Efforts to prune Labor Code section 203 are relegated to compost status in Baker v. American Horticulture Supply, Inc.

An ever astute reader has directed my attention to the fact that the Court of Appeal (Second Appellate District, Division Six) today issued a modification of its June 23, 2010 Opinion in Baker v. American Horticulture Supply, Inc. (June 23, 2010) as mod. (July 21, 2010).  The modification, which is focused entirely on the "willful" definition used in Labor Code section 203, appears to respond to contentions raised in a petition for rehearing.  The majority of the text of the modification is as follows:

The application here of the ordinary definition of "willful" is supported by the judicial construction of Labor Code section 203, subdivision (a), which provides in relevant part: "If an employer willfully fails to pay . . . any wages of an employee who is discharged or who quits, the wages of the employee shall continue as a penalty from the due date thereof at the same rate until paid or until an action therefor is commenced; but the wages shall not continue for more than 30 days." (Italics added.) "The settled meaning of 'willful,' as used in section 203, is that an employer has intentionally failed or refused to perform an act which was required to be done. [Citations.] '[T]he employer's refusal to pay need not be based on a deliberate evil purpose to defraud workmen of wages which the employer knows to be due.' [Citations.]" (Amaral v. Cintas Corp. No. 2 (2008) 163 Cal.App.4th 1157, 1201.)

Slip op. (mod.), at 1-2.

We reject respondent's contention in its petition for rehearing that "conduct violating the Act is willful only if the manufacturer, jobber or distributor knows of its obligations but intentionally declines to fulfill them." The knowledge requirement would be difficult to prove and would encourage manufacturers to remain ignorant of their obligations under the Act. This would frustrate the legislative intent to provide "unique protection" to independent wholesale sales representatives. (§ 1738.10.) But a manufacturer's failure to comply with the Act would not be willful if the manufacturer proved that its failure was "the result of a good faith and reasonable belief the facts imposing the statutory obligation were not present." (Kwan v. Mercedes-Benz of North America, Inc. (1994) 23 Cal.App.4th 174, 185.) For example, a failure to comply would not be willful if the manufacturer reasonably and in good faith believed that a person did not qualify as a "wholesale sales representative" within the meaning of the Act. This interpretation "will not vitiate the intended deterrent effect of the [treble damages provision]." (Ibid.)

Slip op. (mod.), at 2.

The courts, however, have recognized that a finding of "willfulness" within the meaning of Labor Code section 203 may be negated by a reasonable, good faith belief in a legal defense to a wage claim. (Amaral v. Cintas Corp. No. 2, supra, 163 Cal.App.4th at p. 1201; Armenta v. Osmose, Inc. (2005) 135 Cal.App.4th 314, 325; Barnhill v. Robert Saunders & Co. (1981) 125 Cal.App.3d 1, 8-9; see also Cal. Code Regs., tit. 8, § 13520.) Accordingly, we conclude that a finding of a willful failure "to pay commissions as provided in the written contract" (§ 1738.15) may be negated by a reasonable, good faith belief in a legal defense to a commissions claim.

Slip op. (mod.), at 2, n. 7.  The key here is the Court's rejection of a standard that would allow willfulness only when an employer "knows of its obligations but intentionally declines to fulfill them."  An employee does not have to show that the employer had any awareness of is actual obligations; it is enough to show that the employer acted but should have acted otherwise.

Courts draw lines on scope of statutory rights protected by Labor Code section 226

On one end of the Labor Code section 226 spectrum are the defendants who assert that the "injury" requirement of section 226 is met only when an employee suffers a broken leg as a result of the defective wage statement (this would occur when the statement is printed on stone and delivered by dropping it from a substantial height above the employee, whose legs are restrained in a horizontal position to ensure impact).  On the other end of the spectrum are the few optimistic plaintiff-side firms that argue that any violation of Labor Code section 226(a) requirements is an infringement of a legal right sufficient to entitle the employee to, at minimum, statutory penalty damages.

Jaimez v. DAIOHS USA, Inc., et al., 181 Cal. App. 4th 1286 (February 8, 2010), which is the current standard in California, splits the difference at the very minimal injury level.  Specifically, Jaimez holds: "While there must be some injury in order to recover damages, a very modest showing will suffice."  Jaimez went on to state that '''this lawsuit, and the difficulty and expense [Jaimez has] encountered in attempting to reconstruct time and pay records,' may well be 'further evidence of the injury' he has suffered."  In other words, it takes something, but not much.

Today, in Morgan v. United Retail (July 19, 2010), the Court of Appeal (Second Appellate District, Division Seven) added guidance as to what constitutes valid construction of section 226 requirements, or at least one small part of section 226.  Quickly summarizing the entire opinion, the Court said:

On behalf of a class of current and former non-exempt employees, Morgan alleged that United Retail's wage statements failed to comply with section 226, subdivision (a) because they listed the total number of regular hours and the total number of overtime hours worked by the employee, but did not list the sum of the regular and overtime hours worked in a separate line. The trial court granted summary adjudication in favor of United Retail on the section 226 claim. We conclude that the trial court properly granted summary adjudication because United Retail's wage statements complied with the statutory requirements of section 226 by “showing . . . total hours worked.” (§ 226, subd. (a)(2).) We accordingly affirm.

Slip op., at 2.  The Court of Appeal actually went out of its way to analyze the obligations imposed by section 226(a)(2):

Apart from the summary conclusion in Rubin, however, none of the published cases or DLSE opinion letters directly address whether the “total hours worked” component of section 226 may be satisfied by separately listing the total regular hours and the total overtime hours worked during the pay period. (§ 226, subd. (a)(2).) Section 226 itself does not define the terms “showing” or “total hours worked” anywhere in the statute. Yet in construing statutes, we must be mindful that “words are to be given their plain and commonsense meaning.” (Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1103.) In other words, we are not free to “give the words an effect different from the plain and direct import of the terms used.” (California Fed. Savings & Loan Assn. v. City of Los Angeles (1995) 11 Cal.4th 342, 349.)

Slip op., at 11.  After much analysis, the Court concluded that summary judgment was correctly granted:  "Consistent with the language of section 226 and the DLSE's May 17, 2002 opinion letter, United Retail's wage statements listed 'the precise, actual number of hours worked' by the employee at each hourly rate of pay in effect during the pay period."  Slip op., at 12.  You can't fault this panel for the work they did, construing statutory language, examining DLSE materials, looking at a wage statement exemplar on the DLSE's website, and analyzing the import of 1984 and 2000 legislation affecting section 226.

Other courts have been drawing their own lines around section 226 claims.  In an unpublished opinion, the Ninth Circuit, in Villacres v. ABM Industries Incorporated (June 17, 2010) (D.C. Case No. 2:07-cv-05327-VAP-OP), while not tackling the extent of injury required to satisfy section 226, was clear that the "intrusion upon the legally protected right" is not, in its view, sufficient to state a claim:

Villacres argued that violations of section 226(a) in and of themselves are injuries sufficient to make section 226(e) relief available to him and his proposed class. This is not how California courts typically have defined “injury.” See Steketee v. Lintz, Williams & Rothberg, 38 Cal. 3d 46, 54 (1985) (“‘Wrongful act’ and ‘injury’ are not synonymous.  The word ‘injury’ signifies both the negligent cause and the damaging effect of the alleged wrongful act and not the act itself.”)(citations omitted); Lueter v. California, 115 Cal. Rptr. 2d 68, 81 (Cal. Ct. App. 2002) (“Although the words ‘injury’ and ‘damage’ often are used interchangeably, a distinction may be made.  ‘Injury’ refers to the fact of harm suffered by the plaintiff due to the defendant’s conduct.  ‘Damages’ refers to the monetary sum that the plaintiff may be awarded as compensation for injury.”). We have no reason to believe that the California Supreme Court would interpret section 226(e) differently. The district court did not err when it held that section 226(e) relief was unavailable to Villacres and his proposed class.

Memorandum, at 3.  It is interesting to note, however, that this panel's construction of the term "injury" is at odds with another Ninth Circuit panel's view on injury, expressed days later.  In Edwards v. First American Title Insurance (9th Cir. June 21, 2010), the Ninth Circuit, in a published opinion, found that "injury" existed in a RESPA case, despite the absence of an overcharge:  "Because the statutory text does not limit liability to instances in which a plaintiff is overcharged, we hold that Plaintiff has established an injury sufficient to satisfy Article III.  Slip op., at 9095.  Applying that same analysis to a 226 claim, once could see that same Edwards panel concluding that the violation of a protected right under 226 causes the necessary "injury" and the alternative damage clause (greater of actual damage or statutory damages) is triggered when no "actual" damage exists.

So the Ninth Circuit has figured out what it thinks the California Supreme Court would do were it faced with the injury issue raised by section 226.

Until the California Supreme Court decides to tell us what it thinks about any of this, we'll have to settle for Jaimez, Morgan, and the Ninth Circuit's prognostications. 

Ninth Circuit finds that propriety of independent contractor status is not well suited to summary adjudication in Narayan v. EGL, Inc.

In Narayan v. EGL, Inc. (July 13, 2010), the Ninth Circuit reviewed a district court order granting summary judgment to defendant EGL, Inc. on the theory that the plaintiffs were independent contractors, not employees as contended in their lawsuit.  After examining choice of law issues, the Court turned to the showing required to obtain summary judgment on the employment-status issue.  In particular, the Court explained the special burdens in this type of action:

There are two special circumstances that are relevant to the application of this standard here. First, under California law, once a plaintiff comes forward with evidence that he provided services for an employer, the employee has establisheda prima facie case that the relationship was one of employer/employee. Robinson v. George, 105 P.2d 914, 917 (Cal. 1940). As the Supreme Court of California has held, “[t]he rule . . . is that the fact that one is performing work and labor for another is prima facie evidence of employment and such person is presumed to be a servant in the absence of evidence to the contrary.” Id. at 916; see also Cristler v. Express Messenger Sys., Inc., 171 Cal. App. 4th 72, 83 (Ct. App. 2009). Once the employee establishes a prima facie case, the burden shifts to the employer, which may prove, if it can, that the presumed employee was an independent contractor. Cristler, 171 Cal. App. 4th at 84 (approving a jury instruction that “[t]he Defendant has the obligation to prove that the Plaintiffs were independent contractors”)

Slip op., at 10078.  The Court then discussed the employment test in California, saying:  "The Supreme Court of California has enumerated a number of indicia of an employment relationship, the most important of which is the 'right to discharge at will, without cause.' Borello, 769 P.2d at 404 (quoting Tieberg v. Unemployment Ins. App. Bd., 471 P.2d 975, 979 (Cal. 1970)).  Slip op., at 10079.  Incidentally, the right to discharge at will is concomitant with, and, to a large extent creates, the right to control.  The Court then listed the many additional employment test factors approved by Borello.  Such multi-factor tests, the Court concluded, don't lend themselves to summary adjudication:

Judge Easterbrook has keenly observed in a case under the Fair Labor Standards Act that:

[i]f we are to have multiple factors, we should also have a trial. A fact-bound approach calling for the balancing of incommensurables, an approach in which no ascertainable legal rule determines a unique outcome, is one in which the trier of fact plays the principal part. That there is a legal overlay to the factual question does not affect the role of the trier of fact.

Sec’y of Labor v. Lauritzen, 835 F.2d 1529, 1542 (7th Cir. 1987) (Easterbook, J., concurring) (internal citations omitted).

Slip op., at 10080-81.  The Court then reviewed the record, criticizing the trial court for not crediting evidence of the right to terminate at will set forth in the contracts between defendant and plaintiffs and other evidence consistent with employment, including the lack of any need for specialized training and the fact that the Internal Revenue Service declared the plaintiffs employees under its multi-factor employment test.

Judge Easterbrook received a number of nods from the Court.  In describing the policy goals of wage & hour statutes, the Court said:

As Judge Easterbrook observed in a closely analogous context, statutes enacted to confer special benefits on workers are “designed to defeat rather than implement contractual arrangements.” Sec’y of Labor v. Lauritzen, 835 F.2d 1529, 1545 (7th Cir. 1987) (Easterbook, J., concurring).

Slip op., at 10073.  In other words, the protections granted by California's Labor Code are designed, in part, to defeat employer attempts to circumvent them with "independent contractor" agreements. 

Munoz v. BCI Coca-Cola Bottling Company of Los Angeles (Greenwell, objector) provides much-needed words of restraint concerning Kullar

Since Kullar v. Foot Locker Retail, Inc., 168 Cal. App. 4th 116 (2008) (Kullar) and Clark v. American Residential Services LLC, 175 Cal. App. 4th 785 (2009) (Clark) were decided, trial courts and settling parties in class actions have been looking over their shoulder at every settlement, concerned about the amount of information necessary to meet the Kullar/Clark standard for adequate settlement review.  For example, the Los Angeles Superior Court appears to be utilizing some form of checklist derived, in part, from Kullar to analyze proposed class action settlements.  Fortunately, in Munoz v. BCI Coca-Cola Bottling Company of Los Angeles (ord. pub. July 2, 2010) (Greenwell, objector), the Court of Appeal (Second Appellate District, Division Eight) explains that much of the angst over Kullar/Clark is overblown because their requirements have been overstated and/or misconstrued.

Plaintiffs in Munoz filed a class action lawsuit against BCI Coca-Cola Bottling Company of Los Angeles (BCI), alleging unpaid overtime wages, missed meal and rest period wages, and other Labor Code violations and unfair business practices. The proposed class consisted of production supervisors and merchandising supervisors who were allegedly misclassified as exempt.  After mediation, the parties agreed to settle the matter for $1.1 million. Notice of the proposed settlement elicited one objection. Two of the 188 class members opted out.  The average net payment to each class member would be about $4,300. The trial court found the settlement fair and reasonable. The objector, Greenwell, appealed, arguing that the trial court abused its discretion in approving the settlement, principally because the parties did not provide the court with the information necessary to make a finding that the settlement was reasonable and fair.

The Court of Appeal summarized the obligation of a trial court evaluating a class action settlement:

Some cases state that a presumption of fairness exists “where: (1) the settlement is reached through arm's-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small.” (Dunk, supra, 48 Cal.App.4th at p. 1802.) Kullar emphasizes that this is only an initial presumption; a trial court's approval of a class action settlement will be vacated if the court “is not provided with basic information about the nature and magnitude of the claims in question and the basis for concluding that the consideration being paid for the release of those claims represents a reasonable compromise.” (Kullar, supra, 168 Cal.App.4th at pp. 130, 133.) In short, the trial court may not determine the adequacy of a class action settlement “without independently satisfying itself that the consideration being received for the release of the class members' claims is reasonable in light of the strengths and weaknesses of the claims and the risks of the particular litigation.” (Id. at p. 129.)

Slip op., at 10.  However, after explaining that the objector complained "that the record before the trial court contained no evidence of 'the potential value of the claims,'" the Court went on to explain that Kullar is misunderstood:

Greenwell misunderstands Kullar, apparently interpreting it to require the record in all cases to contain evidence in the form of an explicit statement of the maximum amount the plaintiff class could recover if it prevailed on all its claims--a number which appears nowhere in the record of this case. But Kullar does not, as Greenwell claims, require any such explicit statement of value; it requires a record which allows “an understanding of the amount that is in controversy and the realistic range of outcomes of the litigation.”

Slip op., at 11.  Continuing, the Court noted, "Indeed, the standard list of factors a trial court should consider in determining whether a settlement is fair and reasonable does not expressly include specification of the maximum amount of recoverable damages (see Kullar, supra, 168 Cal.App.4th at p. 128), and Kullar is clear that the most important factor '"'is the strength of the case for plaintiffs on the merits, balanced against the amount offered in settlement.'"' (Id. at p. 130.)"  Slip op., at 11, n. 6.

The Court itemized the information available to the trial court in the case before it:

The information before the court included the size of the class (188) and the payroll data on all class members during the class period (including total amounts of salaries paid during the class period). It also included declarations from 30 class members (15 percent of the class) indicating the number of hours worked per week and per day (and the significant differences in those numbers): e.g., 70 hours per week, 48 hours per week, 60 hours per week, 42-44 hours per week, 55 hours per week, “no more than 50 hours per week,” 45 hours per week in winter and 50-60 hours per week at other times of the year, eight to nine hours per day, 45 hours per week, and so on. These declarations also showed significant variations....

Slip op., at 11.  In other words, the trial court had more than enough information to evaluate the "strength of the case" and compare that to the amount offered in settlement.

As an additional measure of assistance, the Court highlighted the facts from Kullar and Clark that undermined those settlements:

As a final observation on this topic, we note that the evidentiary records in Kullar and Clark, upon which Greenwell relies so heavily, are significantly different from this case. In Kullar (which did not involve the misclassification of exempt employees), there was no discovery at all on meal period claims that were added in an amended complaint and were the focal point of the objections to the settlement. (Kullar, supra, 168 Cal.App.4th at pp. 121-122.) While Kullar class counsel argued that the relevant information had been exchanged informally and during mediation (id. at p. 126), nothing was presented to the court--no discovery, no declarations, no time records, no payroll data, nothing (id. at pp. 128-129, 132)--to allow the court to evaluate the claim. And in Clark, the problem was that the trial court was not given sufficient information on a core legal issue affecting the strength of the plaintiffs' case on the merits, and therefore could not assess the reasonableness of the settlement terms. (Clark, supra, 175 Cal.App.4th at p. 798.) The record in this case contains neither of the flaws that doomed the Kullar and Clark settlements.

Slip op, at 13.

Munoz v. BCI clearly holds that there is no obligation on parties seeking approval of a class action settlement to state a specific sum that would represent the maximum possible recovery if the class prevailed on all theories.  Rather, the Court must have information that permits it to evaluate the strength of the claims compared to the amount offered in settlement.  This showing ought to be satisfied by a discussion of the specific risk factors associated with the various theories, along with data about such things as the size of the class.  In other words, if a trial court can roughly approximate the magnitude of the claims and the likelihood of recovery, it can fashion the necessary metric.

In addressing other arguments, the Court rejected a challenge to the $5,000 incentive awards approved by the trial court.

Does Anderson v. Nextel presage assault on percentage-of-fund fee awards?

United States District Court Judge Stephen V. Wilson refused to award a percentage-of-fund fee award, choosing, instead, to apply a lodestar approach with no multiplier and refused to award an incentive payment to the plaintiffs, as part of an Order granting in part and denying in part a final award of attorneys' fees, costs and incentive payments.  Anderson, et al. v. Nextel Retail Stores LLC (June 30, 2010).

The opinion includes an incredibly thorough analysis of hourly rates and fee billing entries (it is helpful reading in that regard), among other things, as part of the Court's decision to examine the lodestar and then cross-check against the requested 25% of the available fund in the wage & hour class action settlement.  After determining that the lodestar would need to multiplied by all of 1.64 to arrive at the percentage-of-fund request at the 25% level, the Court offers this surprising analysis:

In the present case, the Court is unable to conclude that counsel is entitled to a multiplier over the lodestar amount. The lodestar amounts provide perfectly adequate compensation, see generally Perdue, 130 S.Ct. 1662, 1674-75, and none of the relevant considerations justify an upward increase in the amount of compensation. For example, the considerations raised in Vizcaino – the complexity of the case, the duration of the litigation, the risk of nonpayment – are inapplicable. This case was little more than a run-of-the-mill wage-and-hour dispute.

Slip op., at 17.  I find this statement astounding.  No wage & hour class action is "run-of-the-mill" in federal court.  A survey of outcomes in the last few years would, I submit, confirm that.

If a trend favoring lodestar awards over percentage of the fund awards develops, plaintiffs' firms will face an asymmetrical result when compared to firms paid on an hourly basis.  The contingent award (the percentage of the fund in class actions) offsets to some degree the fact that a good percentage of cases generate no recovery to speak of.  This mitigation of risk allows plaintiffs with no resources to challenge unlawful practices causing comparatively smaller amounts of harm on a per capita basis.  An increase in lodestar awards won't cause children to starve, but it will likely result in decisions to decline difficult cases and induce some unscrupulous members of the bar to inflate billing entries.  Courts will then view all fee bills with even more skepticism, further punishing the ethical billers in the plaintiffs' bar.

"See, with those plaintiffs' lawyers, it's all about the fees."  Come closer so I can do that Moe thing to your eyes.  "Why I oughta..."  You don't like working for free any more than I do or anyone else does.  If I won the lottery, I'd be willing to work for a trifling.  Then it would be just about the ability to help others and the intellectual reward.  But I digress.  Taking percentage of the fund awards off the table means that a good portion of the work done by plaintiffs' attorneys in class actions will be done for free.  I hear that at some defense firms, partners don't get paid their shares unless they collect their clients' accounts receivable.  Who's all about the fees again?

In another fairly uncommon move, the Court declined to award any incentive payment to the plaintiffs that obtained the recovery for the class.  So much for rewarding the plaintiffs that accept the stigma associated with suing their employer.

You can view the embedded opinion in the acrobat.com flash viewer below:

If the viewer isn't working for you (say, if you are viewing this on an iPad or iPhone), you can download the opinion here.  Thanks to the (other) reader that alerted me to this decision.

In Faulkinbury v. Boyd & Assoc., Court confirms the broad discretion given to trial courts considering certification

After weeks in the doldrums, a California Court of Appeal finally got around to issuing an opinion related to class actions.  Unfortunately, it isn't very exciting.  In Faulkinbury v. Boyd & Associates, Inc. (June 24, 2010), the Court of Appeal (Fourth Appellate District, Division Three) reviewed an order denying class certification of meal period, rest break and overtime (regular rate calculation) claims.

The Court confirmed what is, by now, a fairly well-established set of standards for appellate review of certification rulings:

Trial courts have discretion in granting or denying motions for class certification because they are well situated to evaluate the efficiencies and practicalities of permitting a class action. (Sav-On, supra, 34 Cal.4th at p. 326.) Despite this grant of discretion, appellate review of orders denying class certification differs from ordinary appellate review. Under ordinary appellate review, we do not address the trial court's reasoning and consider only whether the result was correct. (Kaldenbach v. Mutual of Omaha Life Ins. Co. (2009) 178 Cal.App.4th 830, 843.) But when denying class certification, the trial court must state its reasons, and we must review those reasons for correctness. (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435-436 (Linder).) We may only consider the reasons stated by the trial court and must ignore any unexpressed reason that might support the ruling. (Id.; see also Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193, 1204-1205 (Bufil).)

Slip op., at 7.  The majority of the opinion simply confirms that, in the face of evidence apparently in conflict, the determination of which evidence to credit is left to the trial court.

The Court did reverse the trial court as to the overtime claim.  The Court found that the issue of whether certain payments should be included in the calculation of the regular rate is an issue well-suited to class-wide determination.

Get back to work.

California Supreme Court activity for the week of June 7, 2010

After two weeks with no conferences, the California Supreme Court held its (usually) weekly conference today.  The only marginally notable result I see is:

• A non-substantive correction to the opinion in Martinez v. Combs (June 9, 2010) (expansive definition of "employee" for certain labor code violations) was issued.  The decision was mentioned on this blog here.

Update on 2010-06-12 01:46 by The Complex Litigator

A reader alerts me to the fact that I missed one key petition grant:

• Coito v. Superior Court will be reviewed by the Supreme Court.  See post for discussion about this interesting work product decision.  At least we may finally get some guidance about the reach of Nacht & Lewis Architects, Inc. v. Superior Court, 47 Cal.App.4th 214 (1996).

Brinker Watch 2010 - Version 2

In March of this year, I observed that Brinker Restaurant v. Superior Court (Hohnbaum) was fully briefed back in October 2009.  At that time, I moved the over-under on an Opinion release date from August 2010 to October 2010.  I regret to inform anyone with office pools that I must now make a second, larger move of the line and set the over-under at February 2011.

The problem arises because the Supreme Court is done hearing cases for Summer 2010.  As you can see here, July and August will have no case arguments.  September is the earliest that Brinker could be placed on an oral argument calendar.  For purposes of wagering only (which I fully support but will not participate in), I'm guessing that the argument occurs in November, resulting in a February 2011 opinion release target date.

Martinez v. Combs receives thorough treatment from The California Wage and Hour Law Blog

The California Supreme Court, in Martinez v. Combs (May 20, 2010) (reposted to correct formatting error), addressed a topic that should prove to be of long-lasting significance.  The opinion addresses the weighty question of who is and is not an "employee" under California wage law.

The California Wage Wage and Hour Law Blog, authored by Steven G. Pearl, includes a thorough post discussing this holding, including this important observation:

[T]he Wage Orders set forth a multi-pronged, disjunctive definition of employment: an employer is 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. Slip op. at 25-26. The “engage, suffer, or permit” component of the definition does not require a common law “master and servant” relationship, but is broad enough to cover “irregular working arrangements the proprietor of a business might otherwise disavow with impunity.” Slip op. at 25. Further, “phrased as it is in the alternative (i.e., wages, hours, or working conditions”), the language of the IWC's 'employer' definition has the obvious utility of reaching situations in which multiple entities control different aspects of the employment relationship, as when one entity, which hires and pays workers, places them with other entities that supervise the work.” Slip op. at 26-27. Finally, the IWC’s “employer” definition is intended to distinguish state law from the federal FLSA.

This is a monumental clarification of the breadth of the definition of employment when wage laws are at issue.  The opinion also provides a mighty boost to the authority of the IWC.

For more, visit the blog or see today's Daily Journal for a revised version of the same article.