Source: http://bryanschwartzlaw.blogspot.com/2015/01/
Timestamp: 2019-04-19 04:19:21+00:00

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Today, the Supreme Court denied CLS Transportation Los Angeles v. Iskanian ("Iskanian"), declining to consider overturning a California Supreme Court decision holding that “representative actions” under the Labor Code’s Private Attorneys General Act (“PAGA”) cannot be barred by arbitration agreements. The denial of review leaves in place a potent tool for employees to step in on behalf of the state to enforce their wage rights.
We previously blogged about the California Supreme Court’s "Iskanian" decision in detail here. The decision ruled in favor of the employees, holding that their right to bring a representative PAGA action was not preempted by the Federal Arbitration Act. Monetary recoveries by plaintiffs in PAGA actions are split between the employees and the State. In holding that employees cannot waive the right to bring PAGA actions, the California Supreme Court reasoned that PAGA is an enforcement mechanism designed by the Legislature to carry out the State’s interest in assuring compliance with state wage laws, not merely a matter of contract between private parties.
In seeking certiorari from the U.S. Supreme Court, the employer argued that the right to bring representative PAGA actions should be treated like the right to bring class actions – a right that may be waived in arbitration agreements under the U.S. Supreme Court’s decision in AT& T Mobility v. Concepcion, 131 S. Ct. 1740 (see our blog post on Concepcion here).
By declining to accept the case for review, the U.S. Supreme Court did not disturb California’s effort to allow its wage laws to be enforceable via representative actions brought by employees.
While most employees can answer the question, “Who do you work for?” the question of who is a liable employer under California wage laws hasn’t been so simple. However, if recent trends continue, finding the answer will be easier.
A large company considers its drivers independent contractors. The company has policies governing the drivers' uniforms, their vehicles, the way they are dispatched, and reserves the right to terminate the drivers’ contracts at any time. Are the drivers properly classified as independent contractors? Assume each driver is instead a “franchisee,” and employs drivers himself. Are workers for particular franchisees also employees of the large company that is the ultimate franchisor?
A large corporation has many subsidiaries and takes a “shared services” approach, providing human resources, payroll and other key employment-related functions for its subsidiaries. Yet, the corporation takes the position that workers at each subsidiary can only collect (or litigate against, or certify a class) as to the particular subsidiary where each worker spends her days. Is the large corporation also potentially susceptible for wage claims in its subsidiaries, or a company-wide class action that affects all of its subsidiaries?
A big business uses small (potentially insolvent) janitorial services labor contractors to staff its cleaning jobs, and these personnel are receiving less than the minimum wage. To what extent is the big business on the hook for the actions of its labor subcontractors?
A closely held restaurant employs 50 people. It is incorporated, with the sole owner as its lone officer and director. The owner has ultimate authority over hiring and firing workers and — though he has some subordinate managers — has made policy statements from time to time. Can the owner be held personally liable for wage violations under California or federal wage laws as a joint employer?
This year, California’s courts and legislature have helped get closer to answers regarding many of these questions.
The Borello decision defined an independent contractor. S. G. Borello & Sons Inc. v Dept. of Industrial Relations, 48 Cal. 3d 341 (1989). In response to abuses of the designation, the state Legislature recently added civil and criminal sanctions for willful misclassification — 2011’s Senate Bill 459, which added Labor Code Sections 226.8 and 2753. California’s Employment Development Department has been taking a hard line against independent contractor designations where employers have not paid unemployment insurance or other taxes.
In Ayala v. Antelope Valley Newspapers Inc., 59 Cal. 4th 522 (2014), the state Supreme Court made it easier to certify California class actions based upon independent contractor misclassification. The Supreme Court held that the trial court erred in denying certification of a class of delivery workers who sued a daily newspaper which had classified them as independent contractors. The trial court found too many individual inquiries were necessary into the way different newspaper delivery workers operated.
But the trial court in Ayala missed the crux of the inquiry: Whether a common law employer-employee relationship exists turns foremost on the degree of a hirer’s right to control how the end result is achieved. Because of the preeminence of the right to control test under Borello, as reinforced by Ayala, common proof — e.g., what rights are reserved to the employer in the governing contracts — will often answer the independent contractor versus employee inquiry. Courts likely will certify more independent contractor misclassification class actions.
One caveat: Where a business goes one step further than independent contractor classification, and has franchisees, the franchisor’s vicarious liability for a franchisee’s employment practices may be limited to situations where it maintains “a comprehensive and immediate level of ‘day-to-day’ authority over matters such as hiring, firing, direction, supervision, and discipline of the employee.” Patterson v. Domino’s Pizza, 60 Cal. 4th 474, 499 (2014) (in a Fair Employment and Housing Act harassment case).
Workers have found it difficult to prove Labor Code Section 2810 liability, regarding contracts for insufficient funds. They rarely have access to evidence showing their employer-subcontractors paying substandard wages entered into contracts which the primary contractors knew contained insufficient funds to cover minimum wages. This year, the Legislature responded, and Gov. Jerry Brown approved Assembly Bill 1897, creating Labor Code Section 2810.3. It makes businesses whose workers are supplied by labor contractors jointly responsible for wage payments.
Following Castaneda, individual owners — not just corporate owners — may be liable as joint employers for wage violations, where they fulfill one of the tests outlined by the Martinez v. Combs, Industrial Welfare Commission-inspired framework (“employ” means either: to control wages, hours, and working conditions; to suffer and permit to work (hire and fire); or to engage – under the common law definition). California courts have not yet issued published authority on this specific point — Bain v. Tax Reducers Inc., 161 Cal. Rptr. 3d 535 (2013), was ordered depublished by the state Supreme Court after holding with scanty analysis that an individual owner could not be a joint employer.
Federal courts have been similarly “employee-centric” in applying California law — for example, in Carrillo v. Schneider Logistics, a Wal-Mart distribution subcontractor agreed to pay $21 million after Wal-Mart was found potentially liable for Schneider’s wage violations as a joint employer under both California and federal law. 2014 WL 1893956 (C.D. Cal. Jan. 14, 2014).
Going forward, businesses and their leaders, when they control — or have the right to control — wages, hours, and working conditions — or the right to hire and fire workers — should take measures to ensure that workers are being paid in accordance with California law — or face costly consequences.
Bryan Schwartz Law's principal first published this article in the Daily Journal on December 30, 2014, under the title, "2014 gave more clarity on liability for wage violations"
Bryan Schwartz is an Oakland-based attorney representing workers in class, collective, and individual actions in wage/hour, discrimination, whistleblower, and unique federal and public employee claims. He is an Executive Board member for the California Employment Lawyers Association (CELA) and Secretary of the State Bar of California’s Labor & Employment Law Section. He can be contacted at Bryan@BryanSchwartzLaw.com.

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