Ninth Circuit: Client Employer Liability is Based on Location of Work

/in /by

APPLIES TO

Labor Contractors with CA Employees and Client Employers

EFFECTIVE

June 1, 2023

  

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Quick Look

  • A “client employer” is responsible for the wages of its labor contractor’s employees if they perform the regular and customary work of a business, within or upon the premises or worksite of the client employer.
  • There must be evidence of control of the premises or worksite to support client employer liability.

Discussion

In Morales-Garcia v. Better Produce, Inc., the Ninth Circuit Court of Appeal clarified that client employer liability is analyzed based on the employee’s location of work. California Labor Code § 2810.3 says that client employers are jointly liable for wages and failure to secure workers’ compensation coverage for labor contractor employees. With limited exception, a “client employer” means a business entity “that obtains or is provided workers to perform labor within its usual course of business from a labor contractor.” “Usual course of business” means the “regular and customary work of a business, performed within or upon the premises or worksite of the client employer.”

Here, farmworkers who were hired to harvest strawberries sued the produce distributor for unpaid wages because their direct employer went bankrupt. The distributor leased the land to the direct employer to grow the strawberries but did not otherwise control the terms and conditions of employment for the farmworkers. The question was whether the work was performed in the “usual course of business” for the distributor, which would make them a client employer.

The court said that the work here was not performed “within or upon the premises or worksite of the client employer.” Specifically, the distributor’s business was “separate in nature as well as location” from the business of growing the produce. Although the farmland was subleased to the labor contractor, the distributor’s sublease did not “constitute evidence of control that would render the farms the premises” of the distributor. The distributor did not have the right to exercise control over the farms, or to direct the harvesting work performed on them. The court noted that their analysis under Section 2810.3 is different from the control analysis used to determine a joint employer relationship, because Section 2810.3 focuses on where the work was performed. Ultimately, the distributor was not the client employer of the farmworkers for purposes of unpaid wages.

Action Items

  1. Have joint employer and client employer relationships reviewed by legal counsel.
  2. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase