Cal-Peculiarities: How California Employment Law is Different 2022 Edition

250 | 2022 Cal-Peculiarities ©2022 Seyfarth Shaw LLP  www.seyfarth.com Garment industry . As of January 1, 2022, “Brand Guarantors”—companies sitting atop the garment supply chain—are liable for wage violations committed by their garment manufacturing suppliers, even if the ultimate seller of the garment has been completely unaware of any violatio n. 440 In other words, clothing “brands” and holding companies—and even retailers—could now be jointly liable with the contractors from whom they purchase t-shirts, hats, or even belts to sell for the contractor’s wage and hour violations, and perhaps even for violations by the contractor’s subcontractor. Prudent employers might have their garment manufacturing vendors audited for wage and hour compliance. 7.21 Broadened Definition of Employer? 7.21.1 Joint employers In 2010, in Martinez v. Combs , the California Supreme Court held that the wage orders endorse a broad definition of “employer” that extends beyond the definition of “employer” ordinarily used in interpreting federal statutes (i.e., the common law definition). The California wage order definition of employer extends to anyone who (1) exercises control over wages, hours, or working conditions, (2) suffers or permits a worker to work, or (3) engages a worker to work, thereby creating a common law relationship . 441 M artinez reaffirmed, however, that this definition of employer does not impose liability on individual corporate agents who were acting within the scope of their agency, even if this would leave workers without a remedy because their primary employer has gone bankrupt. In the case before it, Martinez found that merchants who purchased produce from a strawberry farmer were not the “employers” of the farmer’s agricultural workers where only the farmer had the power to hire and fire the workers, to set their wages and hours, and to tell them when and where to report to work. In 2012, the Court of Appeal, in Patterson v. Domino’s Pizza , further promoted a broad notion of employment liability. At issue was whether a pizza franchisor could be held liable for torts and FEHA violations perpetrated against a teenage pizza store employee by the manager of a pizza store franchisee . 442 The Court of Appeal held that liability for the franchisor was possible, on the basis of a franchise contract that gave the franchisor extensive control over the pizza store franchise’s local operations, and on the basis of extra-contractual evidence suggesting that the franchisor exercised extensive local management control over the franchisee in areas including employee conduct and discipline. In 2014, the California Supreme Court reversed, albeit by a 4-3 vote, holding that uniform marketing and operational plans do not automatically make the franchisor liable for the actions of the franchisee’s supervisors. Rather, to be considered an employer, the franchisor would have to retain or assume a “general right of control” over the busines s. 443 But the Court of Appeal has continued efforts to expand the scope of employer liability. In 2014, the same Court of Appeal justice who wrote Patterson v. Domino’s Pizza wrote a similarly expansive decision in Castaneda v. Ensign Group, Inc . 444 A nursing assistant, seeking unpaid minimum and overtime wages earned at a rehabilitation care center, sued Ensign Group, a holding company that owned the care center. The trial court granted summary judgment to Ensign because Ensign did not manage the care center. But the Court of Appeal reversed, holding that a parent corporation could be liable for a wholly owned subsidiary’s wage and hour violations, even if the parent corporation did not directly hire, fire, or supervise the employees in question. The Court of Appeal opined that where the parent corporation exercised structural and managerial control over the subsidiary, and thus could have ensured that the subsidiary’s practices complied with California labor law, a potential basis of liability is “the owner’s failure to perform the duty of seeing to it that the prohibited condition does not exist. ” 445 T he Court of Appeal cited, as evidence of managerial control, that Ensign required care center employees to follow Ensign “core values,” to use Ensign “forms and templates in the course of doing their jobs,” and to use particular computer and billing and operational systems.