Feldman Browne Olivares Wins Appellate Victory Holding Joint Employers Liable For Large Civil Penalties

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Feldman Browne Olivares wins appellate victory clarifying that large California employers who knowingly use misclassified workers and fail to take remedial action will be liable for large civil penalties under PAGA.

Feldman Browne Olivares wins appellate victory clarifying that large California employers who knowingly use misclassified workers and fail to take remedial action will be liable for large civil penalties under PAGA.

In 2013, Feldman Browne Olivares attorneys, Lee R. Feldman and Alicia Olivares, filed a class action entitled entitled Noe v. Canvas Corporation, et al. (BC486653), alleging that workers hired off of Craigslist by Canvas Corporation to sell food and beverages at Southern California concert and sporting venues owned by Anschutz Entertainment Group (AEG) were not paid the minimum wage. Feldman Browne Olivares argued that because AEG and its concession subcontractor, Levy Premium Foodservice Limited Partnership (“LEVY”) had the contractual right to control all aspects of the workers’ employment, including what, how, when, where and for what price they sold to AEG’s customers on AEG’s property, these workers were employees of AEG and LEVY. AEG and LEVY argued that they were not responsible for paying the workers or ensuring that they were properly classified as employees because Canvas Corporation was the entity that hired them and made the classification decision.

In 2014, after extensive discovery, AEG and LEVY brought a motion seeking to have the claims against them thrown out. Feldman Browne Olivares successfully opposed the motion on all claims except one—for violation of Labor Code Section 226.8, which provides for large penalties of up to $25,000 per employee against any employer that engages in the act of willful misclassification of an employee as an independent contractor. The trial court reasoned that AEG and LEVY could not be held liable for engaging in the act of misclassification because Canvas had already classified the workers as independent contractors before they ever stepped foot on AEG property. Feldman Browne Olivares argued that AEG and LEVY had “participated in” and ratified the misclassification decision by employing the misclassified workers despite knowing they did the same jobs as regular employees and knowing they were not paid minimum wage for work done on AEG premises servicing AEG’s customers.

Feldman Browne Olivares filed an application for a Peremptory Writ of Mandate, asking the court of appeals to step in and reverse the trial court’s dismissal of the claim against AEG and LEVY for willful misclassification. On June 1, 2015, the Court of Appeals ruled that the trial court had erred in concluding that joint employers who did not directly misclassify workers cannot be held liable for the penalties set forth in Section 226.8. The Court of Appeals held that Feldman Browne Olivares was correct in arguing that joint employers who were aware of misclassification and took no action to remedy such misclassification can be held liable for huge penalties through the California Private Attorney General Act (“PAGA”). The Court held:

“By choosing to use words with a broader connotation-prohibiting employers from "engaging in" the act of willful misclassification-we presume the Legislature intended to penalize a broader class of employers that includes those who, through their acts or omissions, have knowingly participated or involved themselves in the willful misclassification decision. As applicable here, a joint employer who knowingly acquiesces in a co-joint employer's decision to willfully misclassify their joint employees has necessarily "involved" itself in that misclassification decision.

"We conclude that, contrary to the trial court's interpretation, section 226.8 is not limited to employers who make the misclassification decision, but also extends to any employer who is aware that a co-employer has willfully misclassified their joint employees and fails to remedy the misclassification.”

The Noe decision is expected to have far-reaching impact. It has become quite common for large companies like AEG and LEVY to recruit workers to service their customers through small, poorly funded and often judgment-proof intermediary companies that flout worker protections and basic California labor laws requiring payment of minimum wage, overtime and providing meal and rest breaks. It has become a popular business model for companies like AEG and LEVY to cut costs (employee benefits and salary) by subcontracting out the procurement of labor to other entities that agree to bear those costs. By doing so, the large corporations like AEG are guaranteed a fixed profit without the burden or expense of formally employing the workers servicing their customers. Under the Noe decision, large employers can no longer avoid liability for the harm to workers hired by subcontractors who ignore state wage laws. Feldman Browne Olivares is ecstatic that their hard work, and that of their appellate co-counsel Norman Pine and Michael Rubin, succeeded in winning this important victory for California workers.

About Feldman Browne Olivares: The Attorneys at Feldman Browne Olivares exclusively represent California employees. Through aggressive litigation and zealous advocacy, Feldman Browne Olivares has recovered more than $140,000,000 in verdicts and settlements on behalf of California workers and their families. Feldman Browne Olivares has been recognized as one of the top Employee Rights Firms in California and our Partners and Attorneys have been repeatedly recognized as top Employee Rights Attorneys.

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