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John Futrell et al v. Payday California

December 16, 2010

JOHN FUTRELL ET AL., PLAINTIFFS AND APPELLANTS,
v.
PAYDAY CALIFORNIA, INC., ET AL., DEFENDANTS AND RESPONDENTS.



(Los Angeles County Super. Ct. No. BC347262) APPEAL from a judgment of the Superior Court of Los Angeles County, Richard Fruin, Judge. Affirmed.

The opinion of the court was delivered by: Bigelow, P. J.

CERTIFIED FOR PUBLICATION

This appeal arises from a class action alleging violations of sections of the Labor Code and the federal Fair Labor Standards Act (FLSA) by a payroll processing company operating in the local television commercial production industry. Plaintiffs' primary claim is that the payroll company violated various Labor Code and FLSA wage statutes, including Labor Code sections 510 and 1194 (authorizing a private right of action),*fn1 by failing to pay statutorily required overtime compensation rates to Plaintiffs. In the context of a motion for summary adjudication of issues (SAI), the trial court ruled the payroll company had not been Plaintiffs' "employer." The court thereafter entered judgment in favor of the payroll company, and Plaintiffs filed the appeal that comes before us today.

While Plaintiffs' appeal was pending in our court, the Supreme Court decided Martinez v. Combs (2010) 49 Cal.4th 35 (Martinez), cementing at least three employment principles in place which are relevant to the appeal. First, "no generally applicable rule of law imposes on anyone other than an employer a duty to pay wages." (Id. at p. 49, italics added.) Second, a wage order adopted by the Industrial Welfare Commission (IWC) for a particular occupation, trade or industry, "and not the common law, properly defines the employment relationship in [an] action under section 1194." (Id. at p. 62; id. at pp. 52-66.) Third, wage orders issued by the IWC "do not incorporate the federal definition of employment" under the FLSA. (Martinez, at p. 52; id. at pp. 66-68.) Because our review of the trial court's ruling on the motion for SAI is de novo (McDonald v. Antelope Valley Community College Dist. (2008) 45 Cal.4th 88, 114), we now apply Martinez. Having done so, and having separately considered federal case law interpreting the FLSA, we affirm the judgment in favor of the payroll company.

FACTS

General Background

At all relevant times, Reactor Films, Inc. (a defendant, but not party to this appeal) produced television commercials for different companies, including, among others, JCPenney and Pizza Hut. Reactor did not maintain a staff of full-time production employees; it hired "freelance crewmembers" as needed to complete its production activities.

Payday California, Inc.*fn2 (defendant and respondent) provides payroll processing and related services for companies that produce television commercials. From time to time, Reactor contracted with Payday to provide payroll services. The record contains substantial evidence showing that Reactor and Payday commonly entered written contracts, perhaps in connection with each particular television commercial production. During discovery in the current case, John Futrell (plaintiff and appellant) requested production of the contracts between Reactor and Payday, but Payday claimed it did not have the contracts, and that they might have been destroyed. Payday produced copies of "form" contracts which it regularly used for its other production company clients. Those form contracts included provisions identifying Payday as the "employer of temporary employees under the following conditions: Payday . . . becomes the employer and handles all payment to employees, including but not limited to union, pension, and welfare reports and contributions, employer's share of payroll taxes, and any and all payments and costs and charges that are based on or attributable to the payroll for work required to be performed under [motion picture industry] union contracts . . . ."

It seems fair to say, as the trial court did, that Reactor had "outsourced" its payroll department. These payroll processing practices are apparently common in the television commercial production industry; Payday provides its payroll services for "roughly 100 production company clients that produce television commercials."

In June 2002, Futrell worked in a private police capacity providing traffic and crowd control services for an "Old Spice" commercial produced by Reactor.*fn3 In his pleadings and in his briefs both in the trial court and on appeal Futrell regularly states that this type of work is often provided by off-duty and/or retired police officers. In June 2004, Futrell worked on a JCPenney commercial produced by Reactor. In May 2006, Futrell worked on a Pizza Hut commercial produced by Reactor.

The Litigation

In 2006, Futrell commenced a class action against Reactor and Payday on behalf of himself and others who provided traffic and crowd control services. In January 2007, Futrell filed his operative second amended complaint, alleging seven causes of action respectively: violation of Labor Code sections 510 and 1194 (overtime pay); violation of Labor Code section 203 (prompt payment of wages at the end of employment); violation of Labor Code section 226 (adequacy of pay stubs); violation of Business and Professions Code section 17200 based on predicate violations of the Labor Code; violation of title 29 of the United States Code section 206 (federal minimum wage); violation of title 29 of the United States Code section 207 (federal overtime pay for work week); and, finally, seeking relief, including attorney fees, pursuant to Labor Code section 2699 (private attorney general right of action for violations of the Labor Code).

Futrell's complaint alleged that he worked on several television commercial productions shot on locations in Los Angeles County, providing traffic and crowd control services, and other related safety functions. Futrell alleged Reactor and Payday acted as his "joint employers" during the course of these productions. He further alleged Reactor and Payday failed to pay statutorily required double-time wages when he worked over 12 hours in a day, failed to pay him within statutorily prescribed time periods upon the termination of employment, and failed to provide pay stubs complying with statutory requirements.

More specifically, Futrell alleged he worked 14 hours on one day's shoot and 16.5 hours on a second day's shoot on Reactor's "Old Spice" commercial production in June 2002, and that he should have been paid at his base rate for 8 hours, then at a rate of one and one-half times his base rate for the next 4 hours, and then at a rate of two times his base rate for the time he worked over 12 hours. In other words, Futrell alleged he should have been paid two times his base for the final 2 hours he worked on the first day's shoot, and for the final 4.5 hours he worked on the second day's shoot. Instead, alleged Futrell, all of the time he worked over 8 hours was unlawfully compensated at an overtime rate of one and one-half times his base rate. Futrell alleged he was underpaid by a total of $126.39 as a result of the hours unlawfully compensated at one and one-half times his base rate which should have been compensated at a rate of two times his base rate; he alleged the same type of underpayment of overtime wages occurred on Reactor's JCPenney commercial production in June 2004, and on Reactor's Pizza Hut commercial production in May 2006 (though the calculated figures are different).

The Motion for SAI

In July 2008, Payday filed a motion for "an order granting summary adjudication of this entire action in [its] favor" on the ground that it had not been Futrell's "employer." Payday supported its motion with a declaration from its principal, Ron Renaud, and evidence obtained from discovery, including Futrell's deposition testimony. Between July and December 2008, Payday and Futrell filed arguments, evidence and evidentiary objections on the issue of whether Payday had been Futrell's employer. Payday's evidence in support of its motion for SAI showed that Payday did not hire or fire Futrell or have the authority to do so. Further, the evidence showed Payday did not control Futrell's work, did not set or negotiate his wages, did not assign or supervise his work, did not determine his hours or conditions of employment, and did not set his work schedule. In addition, Payday presented evidence that it never entered into a written or oral employment contract with Futrell.

Futrell filed his opposition to the motion for SAI in November 2008. Futrell supported his opposition with evidence developed during discovery, including deposition testimony from Joyce Gallagher, Payday's senior payroll coordinator, and Ron Renaud, Payday's principal. Futrell submitted his own declaration attesting he "understood" he was a Payday employee because of the payroll documents that Payday processed, and because representatives of Payday made statements to that effect.*fn4 Futrell also submitted a declaration from an industry expert, Dean Bray, who testified to his experience in connection with the International Alliance of Theatrical Stage Employees union, and who offered his opinion that, "[i]n the motion picture industry, it is quite common for the production company to work with another firm that actually employs the crewmembers. This other firm is generally referred to as the 'Payroll Company,' despite the fact that it operates in a fashion that is quite different from a traditional payroll company such as ADP."

Futrell's evidence showed he completed timecards, employee information sheets, employment eligibility verifications, and W-4 employee withholding certificates provided by Payday, and that Payday collected the information about the hours he worked from the timecards and placed the information into Payday's computer payroll system to generate Futrell's paychecks. The pay stubs provided with Futrell's paychecks identified Futrell as the "employee" and identified Payday as the "employer of record." Payday furnished W-2 forms which identified Payday as Futrell's "employer." Futrell also presented evidence that Payday was considered by the Internal Revenue Service as an employer of record for income tax and unemployment insurance purposes. In addition, the evidence showed that the funds accessed for Futrell's paychecks were drawn on Payday's accounts and that Payday paid premiums for workers' compensation insurance and unemployment insurance covering Futrell. Don McVeigh, an expert in "the insurance industry, including matters involving workers' compensation insurance," submitted a declaration in which he stated that only an "employer" can purchase workers' compensation insurance. Finally, Futrell showed the general practices at Reactor's television commercial productions included a freelance production supervisor working on site "to liaise" with Payday.

On December 15, 2008, the parties argued the "employer or non-employer" issue to the trial court, and the court took the matter under submission. On January 20, 2009, the trial court issued an order granting Payday's motion for SAI. In granting Payday's motion, the court, without benefit of Martinez, applied the common law test of employment (see, e.g., S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, 350-351 (Borello)), and concluded Plaintiffs' evidence did not "bear on the critical issue" under that test, namely, "whether the payroll company defendants hire, terminate or control the activities of the officers at the film sites. . . ." The court reasoned an employer-employee relationship imposes burdensome payroll record keeping and reporting responsibilities on the employer, and an employer is allowed to contract out those responsibilities. Further, a payroll company does not make itself an employer by contracting to perform the record keeping responsibilities for an employer, including listing itself as an employer on reports to government entities, purchasing mandated workers' compensation insurance for the job, and identifying itself as the payor on pay stubs received by a worker. The trial court found those actions were factors in determining whether the payroll company was an employer under the common law test, but they were not dispositive. The court ruled, in Futrell's case, those factors were "subordinated to the decision-making authority of the production companies to direct a film shoot and to hire whom they want[ed] to maintain security and traffic control at the site. . . ."

On January 29, 2009, the trial court incorporated its ruling on Payday's motion for SAI into a ...


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