Misclassification as independent contractor law
First published court opinion about California’s misclassification as independent contractor law.
The Second District Court of Appeal recently addressed two questions about California’s law prohibiting misclassification of workers as independent contractors. In Noe v. Superior Court (Cal. App. 2d Dist. June 1, 2015) 2015 Cal. App. LEXIS 478, the court considered whether (1) only the employer who made the classification decision can be held liable, and (2) the law can be enforced directly by employees through a court action.
In this case, several vendors hired by Canvas Corporation to sell food at entertainment venues sued Canvas, the owners of the venues, and a food service company that contracted with the venues. The vendors alleged they were not paid the minimum wage and were denied all earned wages when terminated, and that the companies failed to provide pay statements and maintain payroll records. The vendors also sued under a law that 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.” (Labor Code section 226.8.)
The trial court decided that the misclassification law applies only to the person or employer who makes the classification decision. Because Canvas was the only company who made the decision, the trial court dismissed the case against the venue owners and the food service company.
The vendors sought review in the court of appeal. After noting that there was no published decision interpreting the misclassification law, the appellate court looked at who can be sued for violating it. It started with the ordinary meaning of the word “engage” that appears in the law. The dictionary definition is to involve oneself or take part in. This is a broader meaning than “commit”—which the trial court equated with “engage”—which means to do or perform. The court in Noe also found that the California Legislature in passing the law intended to deter employers and their advisors from knowingly utilizing misclassification to avoid the extra costs and worker protections associated with employee status. On this basis, the court concluded that the law penalizes employers who have knowingly participated or involved themselves in the willful misclassification decision. This, however, does not include joint employers based solely on their status as such where a co-employer makes the classification decision.
The court of appeal turned next to the question of whether the vendors could include the violation of the misclassification law in their case (“private right of action”). This right cannot be based solely on the violation of a law. Instead, the right must be supported by language in the law itself or the Legislature’s intent in passing the law. The court in Noe reviewed the misclassification law, which describes the unlawful conduct and penalties for violations. It also provides that the Labor Commissioner, the head of an administrative agency that enforces some workplace laws, may enforce the law through its own procedure or in court. Based on this language, the appellate court determined that there is no private right of action.