California Supreme Court Holds Buyers of Agricultural Products are not “Employers” of Agricultural Workers and Therefore Not Liable for Unpaid Wages Under California Law

written by Aaron A. Buckley – Paul, Plevin, Sullivan & Connaughton LLP – San Diego, CA

The California Supreme Court has held that buyers of agricultural products, as well as their individual managers, are not “employers” of the agricultural workers under California law, and therefore are not civilly liable for the bankrupt employer’s failure to pay minimum wages.  Martinez v. Combs, No. S121552, 2010 WL 2000511 (Cal. May 20, 2010).

Plaintiffs were seasonal agricultural workers employed by Munoz & Sons.  Munoz sold strawberries to produce merchants Apio, Inc. and Combs Distribution Co.  Munoz failed to pay all wages due to the workers, and eventually declared bankruptcy.  Plaintiffs sued Apio, Combs, and individual managers employed by Combs for the unpaid wages, contending that they were all “employers” as defined by the California Industrial Welfare Commission’s (IWC) wage order regulating the wages of agricultural workers, commonly known as Wage Order No. 14.  The trial and appellate courts rejected plaintiffs’ argument, and the California Supreme Court affirmed.

Plaintiffs argued that defendants “suffered or permitted” plaintiffs to work and therefore qualified as “employers” under the wage order because they had contracts with Munoz from which they benefitted, and they knew Munoz would need to hire workers to fulfill those contracts.  Plaintiffs further argued that defendants exercised control over plaintiffs’ wages, hours and working conditions because plaintiffs’ wages were to be paid from the proceeds of sales under the contracts.

The Supreme Court began its analysis by noting that in actions under California Labor Code section 1194 to recover unpaid minimum wages, the IWC wage orders define the employment relationship, and thus who may be liable.  The Court further noted that the definition of “employer” is different under federal and California law.

Applying the language of the wage order to the facts of the case, the Court found that the defendant buyers and their agents were not “employers” as defined by the wage order, and therefore could not be held liable.  To be “employers” under California law, the defendant buyers would have to (1) know that persons are working without being paid minimum wage; (2) fail to prevent it; and (3) have the power to prevent it.  Under the evidence presented, it was clear that the defendant buyers did not have the power to hire or fire the workers, set their wages and hours, or tell them when and where to report for work.  Also significant was the fact that the defendant buyers lacked the ability to prohibit plaintiffs from working.

The Court further held that the individual manager employees of the buyers could not be personally liable as “employers” under Reynolds v. Bement, 36 Cal.4th 1075 (2005), in which the Court held that the IWC’s definition of “employer” does not impose individual liability on individual corporate agents acting within the scope of the agency.

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