Individual Liability Under Joint Employer Theory

Monday, 23 March 2009 13:34

Wage & Hour

The plaintiff in this case alleged wage and hour violations against both his corporate employer and an individual officer of the company. The Court held that the plaintiff stated a viable claim for individual liability under a joint employer theory for violation of state wage and hour laws.

To make the determination whether an individual or entity is a joint employer of an employee depends on a factual analysis into the “totality of the working relationship of the parties.” (Vernon v. State, (2004) 116 Cal.App.4th 114, 125 n.7.) Factors considered to make this determination are as follows:

• The nature of the parties’ relationship, the extent to which the employer controls the matter in which the employee performs her job;

• Whether there is an arrangement between the employers to share the employee’s services;

• Whether one employer is acting directly or indirectly in the interest of the other employer in relation to the employee; or

• Whether the employers are deemed to share control of the employee, directly or indirectly, because one employer controls the other employer, or each of the employers are under common control.

• Labor Code Section 558, prohibits any employer “or any other person acting on behalf of an employer” from violating or causing to be violated certain Labor Code Statutes and IWC Wage Order provisions. Those that violate Labor Code Section 558 or wage order provisions are subject to civil penalty. Because the plaintiff alleged that the corporate officer had caused the violation of numerous Labor Code and Wage Order provisions, he could proceed with his claims against that officer. The Court held that claims against the individual could be pursued under a joint employer theory because the plaintiff had alleged that the corporate employer and the officer were joint employers. In addition, the Court held that individual shareholders, officers, directors, and managers of a corporation may be personally liable for civil penalties under Labor Code Section 558.

COUNSEL TO MANAGEMENT:
While Ontiveros is a federal decision and California is not bound to follow this ruling, California management should limit their potential exposure by ensuring that authority and/or control of compensation, employment related decisions and labor policies are assigned to non-owners of the companies.
The goal of this article is to provide employers with current labor and employment law information. The contents should not be interpreted or construed as legal advice or opinion. For individual responses to questions or concerns regarding any given situation, the reader should consult with The Saqui Law Group at (831) 443-7100 in Salinas.