Who is A "Joint Employer" in California -- Martinez v. Combs

In Martinez v. Combs, the California Supreme Court has provided long overdue guidance on the question of who may be held liable for unpaid wages as a "joint employer."  

A large part of the decision is an historical treatise tracing the development of California wage regulation since the Progressive Era.  But the "take-away" rules are the following:

  • The Industrial Welfare Commission ("IWC") has the authority to define who is a covered "employer" through its Wage Orders.
  • The California definition of "employer" does not impose liability on "individual corporate agents acting within the course and scope of their agency." 
  • California law also does not incorporate the extremely broad "economic realities" definition of employer used under the federal FLSA.
  • Rather, the California definition of employer includes only entities which have the practical ability to prevent the alleged violations -- in other words, those parties with the power to "hire and fire," "set wages," or to tell workers "when and where to report to work." 
  • The true employer may not shield itself from liability by exercising this level of control through a "straw man" or by using some other "sham arrangement." 

 The main beneficiaries of the new standards are companies that purchase personal services or labor-intensive products from outside contractors.  So long as the purchasing company is not directly supervising the workers or making hiring and firing decisions it should not face liability for unpaid wages.

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