Sharing of Corporate Payroll and HR Functions May Result in "Joint Employment" -- Castaneda v. The Ensign Group, Inc.

Publicly traded corporations have increasingly adopted a structure in which a main corporate entity acts as a central "holding company" which conducts its operations through a series of wholly owned entities. The Corporation internally designates its workers as being "employed" by these entities.  As often as not, however, the employees have never heard of the specific entity that allegedly employs them.  Moreover, the employment policies and payroll functions for these operating entities typically emanate from a central corporate HR department and a "shared services" entity.  

In Castaneda v. The Ensign Group, Inc., the California Appellate Court held that this structure of common ownership and shared services is likely to create a "joint employment" relationship for purposes of wage and hour liability.  

An entity that controls the business enterprise may be an employer even if it did not directly hire, fire or supervise the employees.  Multiple entities may be employers where they control different aspects of the employment relationship. This occurs, for example, when one entity (such as a temporary employment agency) hires and pays a worker, and another entity supervises the work.

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Here Ensign has more than a contractual relationship with Cabrillo. Ensign owns Cabrillo. It purchased it in 2009 and it owns all of its stock. A trier of fact could infer this evidence refutes Ensign's claims of lack of control and responsibility.

(Internal citations and punctuation omitted).  Moreover, the court noted that the corporate parent could be found to be a joint employment based on evidence that its various subsidiaries shared "centralized information technology, human resources, accounting, payroll, legal, risk management, educational and other key services."  (Emphasis in original).

Thus, while it may make eminent business sense for related entities to share common HR, accounting and payroll functions, these shared functions are also likely to result in shared responsibility for wage and hour obligations.   

 

Statistical Sampling and Representative Testimony are Acceptable Ways to Determine Liability -- Jimenez v. Allstate

 In Jimenez v. Allstate, the Ninth Circuit upheld the certification of a class of claims adjusters who alleged that their employer "knew or should have known" that they commonly worked unrecorded overtime beyond their normally scheduled hours.  

In particular, the Plaintiffs' theory of recovery was that the employer had an "unofficial policy of discouraging reporting of such overtime," that it "fail[ed] to reduce class members' workload" after reclassifying the position as overtime-eligible, and "treat[ed] their pay as salaries for which overtime was an 'exception.'”  The Court explained that this was a proper basis for certification as "Proving at trial whether such informal or unofficial policies existed will drive the resolution of" liability.

Perhaps more significantly, the Court held that a lower court may avoid a defendant's due process objections by establishing liability through class-wide "statistics and sampling" while bifurcating potential defenses to individual damages.  

Since Dukes and Comcast were issued, circuit courts including this one have consistently held that statistical sampling and representative testimony are acceptable ways to determine liability so long as the use of these techniques is not expanded into the realm of damages.

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In crafting the class certification order in this case, the district court was careful to preserve All-state's opportunity to raise any individualized defense it might have at the damages phase of the proceedings. It rejected the plaintiffs' motion to use representative testimony and sampling at the damages phase, and bifurcated the proceedings. This split preserved both Allstate's due process right to present individualized defenses to damages claims and the plaintiffs' ability to pursue class certification on liability issues based on the common questions of whether Allstate's practices or informal policies violated California labor law.

Unfortunately, the Jimenez Court did not detail the specific proposed statistical method that the lower court found to be a sufficient liability model.  However, it does seem to stand for the proposition that DukesComcast and Duran are to be narrowly interpreted as rejecting certification only based on the particular flaws in the statistical models used by the Plaintiffs in those cases.