Ninth Circuit Provides Relief from Client Employer or Joint Employer Status for Produce Distributor
The Ninth Circuit gave short shrift to employees’ claims that an intermediary in the commerce of strawberries was responsible for paying the farmworkers’ wages under a creative legal theory that the intermediary was a “client employer” under California Labor Code section 2810.3.
In Morales-Garcia v. Better Produce, Inc., farmworkers hired to harvest strawberries sued a “commission merchant” for unpaid wages as a “client employer” on the theory that harvesting strawberries was within the defendant’s “usual course of business” after the direct employers filed for bankruptcy.
The commission merchant had nothing to do with the terms or conditions of the plaintiffs’ employment or any responsibility for paying their wages. So, without any other pocket, the plaintiffs targeted the commission merchant because the strawberries had to be picked in order for the defendant to sell the produce, rendering the commission merchant a “client employer”.
Labor Code section 2810 appears directed at ensuring that laborers are paid by either a labor contractor, a farm, or other employers that utilizes labor contractors to procure employees in what is essentially a joint employer relationship. Section 2810 imposes liability on companies who use subcontractors to provide workers that (1) perform the work of the company’s business or (2) work at the company’s place of business. Under the statute, the “client employer” that retains a labor contractor is liable for payment of the workers’ wages if the work performed is within the company’s “usual course of business.” Section 2810.3(6) defines “usual course of business” as “the regular and customary work of a business, performed within or upon the premises or worksite of the client employer.”
The Ninth Circuit emphasized that the key issue under Section 2810.3 is where the workers perform the work. The location of the work is significant because the statute is intended to impose liability on entities “who could reasonably be expected to be able to prevent labor violations.” In other words, the company that controls the location where the work is performed. The commission merchant defendant had a sublease agreement with the employer which included restrictions on the land’s use, however, the court found that it did “not constitute evidence of control that would render the farms the premises” of the defendant.
The Ninth Circuit also held that the land was not the defendant’s “worksite” because the defendant’s business of marketing the produce was “separate in nature as well as location” from the business of growing the produce. The court concluded that Section 2810.3 is aimed at companies who use financially shaky subcontractors to obtain workers to perform the company’s business; it “does not go so far as to extend liability for the wages of workers performing work elsewhere, even if the workers are producing a product necessary to that company's business.”
The Ninth Circuit’s opinion is clear that employers who utilize labor contractors will remain responsible for payments to employees that control the working conditions on their premises. Companies with similar outsourcing arrangements will find some relief in the guidance that Better Produce provides. Any employer concerned about the potential joint employer or client employer liability should contact their favorite CDF Attorney to maximize protection.