Joint Employer Liability in California Wage and Hour Cases

Workers who sue for unpaid wages in California often find that their immediate employer has no money to pay them. Fortunately, California has a broad joint employer doctrine that allows workers to sue entities other than their immediate employers-including both businesses and individuals-for such wages.

Under California law, the definition of employer set forth in the Wage Orders governs who and what are liable for unpaid wages. See Martinez v. Combs (2010) 49 Cal.4th 35, 64, as modified (June 9, 2010). Under that definition, to employ can mean three different things:

(a) to exercise control over the wages, hours or working conditions, or

(b) to suffer or permit to work, or

(c) to engage, thereby creating a common law employment relationship.

The California Supreme Court has held that this language “imposes liability on multiple entities who divide among themselves control over those different aspects of the employment relationship.” Martinez, 49 Cal.4th at 67. Accordingly, a business or person that controls another company may be the joint employer of the company’s employees even if it did not hire, fire, or direct the work of those employees. Guerrero v. Superior Court (2013) 213 Cal.App.4th 912, 950.

Type of Joint Employers

Joint employers come in many shapes and sizes, but most fall into one of two broad categories: they are either vertical joint employers or horizontal joint employers.

With vertical joint employers, one entity (sometimes a parent corporation or holding company) owns another entity that is technically the employer:

A good example of this type of joint employer is discussed in the case of Castaneda v. Ensign Group, Inc. (2014) 229 Cal.App.4th 1015. That case involved a corporation with no employees that owned a corporation with employees. The court held that “[i]f the corporation with no employees exercises some control over the corporation with employees, it also may be the employer of the employees of the corporation it owns.” Id., at 1017.

However, there is another type of joint employer that is generally referred to as a horizontal joint employer. In that situation, business entities (for example, restaurants) share employees, supplies, and managers.

Joint Employers under California Law

Whether or not a business or a person is a joint employer will depend upon a factually-specific inquiry regarding their involvement with the workers. In Martinez, the California Supreme Court identified a number of factors that could support a finding of joint employer liability:

►Who controlled the wages, hours, and working conditions?

►Who offered employment to the workers?

►Whom did the workers view as supervisors?

►Who had the power to direct the work of the pickers?

►Who had the power to prevent the actual employer from paying inadequate wages?

The joint employer doctrine in the context of California’s wage and hours was explored in the case of Turman v. Superior Court of Orange County (2017) 17 Cal.App.5th 969, 986. In Turman, the trial court expressed concern that if an individual defendant was held liable for unpaid wages because he was the sole shareholder and president of a corporation, “then all owners of all closely held corporations would suffer the same fate.” However, the court of appeal found that the individual defendant was not insulated from liability under the joint employer doctrine if he met any of the definitions of employer set forth in the wage orders. Id.

 The workers in Turman were therefore able to sue the individual defendant, which was fortunate for them because the corporation had no assets with which to pay them. After a ten year battle, the workers were able to negotiate a settlement of $2.2 million. Without the joint employer doctrine, they would never have been able to recoup that money.

 If you have questions about your wages and who or what you can sue under California law, please feel free to contact the attorneys at Hunter Pyle Law for a free and confidential intake process. We can be reached at hunterpylelaw.com, inquire@hunterpylelaw.com, or (510) 444-4400.