After the price of strawberries declined, Munoz failed to pay its strawberry pickers and subsequently declared bankruptcy. In addition to suing their employer, plaintiffs also sued Apio and Combs for a variety of California Labor Code violations, including failure to pay a minimum wage. The central issue on appeal was whether the strawberry merchants, Apio and Combs, were considered joint employers of the plaintiffs under the California Labor Code.
After engaging in a lengthy review, the Court adopted the Industrial Welfare Commission's (IWC) broad definition of "employer." The Court held that the IWC was authorized by the legislature to define this term as it saw fit, holding that to "employ" someone means:
- to exercise control over the wages, hours or working conditions,
- to suffer or permit to work, or
- to engage, thereby creating a common law employment relationship.
The plaintiffs argued that the strawberry merchants, Apio and Combs, "suffered or permitted" plaintiffs to work because they knew plaintiffs were working and the work benefitted the merchants. The Court rejected this argument. The court found that because Munoz, not Apio or Combs, had the power to hire and fire plaintiffs, to set their wages and hours, and to tell plaintiffs when and where to report to work, Apio and Combs did not "suffer or permit" plaintiffs to work.
Likewise, although Apio and Combs had representatives in the strawberry fields that gave instructions to plaintiffs, it did not mean that they exercised control over the plaintiffs. The court noted that there was no evidence to suggest that Munoz's employees viewed the representatives of Apio or Combs to be their supervisors. Instead, plaintiffs believed that Munoz and Munoz's foreman were their supervisors. The court held that the definition of employer does not encompass individuals or businesses that merely contract with an employer without exercising more control over the employees.
The future may bring more litigation around the definition of an employer. But this case provides useful guidance for companies to evaluate the contracts that they have with their vendors, contractors and temporary employment agencies so that they do not unwittingly become liable for another company's Labor Code violations.
This case illustrates the fine line between conducting quality control over another company's work product and controlling the conditions of the other company's employees. Likewise, the case shows how companies can minimize the risk of being classified as "joint employers" if they make it clear in their contract and in practice that the other entity has the sole right to hire, pay, discipline and terminate the workers.