Seyfarth Shaw LLP | www.seyfarth.com Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) 201 More recently, the court reached the opposite conclusion on joint employer liability under a very similar factual scenario. In Medina v. Equilon Enterprises, LLC, 68 Cal. App. 5th 868 (2021), the court found that Shell, the parent company of another gas station operator, was a joint employer of gas station employees who filed a wage and hour class action, because of the control that Shell exercised over the gas station operator by dictating hours of operation and a process for reimbursement of labor costs.968 C. California Statutory Joint Liability For Workers Placed By Employment Agencies In 2015, the California legislature passed Labor Code section 2810.3, which provides that a “client employer” that obtains workers through a temporary agency or other labor contractor “within its usual course of business” must share in liability for the workers’ wages and workers’ compensation.969 As a result of this statute, California businesses with 25 or more employees that use five or more workers at any one time from an agency or other third party are subject to liability as joint employers for the workers’ wages and workers’ compensation.970 The limiting reference to “usual course of business” in Labor Code section 2810.3 means that joint employer liability applies only as to workers who are performing the regular and customary work of a client employer.971 However, under a different California statute, liability for wage and hour violations may be imposed as to workers who provide certain services that may be ancillary to a hiring party’s regular and customary work, such as janitorial, construction, security and warehousing services, if it “knows or should know” that the contract price is insufficient to permit the contractor to comply with wage and hour laws in performing the contract.972 In order to minimize potential joint employer liability, businesses that contract for labor from employment agencies and other third parties should inquire into the wage and hour policies and practices of such agencies and third parties, should have detailed written contracts that specify all required statutory information regarding the labor of the service stations . . . Shell is therefore entitled to judgment as a matter of law as to all claims based upon the IWC's definition of an “employer.”). 968 Id. at 879. 969 Cal. Labor Code § 2810.3(a)(1)(A), (a)(6), (b)(1)-(2). 970 The law exempts (1) business entities with a workforce of fewer than 25 workers, including those hired directly by the client employer and those obtained from a labor contractor; and (2) business entities with five or fewer workers supplied by a labor contractor at any given time. Id., at (a)(1)(B)(i)-(ii). The liability imposed under Labor Code § 2810.3 is for wages, and does not extend to PAGA penalties that accrue from nonpayment of wages. See Holtegaard v. HowroydWright Employment Agency, Inc., 2020 WL 6051328, *5 (C.D. Cal. Aug. 11, 2020) (dismissing PAGA claim to the extent it sought penalties against manufacturer that obtained workers from staffing agency, because Labor Code § 2810.3 only imputes liability for “payment of wages” and not penalties based on failure to pay wages.). 971 See Morales-Garcia v. Higuera Farms, Inc., 2021 WL 6774327, * 40-41 (C.D. Cal. Oct. 15, 2021) (In a lawsuit by strawberry pickers against strawberry sellers and a produce production entity, the court held that strawberry sellers were not client employers under Labor Code § 2810.3 because their “regular and customary work” did not include growing and harvesting strawberries. The strawberry production entity was also found not liable as a “client employer” because no farmwork was conducted on its premises.). 972 See Labor Code § 2810(a), which prohibits a person or entity from entering into a contract or agreement for labor or services with a construction, farm labor, garment, janitorial, security guard, or warehouse contractor, where the person or entity “knows or should know that the contract or agreement does not include funds sufficient to allow the contractor to comply with all applicable local, state, and federal laws or regulations governing the labor or services to be provided.”
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