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.

DeSaulles v. Community Hospital of the Monterey Peninsula: Supreme Court will Decide Right to Recover Costs after Settlement

In DeSaulles v. Community Hospital of the Monterey Peninsula (2014) 225 Cal.App.4th 1427 (available here), the Court of Appeal held that when an employer pays an employee in settlement, the employee obtains a "net monetary recovery" from the employer and is the prevailing party in the action. As such, where the settlement agreement is silent as to the recovery of costs, the employee is entitled to recover his or her costs as a matter of right. The employer is not entitled to recover its costs in this situation, even though it obtained a judgment denying the plaintiff any relief, which ordinarily would make the defendant the prevailing party.

The California Supreme Court granted review on July 23, 2014. The Court's web site lists the issue presented as follows:

When plaintiff dismissed her action in exchange for the defendant's payment of a monetary settlement, was she the prevailing party for purposes of an award of costs under Code of Civil Procedure section 1032, subdivision (a)(4), because she was "the party with a net monetary recovery," or was defendant the prevailing party because it was "a defendant in whose favor a dismissal is entered"?

DeSaulles is case number S219236, and the Court's web site for it is here. As always, you can sign up for automatic notices regarding the proceedings on the case web site. Or you can watch this space. I'll post the result once it comes down. 

McLean v. State of California: Supreme Court Will Decide Whether Waiting Time Penalties Apply to Retiring Employees and Whether State Employees May Sue the "State of California"

California Labor Code section 202 provides that an employee's wages become due and payable not later than 72 hours after he or she quits. In McLean v. State of California (2014) 228 Cal.App.4th 1500 (available here) the Court of Appeal held that section 202 applies to retiring employees. The Court also held that McLean, a former deputy attorney general, properly sued the State of California as her "employer" but improperly sued the State Controller's Office.

The California Supreme Court granted review on November 25, 2014. The issues, as stated on the Court's web site, are as follows:

(1) When bringing a putative class action to recover penalties against an "employer" under Labor Code section 203, may a former state employee sue the "State of California" instead of the specific agency for which the employee previously worked? 

(2) Do Labor Code section 202 and 203, which provide a right of action for an employee who "quits" his or her employment, authorize a suit by an employee who retires?

McLean is case number S221554, and the Court's web site for it is here.

Verdugo v. Alliantgroup: Court Rejects Out-of-State Forum Selection and Choice-of-Law Clauses in Employment Agreement

In Verdugo v. Alliantgroup, L.P. (5/28/15) --- Cal.App.4th ---, the plaintiff, Verdugo, worked for the defendant, Alliantgroup. Her employment agreement stated that any dispute would be litigated in Alliantgroup's home state, Texas, and that Texas law would apply. Verdugo filed a putative class action for wage and hour violations, and the court granted Alliantgroup's motion to stay the action, holding that the forum selection clause was valid. The Court of Appeal reversed, holding as follows:

When the claims at issue are based on unwaivable rights created by California statutes, the party seeking to enforce the forum selection clause bears the burden of proving that doing so “will not diminish in any way the substantive rights afforded . . . under California law.”

Indeed, a defendant can meet its burden only by showing the foreign forum provides the same or greater rights than California, or the foreign forum will apply California law on the claims at issue.

Verdugo's claims were based on unwaivable statutory rights, and Alliantgroup failed to show that litigating the claims in Texas would not diminish those rights. The fact that a Texas court may choose to apply California law did not prove that Verdugo's unwaivable statutory rights would not be diminished "in any way."

The opinion is available here.

EEOC v. Abercrombie & Fitch: In Title VII Disparate Treatment Action, Job Applicant Need Not Show that Employer Actually Knew of Need for Accommodation or that Applicant Requested Accommodation

Title VII of the Civil Rights Act of 1964 prohibits a prospective employer from refusing to hire an applicant in order to avoid accommodating a religious practice that it could accommodate without undue hardship. The question presented is whether this prohibition applies only where an applicant has informed the employer of his need for an accommodation. 

EEOC v. Abercrombie & Fitch Stores, Inc. (6/1/15) ___ U.S. ___.

Samantha Elauf, a practicing Muslim who wears a headscarf for religious purposes, applied for a job at Abercrombie & Fitch (A&F). A&F staff assumed that Elauf wore the headscarf for religious purposes, but they did not know for sure and they did not ask. A&F rejected Elauf, believing her wearing a headscarf at work would violate its "Look Policy." 

The EEOC sued on Elauf's behalf, alleging that A&F violated Title VII. The trial court granted summary judgment for Elauf on liability, a jury awarded her damages, and the court entered judgment. The Tenth Circuit reversed, holding that A&F could not be liable because it did not know if Elauf actually needed a religious accommodation. 

The US Supreme Court granted certiorari and reversed the Tenth Circuit, holding that a plaintiff may prevail in a Title VII disparate treatment action without showing that the defendant had actual knowledge of his or her need for a religious accommodation. Instead, an employer may be liable "even if he has no more than an unsubstantiated suspicion that accommodation would be needed" and even if the applicant does not request religious accommodation.

The Court rejected the argument that a claim based on an applicant's religious practice must be raised as a disparate impact claim. "[R]eligious practice is one of the protected characteristics that cannot be accorded disparate treatment and must be accommodated."

An employer may be liable even if its policies treat religious practices no less favorably than similar secular practices. 

Title VII does not demand mere neutrality with regard to religious practices—that they be treated no worse than other practices. Rather, it gives them favored treatment, affirmatively obligating employers not “to fail or refuse to hire or discharge any individual . . . because of such individual’s” “religious observance and practice.” An employer is surely entitled to have, for example, a no-headwear policy as an ordinary matter. But when an applicant requires an accommodation as an “aspec[t] of religious . . . practice,” it is no response that the subsequent “fail[ure] . . . to hire” was due to an otherwise neutral policy. Title VII requires otherwise-neutral policies to give way to the need for an accommodation.

Justice Scalia wrote the opinion, with Chief Justice Roberts and Justices Kennedy, Ginsburg, Breyer, Sotomayor, and Kagan joining. Justice Alito wrote a concurring opinion, and Justice Thomas dissented. The opinion is available here. 

Dynamex Operations West v. Superior Court: Supreme Court Will Review Independent Contractor Class Certification Issues

In Dynamex Operations West, Inc. v. Superior Court (Lee) (2014) 230 Cal.App.4th 718 (discussed here) the Court of Appeal held that the IWC Wage Order definition of "employer" -- discussed in Martinez v. Combs (2010) 49 Cal.4th 35 (discussed here) -- applies to claims that fall within the scope of the Wage Order, but the multi-factor test discussed in S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 applies to claims that fall outside the scope of the Wage Order. Got it?

The California Supreme Court granted review on January 28, 2015. The issue presented, according to the Court's web site, is as follows:

In a wage and hour class action involving claims that the plaintiffs were misclassified as independent contractors, may a class be certified based on the Industrial Welfare Commission definition of employee as construed in Martinez v. Combs (2010) 49 Cal.4th 35, or should the common law test for distinguishing between employees and independent contractors discussed in S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 control?

Dynamex is Case No. S222732, and the Court's web site for it is here. 

Higgins-Williams v. Sutter Medical: Employee's Inability to Work under Particular Supervisor Because of Stress Related to Standard Oversight Does Not Constitute Disability under FEHA

In Higgins-Williams v. Sutter Medical Foundation (5/26/15) --- Cal.App.4th ---, the plaintiff, Higgins-Williams, complained to her employer, Sutter, that she suffered stress from interactions with her supervisor and Sutter's HR department. Her physician diagnosed her with adjustment disorder with anxiety, placed her on intermittent leave, and stated that she could return to work without limitation if transferred to a different department. After several months of leave, Sutter advised Higgins-Williams that it would terminate her, unless she provided information as to (1) when she could return to work and (2) whether additional leave as an accommodation would effectuate her return to work. She did not supply the information, and Sutter terminated her.

Higgins-Williams sued, alleging disability discrimination, CFRA, and wrongful termination claims. The trial court granted Sutter's motion for summary judgment on all claims, and the Court of Appeal affirmed, holding as follows:

Higgins-Williams did not suffer from a disability as defined in the FEHA and could not prevail on her FEHA or wrongful termination claims. "An employee's inability to work under a particular supervisor because of anxiety and stress related to the supervisor's standard oversight of the employee's job performance does not constitute a disability under FEHA."

Higgins-Williams also could not prevail on her CFRA claims because she exhausted her available CFRA and FMLA leave, and Sutter granted her an additional five months of leave thereafter. Higgins-Williams's testimony that she didn't think she could have returned to work but would have tried failed to raise a genuine issue of material fact that Sutter failed to reinstate her following leave.

Finally, Higgins-Williams also could not prevail on her claim that Sutter wrongfully terminated her for asserting her CFRA rights. The evidence showed that Sutter had a legitimate business reason for terminating Higgins-Williams, and Higgins-Williams failed to raise a genuine issue of material fact as to whether that reason was pretextual.

The opinion is available here.