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Who Is My Employer?: The Doctrine of Joint Employer Liability

Who is my “Employer?”

There are multiple situations in the modern workplace where employees work for several different entities. For example, an employee might be retained by a temporary agency to provide services to another company. In other situations, employees work for subcontractors where the company retaining the subcontractor has significant influence over the daily operations of the business and controls, to a degree, the services provided by the employee.

Issues arise when it becomes necessary for the employee to file a lawsuit for personal injury, unpaid wages, or for violations of California’s Fair Employment Housing Act based on discrimination or harassment.   If it becomes necessary for the employee to sue,  lawyers and the courts must determine which of these entities should be named in the lawsuit.  So, what are the standards that determine employer liability in situations where there are several companies that have some level of involvement in the workplace?

While there are no clear cases discussing what facts are required to establish the existence of an employment relationship in the context of a FEHA case, there is ample precedent from other areas of law concerning the standards for determining whether a “joint employer” relationship exists between the employee and other entities.

In Martinez v. Combs, 49 Cal. 4th 35, 42-43 (2010), the California Supreme Court articulated the test to determine the existence of an employment relationship. In Martinez, a group of seasonal agricultural workers sued a farming company and two produce merchants who purchased produce from the farming company to recover unpaid minimum wages under California Labor Code Section 1194 and other theories. The merchant defendants moved for summary judgment, arguing they were not liable under Section 1194 because they did not employ the plaintiffs. In response, the plaintiffs argued that the merchant defendants could be liable because they jointly employed plaintiffs with the farming company. The trial court granted summary judgment for the moving defendants and the California Court of Appeal for the Second District affirmed as to that issue.

On appeal to the California Supreme Court, the plaintiffs argued that the broader definition of employ and employer in the Industrial Welfare Commission wage orders applied and the merchant defendants argued that, instead, the narrower common law definition of employment applied. After a detailed analysis of the legislative history of Section 1194 and the acts creating and governing the IWC, the California Supreme Court held that the IWC definition of employment applied, but that definition incorporates the common law definition of employment as one alternative. Thus, the California Supreme Court defined “to employ” as follows:

To employ, then, under the IWC’s definition, has three alternative definitions. It means: (a) to exercise control over the wages, hours or working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a common law employment relationship.” Id. at 39.

The California Supreme Court noted that the basis for liability for “suffering or permitting to work” was “the defendant’s knowledge of and failure to prevent the work from occurring.” Id. at 69-70. The exercise of “control over the wages, hours or working conditions” could be direct or indirect and “is broad enough to reach through straw men and other sham arrangements to impose liability for wages on the actual employer.” Id. at 71. Moreover, employees’ views regarding who they were employed by was considered relevant by the Court.  Id. at 76.

My offices are currently handling several cases involving joint employers.  If you have been wrongfully terminated and a company operates in a manner that shows they have some control over the workplace, or if the entity pays the employee, then a good case can be made that the entity is the employer of the employee for purposes of establishing liability.