Opinion ID: 2630272
Heading Depth: 4
Heading Rank: 1

Heading: Plaintiffs' claims under the wage laws.

Text: We first consider plaintiffs' claim that defendants are liable as employers for plaintiffs' unpaid minimum wages under section 1194 and Wage Order No. 14 because defendants allegedly suffer[ed], or permit[ted plaintiffs] to work and/or exercise[d] control over [their] wages, hours, or working conditions . . . . (Wage Order No. 14, Cal. Code Regs., tit. 8, § 11140, subd. 2(C), (F).)
The IWC, as we have seen, borrowed its definition of employto engage, suffer, or permit to work [44] in 1916 from the language of early 20th-century statutes prohibiting child labor. (See, ante, at p. 57 et seq.) Statutes so phrased were generally understood to impose liability on the proprietor of a business who knew child labor was occurring in the enterprise but failed to prevent it, despite the absence of a common law employment relationship. As courts had explained, the language meant that [the proprietor] shall not employ by contract, nor shall he permit by acquiescence, nor suffer by a failure to hinder. ( Curtis & Gartside Co. v. Pigg, supra, 134 P. 1125, 1129.) The language thus cast[] a duty upon the owner or proprietor to prevent the unlawful condition, and the liability rest[ed] upon principles wholly distinct from those relating to master and servant. The basis of liability is the owner's failure to perform the duty of seeing to it that the prohibited condition does not exist.  ( People v. Sheffield Farms-Slawson-Decker Co. (N.Y.App.Div. 1917) 180 A.D. 615 [167 N.Y.S. 958, 961, 36 N.Y. Cr. 181], italics added, affd. (1918) 225 N.Y. 25 [121 N.E. 474, 477] [the omission to discover and prevent was a sufferance of the work].) (14) We see no reason to refrain from giving the IWC's definition of employ its historical meaning. That meaning was well established when the IWC first used the phrase suffer, or permit to define employment, and no reason exists to believe the IWC intended another. Furthermore, the historical meaning continues to be highly relevant today: A proprietor who knows that persons are working in his or her business without having been formally hired, or while being paid less than the minimum wage, clearly suffers or permits that work by failing to prevent it, while having the power to do so. Plaintiffs argue defendants Apio and Combs suffered or permitted plaintiffs to work because defendants knew plaintiffs were working, and because plaintiffs' work benefited defendants. Concerning defendants' knowledge, plaintiffs note defendants were aware Munoz would need to hire labor to supply strawberries to defendants, and that defendants' field representatives had observed Munoz's employees at work. Plaintiffs also point out that Munoz subleased the Oceano and Zenon fields from Apio, which retained a right to enter the leased property. What is in dispute is the significance, under the wage order, of the assertion that defendants benefited from plaintiffs' labor. Certainly defendants benefited in the sense that any purchaser of commodities benefits, however indirectly, from the labor of the supplier's employees. However, the concept of a benefit is neither a necessary nor a sufficient condition for liability under the suffer or permit standard. Instead, as we have explained, the basis of liability is the defendant's knowledge of and failure to prevent the work from occurring. (See, e.g., People v. Sheffield Farms-Slawson-Decker Co., supra, 167 N.Y.S. 958, 961 [The basis of liability is the owner's failure to perform the duty of seeing to it that the prohibited condition does not exist.], affd. (1918) 225 N.Y. 25 [121 N.E. 474, 477] [the omission to discover and prevent was a sufferance of the work]; Curtis & Gartside Co. v. Pigg, supra, 134 P. 1125, 1129 [the employer shall not . . . permit by acquiescence, nor suffer by a failure to hinder].) Here, neither Apio nor Combs suffered or permitted plaintiffs to work because neither had the power to prevent plaintiffs from working. Munoz and his foremen had the exclusive power to hire and fire his workers, to set their wages and hours, and to tell them when and where to report to work. Perhaps Apio or Combs, by ceasing to buy strawberries, might as a practical matter have forced Munoz to lay off workers or to divert their labor to other projects, such as harvesting berries for the other defendant, for Frozsun, [45] or for Ramirez Brothers. But any substantial purchaser of commodities might force similar choices on a supplier by withdrawing its business. Such a business relationship, standing alone, does not transform the purchaser into the employer of the supplier's workforce. Plaintiffs' interpretation of the wage order is also unreasonably broad. For the same reason that defendants benefited from plaintiffs' work, so too did the grocery stores that purchased strawberries from defendants, and the consumers who in turn purchased strawberries from the grocery stores. Had the IWC intended to impose a rule capable of creating such potentially endless chains of liability, one would expect the commission to have announced it in the plainest terms after vigorous debate. Yet the concept of downstream benefit as a sufficient basis for liability appears nowhere in the wage order's definition of employ or in the decisions interpreting the child labor statutes from which the IWC borrowed the definition. We reject plaintiffs' broad interpretation of the IWC's definition of employ for this reason. We also note that plaintiffs' broad interpretation of the IWC's definition of employ would be difficult to justify as an appropriate exercise of the commission's power. The IWC's power to define employment is, as we have explained, not expressly granted in the act creating the commission but merely implied, and thus extends only so far as necessary to permit the commission effectively to exercise its expressly granted powers to regulate wages, hours and working conditions. ( Cal. Drive-in Restaurant Assn. v. Clark, supra, 22 Cal.2d 287, 302.) [A]n administrative agency may not, under the guise of its rule making power, abridge or enlarge its authority or exceed the powers given to it by the statute, the source of its power. ( Id., at pp. 302-303.) Accordingly, regulations issued by an administrative agency such as the IWC under a delegation of legislative power must be reasonably necessary to effectuate the purposes of the statute. ( Ramirez v. Yosemite Water Co., supra, 20 Cal.4th 785, 800; Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1, 11 [78 Cal.Rptr.2d 1, 960 P.2d 1031].) That the IWC has not, in nearly a century of administering the minimum wage, seen fit to propose plaintiffs' downstream-benefit theory of liability strongly suggests the theory is not reasonably necessary to permit the commission to discharge its statutory responsibilities. We also find significant that the single rule of California law that even approaches the breadth of plaintiffs' theory in imposing liability for wages appears not in a wage order adopted by the IWC, but in a statute enacted by the Legislature. (§ 2673.1, subd. (a).) [46] These considerations suggest that rules of liability as broad as those plaintiffs advocate are appropriately left to the Legislature.

Plaintiffs next argue that defendant Apio, through its contractual relationship with Munoz, dominated his business financially and thus exercised indirect control over his employees' wages and hours. [47] In making this argument, plaintiffs seek to portray Munoz as a straw man, engaged by Apio to shield itself from agricultural workers' wage claims. Certainly Wage Order No. 14's definition of employer, which encompasses any person . . . who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person, [48] is broad enough to reach through straw men and other sham arrangements to impose liability for wages on the actual employer. The undisputed facts, however, show that Munoz alone controlled plaintiffs' wages, hours and working conditions. Plaintiffs contend Apio indirectly controlled Munoz's ability to pay his employees because Apio unilaterally decided the amount of estimated net proceeds to advance to Munoz as Pick-Pack payments, and because Apio demanded that Munoz continue to harvest produce that would not produce a net return. Apio's right to set off its expenses, however, was simply an aspect of its contractual relationship with Munoz. Munoz had made a profit from the same relationship in prior years. Plaintiffs note that Apio reduced its Pick-Pack payments below the $2 level initially set by contract as the end of the season neared and the market deteriorated, but the contract unequivocally permitted Apio to set off its expenses before remitting net proceeds. Moreover, nothing in the record shows that Apio ever compelled Munoz to harvest on any occasion. Although Munoz had strong incentives to harvest fresh market berries for Apio in order to repay Apio's preseason advance and also to make a profit for himself, he testified without contradiction that he, alone, decided which fields to harvest on any given day and whether to harvest strawberries for fresh market sale or for the freezer. So far as the record discloses, negotiations between Apio and Munoz over the amount of fresh market berries to be delivered took place in the field, after Munoz had already informed Apio that he planned to harvest fresh market berries from the Oceano or Zenon field on a given day. While Munoz stated on May 27, 2000, during the work stoppage in El Campo, that he could not pay his workers because Apio was withholding payment, the undisputed facts show that Apio had paid Munoz ahead of schedule and more than it was eventually determined to owe him. More importantly, plaintiffs' factual assertions do not establish that Apio's business relationship with Munoz allowed the company to exercise control over Munoz's employees' wages and hours. In making the argument, plaintiffs ignore the following undisputed facts: First, Munoz operated a single, integrated business operation, growing and harvesting strawberries for several unrelated merchants and combining revenue from all sources with a personal investment, in the hope of earning a profit at the end of the season. Munoz paid his employees out of those combined revenues and assets. Second, Munoz had losses unrelated to his business with Apio from his unsuccessful business with Ramirez Brothers, who paid Munoz nothing during the 2000 season. Third, Munoz had substantial revenue from other sources on May 27, 2000. On that same day, Frozsun paid Munoz $149,340, bringing to $181,003 the amount it had paid him since April 29. This source of revenue continued until August 12, by which date Frozsun had paid Munoz a total of $476,955. Finally, Munoz alone, with the assistance of his foremen, hired and fired plaintiffs, trained and supervised them, determined their rate and manner of pay (hourly or piece-rate), and set their hours, telling them when and where to report to work and when to take breaks. Plaintiffs' claim that Apio dominated Munoz's financial affairs cannot be reconciled with these facts. Taking a different approach not based on the applicable wage order, plaintiffs attempt to compare this case with S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 [256 Cal.Rptr. 543, 769 P.2d 399] ( S.G. Borello ), in which we held that workers hired by a large agricultural landowner under sharefarmer agreements were employees rather than independent contractors for purposes of the workers' compensation law. (§ 3200 et seq.) The sharefarmers, we found, exhibit no characteristics which might place them outside the Act's intended coverage of employees. They engage in no distinct trade or calling. They do not hold themselves out in business. They perform typical farm labor for hire wherever jobs are available. They invest nothing but personal service and hand tools. They incur no opportunity for `profit' or `loss'; like employees hired on a piecework basis, they are simply paid by the size and grade of cucumbers they pick. They rely solely on work in the fields for their subsistence and livelihood. (48 Cal.3d at pp. 357-358, fns. omitted.) Applying the common law test of employment in light of the remedial purposes of the workers compensation law, we reasonably concluded the sharefarmers were, [w]ithout doubt, . . . a class of workers to whom the protection of the [workers' compensation law] is intended to extend. ( Id., at p. 358, fn. omitted.) Assuming the decision in S.G. Borello, supra, 48 Cal.3d 341, has any relevance to wage claims, a point we do not decide, the case does not advance plaintiffs' argument. Plaintiffs are correct in that, if Munoz had been Apio's employee rather than an independent contractor, Munoz's employees arguably would also have been Apio's employees; the determination that a purported independent contractor is in fact an employee raises the strong possibility, generally speaking, that the contractor and its employer jointly employ the contractor's employees. ( Rinaldi v. Workers' Comp. Appeals Bd. (1991) 227 Cal.App.3d 756, 759 [278 Cal.Rptr. 105], and cases cited.) But Munoz was not Apio's employee. In contrast to the sharefarmer-employees in S.G. Borello, Munoz held himself out in business, invested substantial capital and equipment, employed over 180 workers, sold produce through four unrelated merchants, enjoyed an opportunity for profit or loss dependent on his business acumen and market conditions, and had indeed made a profit in prior years operating in the same manner. Next, plaintiffs argue Apio controlled their wages on June 8 or 9, 2000, when Apio's vice-president Tim Murphy cooperated with the DLSE and Munoz to ensure that Munoz used Apio's final advance of net proceeds to pay his workers. (See, ante, at p. 47.) The argument fails. At that time, as noted, Murphy gave Munoz a check for $77,662, Munoz endorsed the check to the bank, and the bank immediately issued cashier's checks payable to 71 employees whose names Munoz had provided. In so doing, Apio participated with the government in what amounts to a garnishment of money owed to Munoz for the benefit of his employees. To hold on this basis that Apio controlled plaintiffs' wages would punish Apio for cooperating with the DLSE's attempt to enforce the wage laws and likely deter future cooperation by other employers. Viewing the undisputed evidence in the light most favorable to plaintiffs, we find no basis for concluding Apio exercised control over plaintiffs' wages and hours.
Plaintiffs contend defendant Combs exercised control over their wages and hours based on the events of May 27, 2000, at the El Campo field. On that date, as noted (see, ante, at p. 46 et seq.), plaintiffs had been picking freezer berries and stopped work to talk with Jose Serrano about unpaid wages. Juan Ruiz, Combs's agent, convinced some of Munoz's employees to return to work. According to plaintiff Asuncion Cruz, Juan [Ruiz] . . . told us to keep working and help Munoz. Juan told us not to worry and said he guaranteed we would be paid as his boss had checks he was delivering to Isidro Munoz. Cruz heard workers tell Juan they were concerned that the amount of the check he brought with him would not be enough to pay everyone. Juan told us not to worry as he would deliver even larger amounts of money from his boss to Isidro Munoz the following week, and even more money the week after that, which would be enough to pay us all. Cruz's declaration is consistent with those of others who heard Ruiz speak; the record contains no statements by Ruiz about what he said. Based on this evidence, plaintiffs contend that Combs offered [plaintiffs] employment through its agent Ruiz. Assuming for the sake of argument Ruiz was acting as Combs's agent in making the alleged statements, [49] the evidence in our view does not fairly support the inference that Ruiz offered plaintiffs employment. Certainly a promise to pay a person for work would be an offer of employment, as well as an exercise of control over wages and hours sufficient to bring the promisor within the wage order's definition of employer. (Wage Order No. 14, Cal. Code Regs., tit. 8, § 11140, subd. 2(F).) But Ruiz did not offer plaintiffs employment with Combs. Instead, he asked plaintiffs to continue working to help Munoz and pointed out that Munoz was not yet utterly without funds to pay them, as he was still receiving payments from Combs. Plaintiffs' declarations show they understood the distinction, as they questioned Ruiz not about the terms of any hypothetical work for Combs but about whether the amount of the check [Ruiz had] brought with him would . . . be enough to pay everyone. That plaintiffs were not working for Combs on May 27 was also reasonably apparent in that they were harvesting freezer berries in bulk rather than picking and packing fresh berries for market sale. Again, plaintiffs understood the distinction and recognized Ruiz as `Juan,' the person [they had seen] checking the strawberries. . . for the company to whom Munoz delivered the market strawberries we picked for sale. (Italics added.) For these reasons, we find plaintiffs' argument lacks merit.
Relying on the same evidence, plaintiffs also contend that Ruiz personally exercised control over their wages and hours and is thus personally liable as an employer under section 1194 and Wage Order No. 14. The claim fails under our holding in Reynolds, supra, 36 Cal.4th 1075, that the IWC's definition of employer does not impose liability on individual corporate agents acting within the scope of their agency. ( Reynolds, at p. 1086.) Plaintiffs specifically allege in the operative complaint that Ruiz, in making the alleged statements on May 27, 2000, was acting in his capacity as agent for [Combs] . . . .
Plaintiffs contend that defendants Apio and Combs, through their field representatives' activities in the areas of quality control and contract compliance, became joint employers of Munoz's workers by exercis[ing] control over [their] . . . working conditions within the meaning of Wage Order No. 14. (Cal. Code Regs., tit. 8, § 11140, subd. 2(F).) Plaintiffs devote little attention to the argument, but it deserves discussion. As we have noted, picking and packing strawberries for fresh market sale necessitated close communication during the harvest between defendants and Munoz's personnel. This is because market berries are packed in the field, as they are picked, into the containers in which they will be sold to consumers, often that same day or the next. The contract between Apio and Munoz expressly provided for such activities, and Munoz operated in the same manner with Combs, apparently as a matter of standard practice. (See, ante, at p. 45.) Viewing the facts most favorably to plaintiffs, Apio sent its representatives Juan Toche and Manuel Cardenas to the field on days when Munoz harvested fresh berries from the Oceano and Zenon fields, and Combs sent defendant Juan Ruiz when Munoz harvested berries from El Campo. Apio's and Combs's representatives followed the same procedure: In the morning, the representatives would explain to Munoz and his foremen how the merchant wanted strawberries packed, and Munoz and his foremen would demonstrate the packing style to the workers. For about an hour, the representatives, together with Munoz and his foremen, would check the packed containers as workers brought them from the field to the truck where they would be loaded for shipping. While the representatives would generally bring problems to the attention of Munoz and his foremen, they would also sometimes speak directly to the workers, pointing out mistakes in packing such as green or rotten berries. In the afternoon, the representatives would return briefly to check the quality and quantity of berries in the loaded truck. (15) The question is whether this evidence raises a triable issue of fact as to whether Apio and Combs exercised control over the working conditions of Munoz's employees. As we have explained, one of the reasons the IWC defined employer in terms of exercising control was to reach situations in which multiple entities control different aspects of the employment relationship. This occurs, for example, when one entity (such as a temporary employment agency) hires and pays a worker, and another entity supervises the work. (See, ante, at pp. 59-60.) Supervision of the work, in the specific sense of exercising control over how services are performed, is properly viewed as one of the working conditions mentioned in the wage order. To read the wage order in this way makes it consistent with other areas of the law, in which control over how services are performed is an important, perhaps even the principal, test for the existence of an employment relationship. (See, e.g., Metropolitan Water Dist. v. Superior Court, supra, 32 Cal.4th 491, 512 [common law]; Tieberg v. Unemployment Ins. App. Bd. (1970) 2 Cal.3d 943, 946 [88 Cal.Rptr. 175, 471 P.2d 975] [unemployment insurance]; McFarland v. Voorheis-Trindle Co. (1959) 52 Cal.2d 698, 704 [343 P.2d 923] [workers' compensation].) While the evidence indicates that Apio's and Combs's field representatives spoke with Munoz's employees about the manner in which strawberries were to be packed, it does not indicate the field representatives ever supervised or exercised control over his employees. No evidence suggests Munoz's employees viewed the field representatives as their supervisors or believed they owed their obedience to anyone but Munoz and his foremen. Plaintiffs, relying on cases interpreting other bodies of law, argue the right to exercise control over the manner in which work is performed is sufficient to prove the existence of an employment relationship, whether or not the right is exercised. (E.g., S.G. Borello, supra, 48 Cal.3d 341, 350; Tieberg v. Unemployment Ins. App. Bd., supra, 2 Cal.3d 943, 946.) But even assuming the same rule applies here, Munoz's contracts with Apio and Combs gave the merchants no right to direct his employees' work. Neither does any evidence in the record suggest that anyone Munoz, Apio, Combs, the merchants' field representatives, or plaintiffsbelieved the merchants or their representatives had such a right. Confusion on this point was not likely to arise, since Munoz and his foremen were present when the field representatives interacted with Munoz's employees. For all of these reasons, we conclude the claim lacks merit.