held liable for labor and wage violations that occur at its facilities despite the fact that the workers are employed by a labor contractor? That is exactly what happened in a recent case involving an Indiana seed company. Reyes v. Remington Hybrid Seed Co., Inc., Inc., 2007 U.S. App. LEXIS 17231 (7th Cir. 2007).

Braulio Zarate recruited workers from Texas to work in Remington’s Indiana fields. Zarate worked as a contractor in supplying workers to Remington. The workers sued Remington, alleging that they were not fully compensated for their work, that they were improperly exposed to pesticides, and that the sanitary facilities provided failed to meet minimum standards.

A federal court of appeals determined that Remington was the “employer” of the workers for the purposes of the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Workers Protection Act. Remington, therefore, could be held liable for violations of these acts even though the workers worked directly for Zarate. The court found that Remington and Zarate were a single entity under common control. In reaching this finding, the court relied on the fact that Zarate had no business independent of his work for Remington. Remington advanced money to Zarate to secure workers’ compensation insurance and pay the workers. Remington also supplied the workers’ tools and the sanitary facilities.

This case serves as an important reminder that, even though those working at a company’s facilities were hired by, and work for, a labor contractor, the company may still be liable for labor and wage violations occurring on its facilities. In order to avoid such liability, consider maintaining adequate separation between the company and the labor contractor so that the company cannot be considered the “employer” of the workers.