July 14, 2018

Key California Employment Law Cases: May 2018

This month’s key California employment law cases are two decisions from the California Court of Appeal.

Curry v. Equilon Enters., LLC, 22 Cal. App. 5th 772 (2018)

Summary:  Employees of entities who leased and operated gas stations owned by oil company were not employees of oil company because it did not exercise control, resulting in no employer-employee relationship.

Facts:  Plaintiff worked as a gas station manager, managing two stations owned by Shell Oil, but operated by defendant company, ARS.  Plaintiff was hired, trained and supervised by ARS employees.  ARS alone determined that plaintiff was an exempt employee.  Plaintiff alleged, in a putative class action, that she and other managers were misclassified as exempt employees and that Shell was their joint employer along with ARS.  The trial court granted Shell’s motion for summary judgment on the ground that Shell did not exercise any control over plaintiff’s wages, hours or working conditions.  The fact that Shell may have exercised some control over the way in which ARS managed the gas stations did not create triable issues of fact on the issue of Shell controlling plaintiff.

Court’s Decision:  The California Court of Appeal affirmed.  The court noted three alternative definitions of what it means to employ someone:  (1) to exercise control over wages, hours or working conditions; (2) to engage; or (3) to suffer or permit to work.  The first definition did not apply because Shell did not control plaintiff’s wages, hours or working conditions.  ARS alone controlled what the plaintiff did on a daily basis, trained the plaintiff, and determined that plaintiff was exempt.  For the second definition, the court looked to a multifactor test to determine if Shell engaged plaintiff.  Under this test, Shell did not engage plaintiff because ARS recruited plaintiff based on her distinct skill set, ARS supervised her work, ARS trained her, ARS controlled her shifts, and ARS paid her.  The third definition did not apply because Shell had no authority to hire or fire plaintiff.  

In an amended opinion, the court rejected plaintiff’s argument that she prevailed under the ABC test set forth in Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903, 232 Cal. Rptr. 3d 1 (2018).  First, the supreme court’s policy reasons for selecting the ABC test are uniquely relevant to the issue of allegedly misclassified independent contractors.  In the joint employment context at issue here, the alleged employee was already considered an employee of the primary employer; the issue was whether the employee was also an employee of the alleged secondary employer.  The supreme court did not appear to intend the ABC test to be applied in joint employment cases.  Nevertheless, even if the ABC test applied, defendant still prevailed, mainly because plaintiff was engaged in an independently established occupation and there was no triable issue of fact under the last factor of the test. 

Practical Implications:  This decision provides a helpful overview of ways in which employers—particularly those with franchises or multiple layers of ownership—can structure their operations in an effort to avoid joint employer liability.



Maldonado v. Epsilon Plastics, Inc., 22 Cal. App. 5th 1308, 232 Cal. Rptr. 3d 461 (2018)

SummaryAlternative workweek schedule was not properly adopted.

Facts:  Plaintiff employees operated production machines that manufactured plastic bags for defendant employer.  Under an alternative workweek schedule, employees worked twelve-hour shifts that paid them at their regular rate for their first ten hours of work, and at an overtime rate for the next two hours.  Plaintiff sued defendant claiming unpaid daily overtime wages for the ninth and tenth hours of work because defendant failed to properly adopt the alternative workweek schedule.  The trial court found defendant failed to properly adopt the schedule as required by California Labor Code section 511.  Therefore, defendant owed plaintiff overtime.  The trial court also awarded penalties for incorrect wage statements because plaintiff was injured when the statements did not properly reflect that the ninth and tenth hours of work were overtime hours.

Court’s Decision:  The California Court of Appeal affirmed in part, reversed in part, and remanded for recalculation of damages.  First, by having two-thirds of workers in an affected unit approve an alternative workweek of fewer days but longer hours, an employer can qualify for an exception to the usual daily overtime requirements.  However, to be legal, the employer must properly adopt the alternative workweek, including by educating employees about their options, taking a vote, and documenting the process.  Here, defendant argued that plaintiff did not prove that defendant’s predecessor failed to comply with proper procedures.  The court rejected this argument, holding that defendant had the burden of proof as to whether its predecessor complied.  Defendant failed to do so.  Second, the court reserved the trial court’s wage statement ruling.  It would be illogical for the wage statements to reflect overtime pay when defendant was not paying overtime based on what it assumed to be a proper alternative workweek schedule.

Practical Implications:  The requirements for a lawful alternative workweek schedule are detailed and complex.  Employers must strictly follow these procedures and document each step of the process.  And, employers have the burden of proof in court to show they followed proper procedures.  If a new owner buys a company that uses an alternative workweek schedule, the new owner must ensure that the previous owner properly adopted the schedule or it could be held responsible for the prior company’s mistakes.