May 19, 2026|Franchise Frontlines
May 19, 2026 | United States Court of Appeals for the Third Circuit | Nonprecedential Opinion
Executive Summary
In a nonprecedential decision, Judge Chung, writing for the United States Court of Appeals for the Third Circuit, affirmed judgment for Public Partnerships LLC after a seven-day bench trial on whether the company jointly employed care workers in a Medicaid self-directed services program. Plaintiffs alleged that Public Partnerships was liable for unpaid overtime under the Fair Labor Standards Act, the Pennsylvania Minimum Wage Act, and the Pennsylvania Wage Payment and Collection Law because it processed timesheets, issued payments, maintained employment records, conducted background checks, reviewed qualification forms, provided some orientation and training, calculated allowable pay ranges under program rules, and selected workers’ compensation vendors. Public Partnerships argued that it served as a financial management services provider, not an employer, because program participants recruited, hired, scheduled, supervised, set wages for, and could terminate care workers. Applying the Third Circuit’s Enterprise joint-employer test, the court held that Public Partnerships did not exercise the significant control required for joint-employer status.
Relevant Background
Ralph Talarico worked as a care worker from 2013 to 2018 through Pennsylvania’s Medicaid waiver Self-Directed Services program. The program, administered by the Commonwealth of Pennsylvania’s Office of Long-Term Living, allows qualifying disabled individuals, called participants, to exercise decision-making authority in identifying, accessing, managing, and purchasing personal assistance services.
In 2012, OLTL entered into a grant agreement with Public Partnerships to provide financial management services for the program. Under that agreement, Public Partnerships made payments to care workers after processing timesheets, ensured background checks and work authorization forms were completed, maintained certain employment records, and provided some orientation and training. Public Partnerships also calculated the range of compensation available under OLTL’s wage schedule, accounting for taxes, workers’ compensation insurance, and similar costs.
The program materials identified participants as the common law employers of care workers. Participants worked with service coordinators to create individualized service plans that determined the participant’s medical needs, the total hours of weekly care, the care worker’s responsibilities, and the services to be provided. Public Partnerships did not finalize or approve those plans. Participants recruited, hired, trained, scheduled, and, where necessary, fired care workers. Public Partnerships supplied paperwork after a participant decided to hire a care worker, reviewed qualification forms to ensure program requirements were met, conducted required background checks, and provided results to participants. Participants could hire a care worker with a criminal history, and Public Partnerships had no authority to override that decision.
Plaintiffs filed wage claims against Public Partnerships, alleging failure to pay overtime. The district court initially granted summary judgment for Public Partnerships. In 2020, the Third Circuit reversed, holding that factual disputes existed regarding joint-employer status. After further proceedings, the district court certified an FLSA collective action and Rule 23 class, conducted a seven-day bench trial, and entered judgment for Public Partnerships, finding that it was not a joint employer and therefore was not liable for unpaid overtime. Plaintiffs appealed.
Decision
The Third Circuit affirmed. It applied the joint-employer test from In re Enterprise Rent-A-Car Wage & Hour Employment Practices Litigation. Under that test, courts consider the alleged employer’s authority to hire and fire employees, authority to promulgate work rules and assignments and set conditions of employment, involvement in day-to-day supervision and discipline, and actual control of employee records, including payroll, insurance, or taxes. The ultimate question is whether the alleged employer exercised “significant control.”
The court first considered hiring and firing authority. The district court found that participants recruited their own care workers and that Public Partnerships had no role in recruiting or recommending them. Plaintiffs argued that Public Partnerships reviewed care worker qualifications and maintained an online recruitment forum. The Third Circuit rejected those arguments. Public Partnerships’ role in reviewing qualification forms was limited to confirming that care workers met OLTL program requirements. That did not amount to hiring authority. The recruitment-forum argument also failed because the record did not show that Public Partnerships controlled participants’ use of the forum to recruit care workers. The Third Circuit noted that OLTL, not Public Partnerships, set the minimum qualifications for care workers.
The court next considered work rules and conditions of employment. The district court found that Public Partnerships had only minor authority over work rules and employment conditions. Public Partnerships provided limited orientation and discrete training, but participants controlled care workers’ schedules and day-to-day work. The most disputed issue was compensation. Plaintiffs argued that Public Partnerships controlled pay because it calculated the program’s allowable wage range, accounted for tax exemptions and workers’ compensation costs, selected the workers’ compensation carrier and broker, set orientation pay at minimum wage, worked with OLTL regarding hazard pay, and applied a default minimum-wage rate when participants failed to identify a wage during onboarding.
The Third Circuit found those facts insufficient to show substantial control over compensation. Public Partnerships had some impact on the maximum wage available under the OLTL schedule, but participants selected the care worker’s hourly wage and could exceed the program maximum by paying the difference out of pocket. Public Partnerships’ default minimum-wage rate applied only as an interim measure until the participant supplied the actual wage. Public Partnerships also did not control whether care workers received orientation pay or hazard pay. The court therefore held that the district court did not err in finding that Public Partnerships had only minor authority over compensation, a factor that slightly favored employer status but did not control the analysis.
The court then evaluated the total employment situation and the economic realities of the work relationship. Public Partnerships maintained payroll and tax records and performed administrative functions, but it did not control day-to-day work, set final compensation, or decide whether a particular care worker would be hired or fired. The record showed Public Partnerships implementing requirements set by the program and OLTL, and facilitating participation by care workers and participants. The court emphasized that the Enterprise analysis is not a counting exercise. Even if an equal number of factors pointed in each direction, the ultimate question remained whether Public Partnerships exercised significant control. The court held that it did not.
The procedural posture mattered. In an earlier appeal, the Third Circuit had found factual disputes sufficient to preclude summary judgment. After extensive discovery and a seven-day bench trial, however, the developed record showed that Public Partnerships’ functions were administrative and facilitative rather than supervisory or controlling. The Third Circuit therefore affirmed the district court’s judgment for Public Partnerships.
Looking Forward
This decision gives employers, service providers, and franchisors a useful example of the difference between administrative involvement and employment control. Public Partnerships touched many aspects of the worker relationship. It processed timesheets, issued payments, reviewed paperwork, checked qualifications, performed background checks, maintained records, provided some orientation, calculated available pay ranges, and handled workers’ compensation-related administration. Those facts gave plaintiffs enough to litigate the issue through trial. But they did not prove joint employment because Public Partnerships did not control the core employment relationship.
For franchisors, the analogy is important but should be kept precise. This was a Medicaid self-directed services case, not a franchise case, and the opinion is nonprecedential. Still, the court’s reasoning fits a recurring issue in franchise and multi-entity litigation: plaintiffs often point to system administration as proof of employment control. They may cite onboarding platforms, payroll interfaces, compliance checks, background-screening requirements, training modules, operations manuals, recordkeeping systems, or payment infrastructure. Talarico shows why courts should ask the next question: did the defendant actually control hiring, firing, schedules, supervision, discipline, compensation, or day-to-day work?
The answer in Talarico was no. Participants recruited the care workers, chose whether to hire them, set their schedules, directed their services, selected their hourly wages within program parameters, and could terminate them. Public Partnerships implemented the program’s administrative requirements and facilitated payments, but it did not decide who worked, when they worked, how they worked, or whether they continued working. That distinction is central to joint-employer defense strategy.
The case also shows why a developed factual record can matter. Plaintiffs survived summary judgment earlier because the record left factual disputes about joint employment. After trial, however, the evidence showed that Public Partnerships’ role was limited. For defendants, that procedural history is a useful reminder that losing at summary judgment does not necessarily mean losing on joint-employer status. Where the defendant can prove that its role is administrative, contractual, or compliance-based rather than supervisory, trial evidence may defeat an expansive joint-employer theory.
Franchisors and service providers should still avoid unnecessary employment control. Administrative support becomes riskier when it crosses into selecting workers, dictating schedules, directing daily tasks, disciplining workers, approving terminations, or setting final wages. The better practice is to define support functions carefully and preserve the direct employer’s responsibility for personnel decisions. In the franchise context, that means distinguishing brand standards and System compliance from franchisee-level employment decisions.
Talarico also reinforces that joint-employer analysis is not a mechanical factor count. Some factors may point toward employer status because any administrative vendor or franchisor may maintain records, process data, or impose limited compliance steps. The question is whether those facts show significant control over the employment relationship. That framing helps defendants resist arguments that any involvement in worker administration automatically creates joint-employer liability.
For franchisors, this decision belongs with other recent cases emphasizing disciplined boundaries. System infrastructure can be valuable and sometimes necessary, but it should be designed and documented as support for independent operators, not control over their workforce. When the record shows that the franchisee or direct employer retains hiring, firing, supervision, scheduling, wage-setting, and discipline authority, courts have a stronger basis to reject joint-employer theories.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Partner at Buchalter LLP and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
This communication is not intended to create, and does not create, an attorney-client relationship or any other legal relationship. No statement herein constitutes legal advice, nor should it be relied upon or interpreted as such. This communication is for general informational purposes only and is not a substitute for legal counsel. Readers should not act or refrain from acting based on any information provided without seeking appropriate legal advice specific to their situation. For more information, visit www.buchalter.com.
