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Tuesday, June 9, 2015

Noe v. Superior Court: Independent Contractor Misclassification Penalties Apply to Joint Employers Who Did Not Make Misclassification Decision, but Plaintiffs Have no Private Right of Action

Many appellate decisions do a poor job of laying out the facts, issues and holdings. Noe v. Superior Court (Levy Premium Foodservice Limited Partnership) (6/1/15) ___ Cal.App.4th ___, is an exception:
Anschutz Entertainment Group (AEG) contracted with Levy Premium Foods to manage the food and beverage services at several entertainment venues located in southern California. Levy contracted with Canvas Corporation to provide laborers who sold food and beverages at AEG venues. In 2013, several vendors filed a wage and hour class action against AEG, Levy and Canvas for failure to pay minimum wage and willfully misclassifying them as independent contractors in violation of Labor Code section 226.8. 
AEG and Levy filed motions for summary judgment arguing in part that they were entitled to summary adjudication of plaintiffs’ section 226.8 claim because the undisputed evidence showed Canvas was the entity that had classified the vendors as independent contractors. Although the trial court denied the motions for summary judgment, it agreed that plaintiffs could not pursue a section 226.8 claim against AEG or Levy because neither entity had made the alleged misclassification decision.  
Plaintiffs filed a petition for writ of mandate and we issued an order to show cause. In their return to the writ, AEG and Levy argued for the first time that even if the trial court erred in interpreting section 226.8, we should deny the writ because the statute does not provide a private right of action. We now deny plaintiffs’ petition. We conclude that, contrary to the trial court’s interpretation, section 226.8 is not limited to employers who make the misclassification decision, but also extends to any employer who is aware that a co-employer has willfully misclassified their joint employees and fails to remedy the misclassification. However, we further conclude that section 226.8 cannot be enforced through a direct private action and deny the plaintiffs’ writ on that basis. 
If every court wrote this clearly, nobody would read my blog. Seriously. 

The Court held that the plaintiffs could pursue writ relief because: (1) the ruling on summary adjudication "summarily disposed of a large portion of the case," particularly given the potential value of the 226.8 penalties; (2) review could "obviate a duplicative expenditure of resources"; and (3) the petition presents a "significant issue" of first impression. 

As to the merits, the Court reasoned as follows: 

Section 226.8 makes it unlawful for an employer to "engage in" the act of "voluntarily and knowingly misclassifying [an] individual as an independent contractor." Because "to engage" means to "involve oneself or take part in," an individual or entity can "engage" in misclassification without actually having "committed" that act. "[A] joint employer who knowingly acquiesces in a co-joint employer’s decision to willfully misclassify their joint employees has necessarily 'involved' itself in that misclassification decision." This is consistent with the purpose of the statute, which is to provide a "broad deterrent" against misclassification and comports with the principle that employment statutes should be construed broadly in favor of protecting employees.

An employer may not be held liable under section 226.8 based solely on the acts of a co-employer. To engage in misclassification, and employer must involve itself with or participate in "voluntary and knowing misclassification." A joint employer is not liable for 226.8 penalties as the agent of a "co-joint employer" or under principals of joint and several liability.

Section 226.8 authorizes the Labor Commissioner to enforce the statute “pursuant to Section 98 or in a civil suit," but nothing in section 226.8 itself indicates a legislative intent to create a private right of action for employees themselves. Further, Labor Code section 218, which authorizes employees to sue for wages and penalties that are due to them, does not provide a private right of action under 226.8 because section 226.8 penalties are not payable to the employees.

The defendants did not contend that the plaintiffs could not obtain penalties for violation of section 226.8 under PAGA, and the Court did not address this issue.

The opinion is available here.

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