State:
September 05, 2023
9th Circuit Weighs in on Who Is Responsible for Unpaid Wages

by Mark I. Schickman

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When you see the packages of strawberries in the produce department, you probably don’t consider whose employees grew, packaged, and shipped them. The court of appeal recently had to consider whether farmworkers work for an individual employer or a joint employer.

Are Growing and Selling Fruit the Same Business?

A group of farmworkers who harvested strawberries in Santa Barbara County, California, in 2016 and 2017 filed a lawsuit alleging a series of wage and hour violations. They were hired by strawberry growers to pick the fruit that was then turned over to marketers Red Blossom and Better Produce, who cooled and sold the berries principally to large retail grocery chains. They conducted the cooling and distribution operations on premises close to but separate from the farms.

The marketers entered into yearly marketing and sublease agreements with the growers, which specified that the land would be used only to grow strawberries and that they retained the exclusive right to sell the strawberries to their retail customers. The growers were responsible for preparing and cultivating the land and for supervising and controlling the harvesters.

The marketers provided the growers with packaging materials, communicated with them about the quantity of the strawberries produced, and had the strawberries placed into containers with the marketers’ labels on them. The growers conducted the actual farming operations and supervised the agricultural workers.

Once the farmworkers completed harvesting and packing the berries, the marketers were then responsible for cooling and selling them. As commission merchants, the marketers had the sole authority to make decisions regarding sales of the strawberries. After deducting their commission fee, cooling fee, and the cost of packaging materials, the marketers paid the remaining sale proceeds to the growers.

In 2018, the growers stopped paying their employees and later filed for bankruptcy. The employees filed suit in federal district court against the growers and the marketers as joint employers under federal and California law.

The farmworkers also sued the marketers as “client employers” under a California statute that could make the marketers joint employers responsible for payment to the workers, if the work being done was labor within the “usual course of business” as defined by the statute. That work is defined as “the regular and customary work of a business, performed within or upon the premises or worksite of the client employer.”

After a federal district court judge in Southern California ruled against the workers, they appealed the decision to the U.S. 9th Circuit Court of Appeals (which covers employers in Alaska, Arizona, California, Guam, Hawaii, Idaho, Montana, Nevada, Northern Mariana Islands, Oregon, and Washington). The appeals court agreed with the trial court.

Not a Joint Employer Under Any of the Three Theories

The 9th Circuit first found the marketers weren’t joint employers under federal law. It concluded the workers weren’t economically dependent on the marketers because the marketers didn’t supervise the workers in planting, cultivating, harvesting, or packing the strawberries, nor did they control decisions related to the workers’ assignments.

The appeals court made the same finding with regards to California law, quoting a very similar California supreme court case where, like here, the merchants who sold the berries were found not to be joint employers. They didn’t supervise or control the work. Because the farmer had the “exclusive power to hire and fire his workers, to set their wages and hours, and to tell them when and where to work,” the merchants didn’t exercise control over the workers’ wages, hours, or working conditions.

Finally, the court found the marketers weren’t joint employers under the special California legislation designed to deal with the situation. A key factor in a finding of joint employment under the statute is that the worker be involved in the merchant’s “usual course of business.” The statute defined that term to be the marketers “regular and customary work, which must take place on the marketers ‘premises or worksite.’”

The employees raised several arguments of policy, logic, and fairness, but the court was bound by the plain language of the statute. It also found a logical basis for the statutory limitation because “the legislature sought to confer liability on entities that could reasonably be expected to prevent labor violations because they exercised sufficient control over the premises.”

The statute 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. It doesn’t go so far as to extend liability for the wages of workers performing work elsewhere, even if they are producing a product necessary to the company’s business.

Finally, the court quoted from the legislative history of the joint employer legislation, poignantly noting the public assumption that the people they see at a company’s place of business are employees:

We walk into a Marriott and assume that the people who greet us at the front desk or who clean our rooms each day are employees . . . (as their uniforms imply). We greet the technicians sent to our home to fix our cable, not even questioning whether they work for the media company to whom we pay our bills. In short, we assume that the companies who invest millions of dollars to convince us of the benefits of buying products . . . also undertake the operations needed to produce them—including acting as the employer of all the inter-connected people who make their business possible.

But that rationale doesn’t apply to agricultural farm workers picking strawberries for a grower on a farm, separated from the business location of the marketers. The trial court and 9th Circuit agreed that the marketers weren’t joint employers under federal law, California common law, or California statute. Morales-Garcia v. Better Produce, Inc. (9th Cir., 22-55119 6/1/23).

Bottom Line

Whether joint employment exists can be a sticky situation. For statutory liability, the critical factor is where the work occurred because liability under the specific statute at issue required that the work be done on the marketers’ premises. But other factors are important, too, including how much control is exercised by the claimed joint employer and how central the work is to its business. Indeed, make sure any third-party contracts don’t give you the right to control or assign their employees—regardless of whether you ever exercise that right. Make sure you don’t fall into a claim of being a joint employer.

Mark I. Schickman is Editor of the California Employment Law Letter and the founder of Schickman Law in Berkeley, California. Mark has successfully litigated almost every type of employment case in the courts before juries and administrative agencies and on appeal and is a popular and engaging trainer providing employment advice to employers across the country. He can be reached at Mark@SchickmanLaw.com.

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