Martinez v. Combs: A New Definition of an Employer!Third Quarter 2010 – Newsletters California Update Employment Law
Ninety-seven years after California passed Labor Code § 1194, which enables recovery for minimum wages, the California Supreme Court finally defined who is an employer subject to §1194 and various other Labor Code provisions. The court defined an "employer" as one who, directly or indirectly, or through an agent or any other person, engages, suffers, or permits any person to work or exercises control over the wages, hours, or working conditions of any person as outlined by the Industrial Welfare Commission's (IWC) Wage Order 14-2001. Martinez v. Combs, 49 Cal.4th 35 (2010).
In Martinez, plaintiff strawberry pickers sued their employer, strawberry harvester Isidoro Munoz (who was later discharged in bankruptcy), and the companies that sold Munoz's strawberries ("brokers"), for unpaid minimum wages under §1194. Section 1194 never defined the employment relationship or who may be liable under the statute for unpaid wages. The court determined that as a quasi-legislative branch, the IWC's wage orders are to be given great deference. Therefore, the IWC's Wage order 14-2001, and not the federal "economic realities" definition, defined the employment relationship under Section 1194.
However, when applying the new definition, the court determined the brokers were not employers because: (1) the brokers did not "suffer or permit" plaintiffs to work as the brokers did not have the right to hire or fire, set wages and hours, or tell the workers when and where to report to work; (2) the brokers did not "exercise control over" the plaintiffs' wage and hours as Munoz alone decided which fields to harvest, trained and supervised the workers, determined their rate and manner of pay, set hours and working conditions, and decided what type of fruit to harvest at what time; and (3) the plaintiffs knew they owed their obedience to Munoz and not the broker's field representatives. Accordingly, though the court broadens the definition of an employer, the court held that the brokers, as investors or business partners, could not be held liable for unpaid wages under Section 1194.
There will continue to be litigation over who is or is not an "employer." To minimize the chance of getting dragged into those disputes, companies should insist on contract language that:
- Specifies that the other party is solely responsible for selecting, hiring, firing, supervising, training, assigning, and setting the wages, hours, and working conditions of its workers;
- Requires the other party to represent that it will comply with all laws applicable to its operations, including wage and hour laws; and
- Requires the other party to provide indemnity for employment-related claims by its workers.
No matter how the legal definition of "employer" continues to evolve, it is likely to be significantly broader than the term is generally understood in the business community.