Liability of Companies for Outsourced Workers under California Law

Some businesses in California use other companies to provide their workers. The company that provides the workers is sometimes referred to as a “Labor Contractor.” Unfortunately, Labor Contractors may, for a number of reasons, stop paying their workers. The question then is whether the workers can sue the business that used the Labor Contractor for their unpaid wages.

In 2014, California enacted a statute to address this situation: Labor Code section 2810.3.  Section 2810.3 provides a new form of liability for businesses that obtain workers from third-party contractors. It applies to business entities, regardless of its form, that obtain or are provided workers to perform labor within the usual course of business from a labor contractor.” Cal. Labor Code § 2810.3(a)(1)(A). A third-party contractor who supplies workers to the client employer is considered a “labor contractor” and is defined in the statute as “an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business.” Id. § 2810.3(a)(3). The statute in turn defines “usual course of business” as “the regular and customary work of a business, performed within or upon the premises or worksite of the client employer.” Id. § 2810.3(a)(6).

Section 2810.3 thus expands liability for a company that may use financially shaky subcontractors to provide workers to perform the work of the company’s business at the company’s place of
business.

A recent Ninth Circuit Court of Appeals case called Morales-Garcia v. Better Produce, Inc. (June 1, 2023) Case No. 22-55119 explores the limits of Section 2810.3. There, two companies, Red Blossom and Better Produce (“the Marketers”), sold strawberries to large grocery stores. The strawberries were picked by workers who were employed by strawberry growers (“the Growers”) who went bankrupt. The workers sued both the Growers and the Marketers both as joint employers and under Section 2810.3.

The Ninth Circuit held that the key question under Section 2810.3 was where the workers performed the work of harvesting the strawberries. The Marketers did not own the farmlands where the strawberries were picked, not did the exercise control over those farmlands. The plaintiffs pointed to the fact that the Marketers held the master leases on those farmlands, and could enter them and take over the operations under certain circumstances. However, the court rejected these arguments because it found that only the Growers had the right to exercise control over the farmlands, to control the farming, and to direct the work of the workers who were picking the strawberries.

The court further held that imposing liability on the Marketers would be inconsistent with the purpose behind Section 2810.3. That purpose was focused on businesses that could reasonably be expected to be able to prevent labor violations. Here, the Marketers did not have the ability to oversee the Growers’ compliance with those laws.

For all of these reasons, the court concluded that the strawberry pickers could not sue the Marketers under Section 2810.3.

If you feel that you are owed unpaid wages, or have questions about your rights at work, please feel free to contact Hunter Pyle Law for a free and confidential intake process. We can be reached at www.hunterpylelaw.com, inquire@hunterpylelaw.com, or (510) 444-4400.