Class Action Year in Review: Labor & Employment

A salient example of such a class action was one recently concluded by ArentFox Schiff in Humboldt County Superior Court. After more than five years of extensive litigation on behalf of Sun Valley Group, we successfully defeated class certification and secured a dismissal. This Year-in-Review provides guidance on how a state court may — correctly — rule on a class certification motion involving contractors and potential defenses and legal arguments that could be applied to overcome class certification.

Who Were the Parties To This Class Action?

Sun Valley is the largest fresh flower growing operation in California that utilizes seasonal laborers to grow high-quality and fresh flowers, particularly tulips. During holiday seasons, the demand for Sun Valley’s flowers is at an all-time high. To meet demand, Sun Valley works with labor contractors to provide several hundred seasonal workers to assist its own, directly hired employees. At all times in this litigation, Sun Valley did not directly control or supervise any of the seasonal workers directly employed and supervised by the farm labor contractor. As a result, the workforce at Sun Valley comprised a mix of seasonal workers directly supplied by a farm labor contractor working side-by-side with those directly employed by Sun Valley. The two originally named plaintiffs in this case were employed by a farm labor contractor, and the third plaintiff who was later added to the case was a direct employee of Sun Valley. The defendants were Sun Valley and the labor contractor who employed the two original named plaintiffs.

What Were The Claims Against Sun Valley And The Labor Contractor?

The plaintiffs alleged general wage and hour claims against both Sun Valley and the labor contractor, including inter alia, causes of action for failure to pay all wages for off-the-clock work, failure to provide second meal breaks, failure to pay overtime wages at the appropriate legal rate, failure to provide accurate itemized wage statements, waiting time penalties, declaratory relief, and unfair business practices. The plaintiffs sought to represent all seasonal workers, including pickers, planters, bunchers, leaf tippers, wet packers, crate dumpers, forklift drivers, drivers, and packaging and shipping strappers that were employed by the farm labor contractor and Sun Valley in the State of California.

What Was Argued To The Court To Defeat Class Certification?

To defeat class certification, the following arguments were made:

1. Overbroad Proposed Class. First, despite only seeking to represent seasonal workers in the operative complaint, plaintiffs did not limit class certification to what was defined in the complaint and sought to represent all hourly employees of Sun Valley and the labor contractor. It was argued that because the proposed class was beyond the complaint’s scope, the court could not certify a class.
    
2. Failure to Adequately Address Joint Employment Liability. Second, despite the fact that two of the plaintiffs worked directly for the farm labor contractor and the third plaintiff, added later, was directly employed by Sun Valley, plaintiffs improperly lumped every worker together without distinguishing Sun Valley from the farm labor contractor. Additionally, Sun Valley argued that plaintiffs did not adequately establish whether Sun Valley was an actual joint employer and there was a lack of evidence that Sun Valley (1) controlled wages, hours, or working conditions of the seasonal workers that were employed by the farm labor contractor, (2) suffered or permitted individuals from the farm labor contractor to work for it, or (3) acted to engage, and thus created a common law employment relationship.
    
3. Common Questions of Law and Fact Did Not Predominate. Third, Sun Valley argued that plaintiffs did not demonstrate or proffer any evidence to establish the existence of common questions of law and fact existed. Significantly, and in direct contravention of the allegations contained in the operative complaint, both current and former employees of Sun Valley and the farm labor contractor confirmed that they received their breaks. Moreover, and again in opposition to the allegations, employees of both Sun Valley and the labor contractor testified that they always clocked-in before doing any work and clocked-out only after finishing all work, thereby demonstrating that individual inquiries would have to be made to determine whether the putative class members actually performed off-the-clock work or not. Finally, even the named plaintiffs testified inconsistently at their depositions on these issues, as well as the amount of time they needed to perform tasks. For all of these reasons, defendants vigorously argued that the lack of commonality completely precluded class certification.
    
4. Plaintiffs Claims Were Not Typical and They Were Inadequate Class Representatives. Finally, the defendants argued that the plaintiffs’ claims lacked typicality and that they were inadequate representatives of the putative class. Indeed, because the plaintiffs could not provide any information regarding any of the alleged wage violations and/or had limited knowledge regarding the identity of their direct employer, defendants argued that class certification should be denied.

The court ultimately agreed with Sun Valley that, because plaintiffs had significant differences and inconsistencies within their own allegations, they lacked a sufficient community of interests, and the plaintiffs’ Motion to Certify Class should be denied in its entirety.

Practical Advice for Employers Utilizing the Services of Labor Contractors.

Based on the outcome of the Sun Valley wage/hour class action, there are few practical tips that employers using the services of labor contractors could implement in order to mitigate exposure to or successfully oppose a class action lawsuit. First, when hiring labor contractors to provide seasonal workers, it is important to have language in the pertinent contracts specifically requiring those “suppliers of labor” to comply with this state’s rigorous wage and hour statutory obligations. Safeguards and preventative measures in this area should include, but are not limited to, specific language requiring the contractor to: (1) indemnify and hold the employer harmless for wage/hour violations committed by the contractor; (2) require the contractor to be solely responsible for training its own employees or subcontractors; and (3) require the contractor to administer its employment/HR policies, maintain personnel records and files, pay all wages and benefits, and maintain insurance coverage, I-9 policies, and withhold taxes for its own employees. The agreement should also require the labor contractor to direct and control its own employees, including setting schedules, imposing discipline and termination, and directing the day-to-day activities of its own employees.

Indeed, if all of these issues or items are appropriately addressed in the agreement with the labor contractor, employers will mitigate joint employer liability should the labor contractor face allegations of non-compliance with California’s rigorous statutory wage/hour requirements. Finally, the employer could also train and regularly supplement the training of its own managers to ensure that they are not inadvertently creating joint employer liability by implementing and strictly observing procedures whereby the managers of the employer are handling employment/HR issues on behalf of the labor contractor.