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Noe v. Superior Court (Levy Premium Foodservice Partnership)

California Court of Appeals, Second District, Seventh Division

June 1, 2015

YVETTE NOE, et al. Petitioners,
v.
SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent. LEVY PREMIUM FOODSERVICE LIMITED PARTNERSHIP, et al. Real Parties in Interest.

ORIGINAL PROCEEDINGS in mandate, Los Angeles County. No. BC486653 Mary Strobel and John Shepard Wiley, Jr., Judges.

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COUNSEL

Feldman Browne Olivares, Lee R. Feldman, Alicia Olivares; Pine & Pine, Norman Pine; Altshuler Berzon, Michael Rubin and Peder J. Thoreen for Petitioners.

No appearance for Respondent.

Davis Wright Tremaine, Camilo Echavarria, Rochelle L. Wilcox, Janet L. Grumer, Evelyn Wang; Horvitz & Levy, John A. Taylor, Jr., Felix Shafir and Eric S. Boorstin for Real Parties in Interest.

Littler Mendelson, Michael J. Lotito and Elizabeth Parry for U.S. Chamber of Commerce, Calchamber and Civil Justice Association of California as Amici Curiae on behalf of Real Parties in Interest.

OPINION

ZELON, J.

Anschutz Entertainment Group (AEG) contracted with Levy Premium Foodservice Limited Partnership to manage the food and beverage services at several entertainment venues located in Southern California. Levy contracted with Canvas Corporation to provide laborers who sold food and beverages at AEG venues. In 2013, several vendors filed a wage and hour class action against AEG, Levy and Canvas for failure to pay minimum wage and willfully misclassifying them as independent contractors in violation of Labor Code section 226.8.

AEG and Levy filed motions for summary judgment arguing in part that they were entitled to summary adjudication of plaintiffs' Labor Code section 226.8 claim because the undisputed evidence showed Canvas was the entity that had classified the vendors as independent contractors. Although the trial court denied the motions for summary judgment, it agreed that plaintiffs could not pursue a section 226.8 claim against AEG or Levy because neither entity had made the alleged misclassification decision.

Plaintiffs filed a petition for writ of mandate and we issued an order to show cause. In their return to the writ, AEG and Levy argued for the first time that even if the trial court erred in interpreting Labor Code section 226.8, we should deny the writ because the statute does not provide a private right of action. We now deny plaintiffs’ petition. 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

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employees and fails to remedy the misclassification. However, we further conclude that section 226.8 cannot be enforced through a direct private action and deny the plaintiffs’ writ on that basis.

FACTUAL AND PROCEDURAL BACKGROUND

A. Summary of Plaintiffs’ Lawsuit

AEG and its related entities[1] (collectively AEG) own several entertainment venues located throughout Southern California, including Staples Center, Home Depot Center, Nokia Center and Citizens Arena. AEG contracted with Levy Premium Foodservice to provide food and beverage services at each venue. Levy then entered into a labor agreement with Mark Saranoff and his affiliated companies Canvas Corporation, Canvas Vending and iCandy (collectively Canvas) to provide vendors who sold food and beverage items to event spectators.

In 2013, several former vendors who had been hired by Canvas to sell food at AEG’s venues filed a wage and hour class action against AEG, Levy and Canvas, contending that each defendant qualified as their “joint employer.” Plaintiffs alleged numerous violations of the Labor Code, including failure to pay minimum wage (Lab. Code, §§ 1194, 1194.2, 1197, 1197.1[2]), failure to pay wages upon termination (§§ 201, 202, 203) and failure to furnish accurate wage statements and maintain accurate payroll records. (§§ 226, 226.3, 1174, 1174.5, 2810.5.)

Plaintiffs also sought recovery under section 226.8, which imposes civil penalties on any person or employer who “engage[s] in” the act of “voluntarily and knowingly misclassifying [an] individual as an independent contractor.” (§ 226.8, subds. (a) & (i)(4).) Plaintiffs alleged that each defendant had “misclassified [class members] as ‘independent contractors’ rather than employees knowing that the [class members] should lawfully be classified as an ‘employee.’” Plaintiffs additionally asserted claims under the Labor Code Private Attorneys General Act of 2004 (PAGA) (§§ 2698 et seq.) and the unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.) predicated on the defendants’ alleged violations of state and federal labor laws.[3]

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B. AEG and Levy’s Motions for Summary Judgment or Summary Adjudication

1. Summary of AEG and Levy’s motions for summary judgment

AEG and Levy (collectively defendants) filed motions for summary judgment, or in the alternative summary adjudication, arguing that they were not the plaintiffs’ “joint employer” and therefore could not be held liable for any of the Labor Code violations set forth in the complaint. Defendants contended that the undisputed evidence showed Canvas was solely responsible for hiring and paying plaintiffs, setting their schedules, maintaining their employment records and ensuring they were properly compensated. Defendants further asserted that whatever “limited oversight” they exerted over plaintiffs “fell short of the ‘control’ required to find a joint employment relationship.”

Defendants alternatively argued that “even if the court were to find that disputed issues of material fact exist on the joint employer issue, ” plaintiffs’ claim for civil penalties under section 226.8 “fail[ed]” because the statute only applies to the employer who “actually made the decision to classify workers as independent contractors.” Defendants contended that, in this case, the evidence demonstrated the decision to classify plaintiffs as independent contractors and to pay them on “a commission basis only” had been “made exclusively by Canvas.”

Defendants raised similar arguments regarding plaintiffs’ penalty claims for willfully failing to pay wages due upon termination (§ 203), willfully failing to maintain payroll records (§ 1174.5) and knowingly and intentionally failing to provide itemized wage statements (§ 226, subd. (e).) Specifically, defendants argued that plaintiffs had identified no evidence showing AEG or Levy had acted either willfully or intentionally because Canvas was the entity responsible for paying plaintiffs, preparing their wage statements and maintaining their payroll records.

2. Summary of plaintiffs’ opposition

In their opposition, plaintiffs argued that that the terms of the contractual agreements between AEG, Levy and Canvas demonstrated there were triable issues of fact whether defendants qualified as the joint employers of the vendors that Canvas had provided to them. Plaintiffs contended the contracts showed defendants exerted substantial control over the vendors’ working conditions, dictating “what [the vendors] s[old], where they [worked], the price [of the products they sold], their appearance, their dress and even what they [could] say when they [we]re selling products.”

Plaintiffs also argued there were triable issues of fact whether defendants were liable for civil penalties under section 226.8. Plaintiffs contended that

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the statute was not limited to employers who made the actual decision to knowingly misclassify their workers, but rather extended to any employers who had “engaged in” that activity. According to plaintiffs, the evidence showed defendants had “engaged in” the act of willful misclassification because they were aware that their co-employer (Canvas) had improperly classified their joint employees. In support, plaintiffs provided emails in which a Levy human resources representative acknowledged that Canvas only paid the vendors on a commission basis and questioned whether this practice violated wage and hour requirements. Plaintiffs also cited evidence showing that Levy directly hired some of the vendors who sold food at AEG events and classified these workers as employees. Plaintiffs argued that, considered together, this evidence demonstrated Levy knew Canvas had failed to “properly classif[y]” the vendors. They further asserted that knowledge of this information was “imputed” to AEG “because Levy was AEG’s agent.”

Plaintiffs also argued that even if defendants were not aware Canvas had misclassified the vendors, they could nonetheless be held liable under section 226.8 based solely on their status as “joint employers.” Plaintiffs theorized that the statute imposed a duty on AEG and Levy to ensure all of their employees were properly classified. Plaintiffs raised similar arguments on their claims for penalties under sections 203, 1174.5 and 226, arguing that each statute imposed a duty on every joint employer to ensure its employees were paid for all wages due immediately upon discharge and received accurate, itemized wage statements.

B. The Trial Court’s Ruling

After a hearing, the trial court denied defendants' motions for summary judgment, but granted summary adjudication on plaintiffs’ section 226.8 claim. The trial court concluded there were “triable issues of fact whether Levy and AEG were [plaintiffs’] joint employers” because the contracts between AEG, Levy and Canvas indicated that both defendants exerted control over many aspects of plaintiffs’ “working conditions.” The court also found there were “triable issues of fact... as to whether Levy was AEG’s agent, ” explaining that plaintiffs’ evidence suggested AEG had “granted Levy the right to represent AEG in its interactions with food service staff and food service suppliers.”

The court ruled that because there were triable issues of fact on the issues of “joint employment” and agency, defendants were not entitled to judgment on plaintiffs’ claim for unpaid minimum wages. The court further concluded that these findings precluded judgment on plaintiffs’ claims under sections 203 (failure to pay all wages due upon discharge), 226, subdivision (e) (failure to provide itemized wage statements) and 1174.5 (failure to maintain accurate

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payroll records), explaining that these “sections.... all impose liability” by “virtue ...


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