May 16, 2022

Key California Employment Law Cases: April 2022

Hill v. Walmart Inc., No. 21-15180, 2022 WL 1218776 (9th Cir. Apr. 26, 2022)

Summary: Good-faith dispute about employment status of freelancer who modeled in sporadic one- or two-day increments precluded imposition of waiting-time penalties pursuant to Labor Code section 203.

Facts: Plaintiff Bijon Hill appeared in 10 photo shoots organized by Defendant Walmart, Inc. between July 2016 and August 2017, for a total of 15 days, in non-consecutive periods of one or two days. Plaintiff sued Defendant for more than $540,000 in waiting-time penalties under California Labor Code section 203 for its failure to pay her immediately after each photo shoot ended. Defendant moved for summary judgment on the basis that Plaintiff was an independent contractor outside the coverage of the relevant Labor Code provisions, and on the basis that there was a good-faith dispute about whether Plaintiff was an independent contractor. The district court denied summary judgment on Defendant’s independent contractor argument, concluding that there was a triable question of fact about whether Plaintiff was an employee, but it granted summary judgment on Defendant’s good-faith defense argument. The district court concluded that there was a good-faith dispute about whether Plaintiff was an independent contractor, noting that the short length of time that Plaintiff worked for Defendant and the fact that she had worked for other companies, among other factors, made it objectively reasonable for Defendant to believe that Plaintiff was not an employee.Plaintiff appealed. 

Court’s Decision: The Court of Appeals for the Ninth Circuit affirmed. First, the court rejected Plaintiff’s contention that Defendant was foreclosed from raising a good-faith defense based on mistakenly classifying an employee as an independent contractor. The court held that a good-faith mistake about a worker’s employment status is a valid defense to the imposition of waiting-time penalties pursuant to Labor Code section 203. Second, on the merits, the court held that based on the undisputed material facts and the state of California employment law in 2016 and 2017, Defendant had reasonable grounds to believe that Plaintiff was an independent contractor. In so holding, the court noted that Plaintiff arranged and paid for her own travel, that she provided modeling services for other companies, and that Defendant did not provide her a Form W-2; the court also explained that the brief length of time Plaintiff provided services to Defendant did not support an employee relationship. The court also rejected Plaintiff’s reliance on Zaremba v. Miller, 113 Cal. App. 3d Supp. 1 (1980), a decision of the Appellate Department of the Los Angeles County Superior Court, as factually distinct, “a very old case,” and not the “seminal case” that Plaintiff had construed it to be.

Practical Implications: These types of lawsuits claiming waiting-time penalties for freelance photo shoot models have been around for several years now. While this case provides useful authority for defending against such claims, it is important to keep in mind that it does not hold that freelance photo shoot models are necessarily independent contractors. Companies making use of these types of model services should still exercise caution and should take care when determining whether photo shoot models qualify as independent contractors under the “ABC” test. Companies making use of these services should also be aware of California Labor Code section 201.6, which sets the deadline for payment of final wages for “print shoot employees,” defined as individuals “hired for a period of limited duration to render services relating to or supporting a still image shoot, including film or digital photography, for use in print, digital, or internet media.” If an individual qualifies as a “print shoot employee,” he or she is entitled to receive payment of the wages earned and unpaid at the time of termination “by the next regular payday.”  

Leshane v. Tracy VW, Inc., No. C093881, 2022 WL 1283276 (Cal. Ct. App. Apr. 29, 2022)

Summary: A defendant’s motion to compel arbitration will not stand where a plaintiff dismisses class claims and proceeds with a PAGA claim only.

Facts: Plaintiffs brought a wage-and-hour lawsuit against their former employers, Defendants Tracy VW, Inc. and RJ Gill Ventures, Inc. They alleged class claims under the California Labor Code Private Attorneys General Act (“PAGA”). Defendants moved to compel arbitration, and Plaintiffs responded by amending their complaint to include only a PAGA claim. Defendants continued with their motion to compel arbitration, arguing that Plaintiffs’ dismissal of the class action claims did not eliminate the controversy, as Plaintiffs could resuscitate those claims at any time. The trial court denied Defendants’ motion. Defendants appealed.

Court’s Decision: The California Court of Appeal affirmed. The court rejected Defendants’ argument that the term “controversy,” as used in Code of Civil Procedure section 1281.2, includes “any question subject to an arbitration agreement, even if that question is not asserted by a claimant in any forum.” Instead, the court held that to qualify as a “controversy,” there must be a “bilateral dispute to resolve,” as section 1281.2 uses the phrase “between the parties.” Where Plaintiffs were no longer asserting the claims Defendants sought to compel to arbitration, there was no question of law or fact between the parties, and, thus, no controversy. The court noted that Defendants appeared to be making this argument to obtain a stay of the trial court action and, thus, “shield [themselves] against liability under” PAGA, instead of as a means to neutral dispute resolution.

Practical Implications: This case represents yet another creative, but ultimately unsuccessful, attempt to use arbitration to defeat PAGA claims. While this decision is not surprising given the general trend in the California state courts, the United States Supreme Court’s forthcoming decision in Viking River Cruises v. Moriana has the potential to change the terrain in this area substantially. 

Buchanan v. Watkins & Letofsky, LLP, 30 F.4th 874 (9th Cir. 2022)

Summary: The “integrated enterprise” doctrine applies to the ADA.

Facts: Plaintiff Amy Buchanan filed suit against Defendant Watkins & Letofsky, LLP (“W&L Nevada”), a Nevada limited liability partnership, under the Americans with Disabilities Act (“ADA”), and state law. Daniel Watkins and Brian Letofsky, who were licensed to practice law in Nevada and California, owned and were the only partners of W&L Nevada. Likewise, they owned and were the only partners of Watkins & Letofsky (“W&L California”), a California limited liability partnership. Plaintiff worked full time for W&L Nevada for about six months, but then resigned. Later, she returned to work for W&L Nevada, but requested an accommodation of her medical condition in the form of only working 20 hours per week. W&L Nevada agreed to provide the accommodation, but Plaintiff contended that W&L Nevada did not actually uphold its agreement and required her to work more than 20 hours per week. Plaintiff then asked for time off to focus on her health, and W&L Nevada placed her on an indefinite leave of absence. On W&L Nevada’s motion, the district court granted summary judgment in favor of W&L Nevada, holding that it was not a covered employer under the ADA because (1) it had fewer than 15 employees, and (2) Plaintiff did not present sufficient evidence to create a genuine issue of material fact as to whether W&L Nevada was an “integrated enterprise” with its counterpart in California. Plaintiff appealed.

Court’s Decision: The Court of Appeals for the Ninth Circuit reversed. First, the court held, as a matter of first impression, that the “integrated enterprise” doctrine, which the Ninth Circuit had previously applied to claims under Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act, applies equally under the ADA. Second, the court found that, considering the four factors relevant to the “integrated enterprise” doctrine — interrelation of operations, common management, centralized control of labor relations, and common ownership or financial control — Plaintiff had established a genuine issue of material fact as to whether W&L Nevada and W&L California were an integrated enterprise.

Practical Implications: Many employment-related laws, both state and federal, apply only to employers of a particular size. Small employers should not, however, automatically assume that their size exempts them from any employment-related laws. Doctrines like the “integrated enterprise” doctrine and the “joint-employer” doctrine, just to name a couple, operate to combine otherwise independent entities to satisfy the size thresholds for these laws. These doctrines are complicated and fact-intensive, and small employers should carefully consider them before reaching the conclusion that a particular law does not apply to them based on their small size.