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[No. S121552. May 20, 2010.]
MIGUEL MARTINEZ et al., Plaintiffs and Appellants, v.
CORKY N. COMBS et al., Defendants and Respondents.
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Counsel
Law Offices of Talamantes/Villegas/Carrera, Mark Talamantes, Jennifer
Reisch; California Rural Legal Assistance, Inc., William G. Hoerger,
Michael C. Blank; California Rural Legal Assistance Foundation, Inc., and
Julia Montgomery for Plaintiffs and Appellants.
Virginia Ruiz for Farmworker Justice, National Employment Law Project and
United Farm Workers as Amici Curiae on behalf of Plaintiffs and Appellants.
Schneider & Wallace, Joshua Konecky and W.H. “Hank” Wilson IV for Centro
Legal de La Raza, Golden Gate University Women’s Employment Rights
Clinic, The Katharine and George Alexander Community Law Center, The
Legal Aid Foundation of Los Angeles, The Legal Aid Society of San
Francisco-Employment Law Center and Neighborhood Legal Services of Los
Angeles County as Amici Curiae on behalf of Plaintiffs and Appellants.
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Law Offices of Carroll & Scully, Donald C. Carroll and Charles P. Scully II for
California Labor Federation, AFL-CIO as Amicus Curiae on behalf of
Plaintiffs and Appellants.
Anastassiou & Associates, Jane E. Bednar and Effie F. Anastassiou for
Defendant and Respondent Apio, Inc.
Western Growers Law Group, Noland, Hamerly, Etienne & Hoss and
Terrence R. O’Connor for Defendants and Respondents Corky N. Combs and
Larry D. Combs dba Combs Distribution Co., and Juan Ruiz.
Monte B. Lake for California Farm Bureau Federation, Agricultural Council of
California, California Citrus Mutual, California Grape and Tree Fruit League,
Grower-Shipper Association of Central California, Imperial Valley Vegetable
Growers Association, Nisei Farmers League, Ventura County Agricultural
Association, Western Growers Association and Wine Institute as Amici Curiae
on behalf of Defendants and Respondents.
Opinion
WERDEGAR, J. Plaintiffs, seasonal agricultural workers, brought this
action under Labor Code section 11941 and other theories to recover unpaid
minimum wages. Plaintiffs contend the Industrial Welfare Commission’s
(IWC) wage order No. 14-2001, entitled “Order Regulating Wages, Hours,
and Working Conditions in Agricultural Occupations” (Cal. Code Regs., tit. 8,
§ 11140), commonly known as Wage Order No. 14, defines defendants as
their employers for purposes of section 1194. The lower courts rejected the
argument. We affirm.
I. Background
This case arises out of the strawberry farming operations of Isidro
Munoz, Sr., who did business as Munoz & Sons (Munoz). Plaintiffs are
seasonal agricultural workers whom Munoz employed during the 2000
strawberry season: Antonio Perez Cortes, Catarino Cortez, Otilio Cortez,
Asuncion Cruz, Hilda Martinez and Miguel Martinez. Munoz, originally
named as a defendant, has been granted a discharge in bankruptcy. The
remaining defendants are two of the produce merchants through whom
Munoz sold strawberries: Apio, Inc. (Apio), and Combs Distribution Co.,
1 All further statutory citations are to the Labor Code, except as noted.
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together with its principals, Corky N. Combs and Larry Combs, and its field
representative Juan Ruiz (collectively Combs). Plaintiffs’ separate action
against a third merchant, Frozsun, Inc. (Frozsun), has been stayed pending
the outcome of this action. A fourth merchant, Ramirez Brothers, has
petitioned for bankruptcy.
During the 2000 season, Munoz grew and harvested strawberries in the
Santa Maria Valley, which lies on the Central Coast along the border of San
Luis Obispo and Santa Barbara Counties. Munoz farmed a total of 130 acres
divided among four sites. He leased two 30-acre sites (the “Océano” and
“Zenon” fields) from defendant Apio and a 40-acre site (the “El Campo”
field) from an unidentified third party.2 Munoz had leased the Océano and El
Campo fields in prior years. He rented an additional 30-acre site (the “Santa
Maria” field) from Ramirez Brothers. Munoz operated his business as a
single, integrated concern, using his employees and equipment in all four
fields, as needed, and combining his revenues and expenses. During the peak
of the harvest, Munoz employed approximately 180 agricultural workers,
three foremen (including his brother, Armando Munoz) and two office
workers (including his son, Isidro Munoz, Jr.). Munoz owned his equipment,
including trucks, tools and strawberry carts, and paid his own business
expenses, including plants, fertilizer, pesticide, irrigation, fuel, packaging, and
rent for additional trucks, a large tractor and field toilets. On the occasions
when Apio and Combs paid Munoz’s expenses in the first instance, they
billed him. Both defendants, for example, charged Munoz for packaging that
bore their companies’ labels, and for refrigeration, and Apio charged Munoz
for his portion of the cost of a shared irrigation system.
Munoz grew and harvested strawberries for two distinct markets: fresh sale
to consumers in markets, and sale for processing (typically freezing). Fresh
market and freezer berries are harvested differently. Fresh market berries
cannot be too green or too ripe, and the calyx (sepals and stem) is left
attached. Market berries are packed in the field, as they are picked, into the
containers in which they will be sold to consumers, such as plastic baskets or
clamshell boxes. Freezer berries, in contrast, are selected for advanced
ripeness and packed in bulk into crates with the calyx removed. Munoz
harvested strawberries for both markets from the same fields. He decided
which fields to harvest on any given day, and whether to harvest for fresh
market sale or the freezer, based largely on the need to pick fields every three
days, informing the merchants of his schedule and taking into account their
orders and the berries’ condition.
2 The parties sometimes refer to these fields by other names: the Océano field as the Phelan
and Taylor Ranch, El Campo as Mesa One, and Zenon as Mesa Two.
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The four produce merchants through which Munoz sold strawberries are
not related to one another. Munoz had dealt profitably with defendant Apio
for three years prior to 2000, and with defendant Combs for one. The
principals of Ramirez Brothers were Munoz’s personal friends. Apio, Combs
and Ramirez Brothers dealt only in fresh market berries, and Frozsun dealt
only in freezer berries. Apio, Combs and Frozsun each accepted berries from
many independent growers, not just Munoz. Combs also sold beans for
Munoz after the strawberry season ended.
Munoz had different contractual relationships with each merchant. Apio
and Combs acted as produce brokers, selling Munoz’s strawberries for a
commission and remitting to him the net proceeds.3 Munoz retained title until
sale. Both defendants, following a common practice of produce merchants on
the Central Coast, advanced money to Munoz before the season began, in
exchange for exclusive rights to fresh produce from designated fields. These
advances were retired over the season from sales revenues. Apio and Combs
handled payment differently. Combs agreed to remit the actual net proceeds
of sale to Munoz within 21 days, in weekly payments, minus a deduction for
loan repayment (30 percent), expenses such as packaging materials and
cooling, and an 8 percent commission. Apio operated similarly and charged
the same commission but, rather than making weekly payments to Munoz of
actual net proceeds, paid him estimated net proceeds in the form of a weekly
“Pick-Pack” payment that was initially set at $2 per carton but actually varied
with the price of strawberries. Frozsun, which purchased strawberries exclu-
sively for processing, paid Munoz on delivery the official “field price” posted
by the Processing Strawberry Advisory Board of California. Munoz and
Ramirez Brothers, being personal friends, conducted business without a
written contract. Their understanding was that Munoz would pay for plants
and labor and Ramirez Brothers would pay all other expenses, remitting net
profits to Munoz after recovering their costs.
Munoz’s financial resources for the 2000 season came from many sources.
Much of his cash during the season came from sales proceeds, including at
least $378,392 in Pick-Pack payments (estimated net proceeds) from Apio,
$476,955 in net proceeds from Frozsun, and an unspecified amount from
Combs. Munoz also invested at least $500,000 of his own funds and an
unspecified amount of loan proceeds. The record does not identify all of
Munoz’s financing sources. Some financing, as noted, came from the produce
merchants. Apio advanced Munoz $163,000, or $2,716 per acre for the
3 Munoz, who speaks only Spanish, dealt with defendants Apio and Combs through their
field representatives, respectively Juan Toche and Juan Ruiz.
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Océano and Zenon fields, and Combs advanced $80,000, or $2,000 per acre
for El Campo. These advances were not intended to cover Munoz’s actual
costs for growing and harvesting strawberries, which were far higher.4 The
vice-president of Apio described that company’s advances as covering rent
for the Océano and Zenon fields. Frozsun agreed to make or facilitate a loan
of up to $225,000 in exchange for the exclusive right to purchase freezer and
cannery berries from all of Munoz’s acreage. Munoz also received loans from
personal friends and financing for equipment from Ford Motor Company and
John Deere.
Munoz alone, with the assistance of his foremen, hired and fired his
employees, trained them when necessary, told them when and where to report
to work, when to start, stop and take breaks, provided their tools and
equipment,5 set their wages, paid them, handled their payroll and taxes, and
purchased their workers’ compensation insurance.6
Munoz and his foremen also supervised his employees. Plaintiffs contend
defendants Apio and Combs participated in the supervision, characterizing as
supervision the activities of defendants’ field representatives in the areas of
quality control and contract compliance. We will return to this subject below.
(See, post, at p. 75 et seq.) Summarizing for present purposes, picking and
packing strawberries for fresh market sale necessitated communication in the
field, during the harvest, between defendants and Munoz’s personnel. Both
Apio and Combs regularly sent field representatives to ascertain the quality of
available strawberries and to explain the manner in which they were to be
packed. Apio sent their representatives Juan Toche and Manuel Cardenas.
Combs sent defendant Juan Ruiz, who performed similar services for many
entities and whom Combs eventually hired as an employee in June 2000.
Munoz’s contract with Apio expressly provided for these quality control
activities. The contract provided, under the headings “Performance Oversight
and Coordination” and “Quality of Crops,” that Apio would “set the standards
for, and be the sole judge of, the quality and maturity of the Crops and the
pack,” and that Apio would “have the right to send its quality control
personnel to the fields ... at any time to confirm that the Crops ... are the
4 The parties refer to a publication from the University of California Cooperative Extension,
which estimates average total operating costs in the 2001 season in the Santa Maria Valley as
$21,390 per acre. (U. Cal. Cooperative Extension, Sample Costs to Produce Strawberries:
South Coast Region—Santa Maria Valley (2001) p. 10.)
5 Some employees used their own gloves and strawberry carts. Munoz provided these tools
for those who did not.
6 At some point in the 2000 season, Munoz fell behind on workers’ compensation insurance
payments.
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quality required for purchase by [Apio] and/or marketing and sale under
[Apio’s] labels . . . Munoz operated the same way with Combs, apparently
as a matter of standard practice, even though the parties’ terse, single-page
contract did not address the subject.
Munoz began delivering fresh market strawberries to Apio and Combs
sometime in March 2000. He delivered the last fresh berries to Apio on May
16, 2000, and to Combs on May 18, 2000. The freezer berry harvest began at
the end of April and thus overlapped the last few weeks of the fresh berry
harvest. When the fresh berry harvest ended, the freezer berry harvest greatly
increased. To illustrate, as of May 20 Munoz had sold to Frozsun a total of
175,400 pounds of freezer berries for $31,663. In the next week alone
(ending May 27), Munoz sold 787,208 pounds for $149,340. Sales to Frozsun
continued until August 12, eventually totaling 2,608,781 pounds and
$476,955 in payments to Munoz.
In the last few weeks of the fresh strawberry harvest, the market for fresh
berries deteriorated. According to Munoz, more berries were grown and
harvested in 2000 than the market could handle. Apio, Combs and Ramirez
Brothers were receiving poor prices for berries and, in some cases, no price at
all when customers took berries on consignment. Apio’s Pick-Pack payments
of estimated net proceeds, initially set at $2 per carton, reached a high of
$2.50 per carton from mid-March to April 23 and then dropped gradually to
$1.33 in May as the price of strawberries fell. Apio paid Munoz $68,791 on
May 12 for berries delivered the week ending May 7, in advance of the
21-day contractual due date for payment. The next Pick-Pack advance
payments from Apio were due on June 2 for the week ending May 14, and on
June 9 for the week ending May 21. Apio actually advanced Munoz $77,662
for both weeks sometime between June 8 and 10. Combs advanced Munoz
$30,000 in the last five days of May. Munoz received no payments at all from
Ramirez Brothers during the 2000 season. Munoz finished the season owing
Apio about $80,000, Combs about $8,000, and Ramirez Brothers about
$30,000.
Despite advances from Apio and Combs, and despite increasing payments
from Frozsun, Munoz at some point in May 2000 began to have problems
paying his workers. This led to a work stoppage on the afternoon of Saturday,
May 27, in the El Campo field, where over 100 of Munoz’s employees were
harvesting freezer berries. Munoz’s employees, who had apparently not been
paid for several weeks, had stopped work and were talking with Jose Popoca
Serrano, who identified himself as a member of the “Organization for Human
Rights.” Serrano was compiling a list, which he later gave to the Division of
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Labor Standards Enforcement (DLSE), of workers claiming unpaid wages.
Munoz’s supervisor Arturo Leon, and Munoz himself by telephone, asked
Serrano to help persuade the workers to return to work, telling Serrano that
Munoz could not pay because Apio was withholding payment.7 Munoz
promised Serrano he would pay his workers on Tuesday. At some point,
Combs’s field representative Juan Ruiz arrived, telling Serrano he had a
check payable to Munoz from Combs for $25,000 and that Munoz already
had another $20,000. Ruiz then spoke directly to Munoz’s workers. Accord-
ing to plaintiff Asuncion Cruz, “Juan [Ruiz] . . . told us to keep working and
help Munoz. Juan told us not to worry and said he guaranteed we would be
paid as his boss had checks he was delivering to Isidro Munoz.” Cruz “heard
workers tell Juan they were concerned that the amount of the check he
brought with him would not be enough to pay everyone. Juan told us not to
worry as he would deliver even larger amounts of money from his boss to
Isidro Munoz the following week, and even more money the week after that,
which would be enough to pay us all.” Munoz’s workers recognized Ruiz as
the field representative for the company (Combs) to whom Munoz delivered
fresh market berries from the El Campo field. According to Leon, Ruiz also
spoke with individual workers, explaining that “if all of you stop right now,
the strawberries are going to go to waste. And they won’t be able to pay
you.” After Ruiz spoke, several workers crossed their names off Serrano’s list
and returned to work, but 75 workers left for the day to return on Monday.
On June 5, 2000, the DLSE began to investigate wage claims against
Munoz, based on Serrano’s information. The next day, DLSE investigator
Paul Rodriguez met with Tim Murphy, Apio’s vice-president, who said that a
payment to Munoz of approximately $75,000 was pending. Rodriguez asked
Murphy not to pay Munoz but, instead, to pay Munoz’s employees directly.
Murphy declined because Apio owed the money to Munoz, not his employ-
ees, and did not want to breach its agreement with Munoz. Subsequently,
however, Apio and Munoz agreed, at the DSLE’s suggestion, that Apio would
pay Munoz, and that cashier’s checks would immediately be issued in the
names of the employees who had filed wage claims. Implementing this
agreement on June 8 or 9, Murphy and Munoz visited Mid-State Bank &
Trust in Guadalupe, where Murphy did business. Munoz endorsed Apio’s
check to the bank, and the bank issued checks to the workers named on a list
Munoz provided. On June 10, Murphy delivered the checks to DLSE
investigator Rodriguez at the Betteravia Government Center in Santa Maria.
Rodriguez, a second DLSE investigator, and Munoz’s foreman Arturo Leon
7 The record does not support Munoz’s statement to Serrano. As noted, as of May 27, 2000,
Apio had already paid Munoz for the week ending May 7, ahead of the contractual 21-day due
date. Apio’s next payment would not come due until June 2.
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distributed the checks to Munoz’s employees. Murphy observed the distribu-
tion but did not participate.
On November 21, 2000, plaintiffs filed the present action against defend-
ants Apio, Combs and Ruiz, as well as the now bankrupt Munoz. Plaintiffs
asserted a variety of claims. Specifically, plaintiffs alleged defendants were
liable for unpaid minimum wages (§ 1194), liquidated damages for unpaid
minimum wages (§ 1194.2),8 unpaid contract wages (§ 216), waiting time
penalties (§ 203), penalties for failure to provide wage statements (§ 226),
and breach of contract. On behalf of similarly situated employees, plaintiffs
also alleged claims under the unfair competition law (Bus. & Prof. Code,
§ 17200 et seq.) (UCL) for restitution (id., § 17203) and liquidated damages
(Lab. Code, § 1194.2). Plaintiffs did not seek class certification.
Defendants Apio, Combs and Ruiz moved for summary judgment on all
claims. Plaintiffs’ opposition to the motions focused on three theories of
liability. First, applying the definitions of “employ” and “employer” set out in
Wage Order No. 14,9 plaintiffs contended defendants Apio and Combs,
together with Munoz, jointly employed plaintiffs and were thus liable under
sections 1194 and 1194.2 for their unpaid wages and liquidated damages.
Second, plaintiffs argued they were third party beneficiaries of the contract
between Munoz and Apio, in which, among other things, Munoz agreed to
comply with all applicable laws, including the labor laws. Third, plaintiffs
asserted they were parties to an oral employment agreement with Combs.10
The superior court rejected plaintiffs’ arguments and granted judgment for
defendants.
8 The “liquidated damages” allowed in section 1194.2 are in effect a penalty equal to the
amount of unpaid minimum wages.
9 “ Under Wage Order No. 14, ‘Employ’ means to engage, suffer, or permit to work,” and“ ‘[e]mployer’ means any person as defined in Section 18 of the Labor Code, who directly or
indirectly, or through an agent or any other person, employs or exercises control over the
wages, hours, or working conditions of any person.” (Cal. Code Regs., tit. 8, § 11140,
“subd. 2(C), (F).) Under Labor Code section 18, ‘[p]erson’ means any person, association,
organization, partnership, business trust, limited liability company, or corporation.”
The California Code of Regulations incorrectly designates section 2(F) of Wage Order
No. 14 as subdivision 2(G) of title 8, section 11140. This opinion cites section 11140’s
subdivisions as if they were correctly numbered to conform to those of the wage order.
10Only these three claims remain pending. Plaintiffs have abandoned all others except for
their claims under the UCL, which, as plaintiffs acknowledge, depend on the validity of the
three claims mentioned above. The UCL claims are also subject to our holding in Arias v.
Superior Court (2009) 46 Cal.4th 969, 980 [95 Cal.Rptr.3d 588, 209 P.3d 923], that private
plaintiffs must ordinarily obtain class certification to represent others in UCL actions.
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Plaintiffs appealed. The Court of Appeal affirmed in part and reversed in
part. Finding no California case law interpreting the IWC’s definitions of
“employ” and “employer” (e.g., Wage Order No. 14, Cal. Code Regs., tit. 8,
§ 11140, subd. 2(C), (F)), the court imported the “economic reality” test for
employment developed in federal cases interpreting the Fair Labor Standards
Act of 1938. (29 U.S.C. § 201 et seq.; see Goldberg v. Whitaker House Coop.
(1961) 366 U.S. 28, 33 [6 L.Ed.2d 100, 81 S.Ct. 933].) Applying that test, the
court concluded defendants “did not exercise sufficient control over [plain-
tiffs,] and [over Munoz’s] agricultural operation^] to be [plaintiffs’] joint
employers,” and thus affirmed the summary judgment for defendants on
plaintiffs’ claims under Labor Code sections 1194 and 1194.2. The court also
affirmed the summary judgment for Apio on plaintiffs’ claim as purported
third party beneficiaries of Apio’s contract with Munoz. Finally, the court
found triable issues of fact on plaintiffs’ claim regarding the alleged oral
agreement with Combs. The Court of Appeal reversed the judgment on this
claim alone, and Combs did not seek review. In all other respects, the Court
of Appeal affirmed.
We granted plaintiffs’ petition for review and deferred further action
pending consideration of a related issue in Reynolds v. Bement (2005) 36
Cal.4th 1075 [32 Cal.Rptr.3d 483, 116 P.3d 1162] (Reynolds).
II. Discussion
A. Introduction.
The central question before us is whether defendants are subject to
suit by plaintiffs under section 1194.11 The statute provides in relevant part as
follows: “Notwithstanding any agreement to work for a lesser wage, any
employee receiving less than the legal minimum wage or the legal overtime
compensation applicable to the employee is entitled to recover in a civil
action the unpaid balance of the full amount of this minimum wage or
overtime compensation, including interest thereon, reasonable attorney’s fees,
and costs of suit.” {Id., subd. (a).) The Legislature has thus given an
employee a cause of action for unpaid minimum wages without specifying
who is liable. That only an employer can be liable, however, seems logically
inevitable as no generally applicable rule of law imposes on anyone other
than an employer a duty to pay wages.
11 Plaintiffs cannot recover liquidated damages under section 1194.2 unless they have a valid
claim under section 1194. (See § 1194.2, subd. (a).) Accordingly, we will from this point on
refer only to section 1194.
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Plaintiffs’ effort to recover unpaid wages from persons who contracted
with their ostensible employer raises issues that have long avoided the
attention of California’s courts. The statute currently designated as section
1194, with its specific operative language, was enacted in 1913 as part of the
act that created the IWC and delegated to it the power to fix minimum wages,
maximum hours of work, and standard conditions of labor. (Stats. 1913,
ch. 324, § 13, p. 637.) In the ensuing 97 years, however, we have touched
only once upon the question of how employment should be defined in actions
brought under section 1194. (Reynolds, supra, 36 Cal.4th 1075,
1085-1089.)12 Similarly, the phrases the IWC presently uses to define the
terms “employ” and “employer” in all 16 of its current industry and
occupation wage orders (IWC wage orders Nos. 1-2001 to 16-2001, Cal. Code
Regs., tit. 8, §§ 11010-11160) first appeared in orders dated 191613 and
1947,14 respectively, yet the courts of this state have never considered their
meaning or scope.15 Likewise has the concept of joint employment avoided
judicial scrutiny in the context of wage claims brought under state law.
Although we have recognized that a person, by exercising significant control
over the employees of another, may come to share the employer’s legal
obligations, our decisions on this point have concerned statutory schemes
other than the wage laws.16
12 As we explain below, Reynolds, supra, 36 Cal.4th 1075, spoke too broadly in concluding
that the common law defines the employment relationship in actions under section 1194. (See,
post, at p. 62 et seq.) The few lower court decisions addressing the definition of employment
under section 1194 (Bradstreet v. Wong (2008) 161 Cal.App.4th 1440, 1449-1454 [75
Cal.Rptr.3d 253]; Jones v. Gregory (2006) 137 Cal.App.4th 798, 803-805 [40 Cal.Rptr.3d
581]) add nothing to our understanding of the problem because they postdate and thus
necessarily follow Reynolds. (See Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d
450, 455 [20 Cal.Rptr. 321, 369 P.2d 937] [this court’s decisions bind all lower courts].)
13 IWC former wage order No. 1, “Fruit and Vegetable Canning Industry” (Feb. 29, 1916)
sections 1 through 5 (IWC, approved minutes for Feb. 14, 1916, meeting).
14 IWC former wage order No. 1R, “Wages, Hours, and Working Conditions for Women and
Minors in the Manufacturing Industry” (June 1, 1947), section 2(f).
15 The DLSE has devoted some attention to the wage orders’ definition of employer in its
published policies governing the enforcement of wage claims. (DLSE, Enforcement Policies
and Interpretations Manual (Mar. 2006) §§ 2.2.1, 55.2 to 55.2.1.2.1.) However, we give the
DLSE’s current enforcement policies no deference because they were not adopted in compli-
ance with the Administrative Procedure Act (Gov. Code, § 11340 et seq.). (Morillion v. Royal
Packing Co. (2000) 22 Cal.4th 575, 581-582 [94 Cal.Rptr.2d 3, 995 P.2d 139]; Tidewater
Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, 575-577 [59 Cal.Rptr.2d 186,
927 P.2d 296].)
16 For example, the Public Employees’ Retirement Law (Gov. Code, § 20000 et seq.; see
Metropolitan WaterDist. v. Superior Court (2004) 32 Cal.4th 491, 499-509 [9 Cal.Rptr.3d 857,
84 P.3d 966]); the Alatorre-Zenovich-Dunlap-Berman Agricultural Labor Relations Act of 1975
(§ 1140 et seq.; see Rivcom Corp. v. Agricultural Labor Relations Bd. (1983) 34 Cal.3d 743,
767-769 [195 Cal.Rptr. 651, 670 P.2d 305]); the California Fair Employment and Housing Act
(Gov. Code, § 12900 et seq.; see Bradley v. Department of Corrections & Rehabilitation (2008)
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How then do we define the employment relationship, and thus
identify the persons who may be liable as employers, in actions under section
1194? The question is ultimately one of legislative intent, as “[o]ur funda-
mental task in construing a statute is to ascertain the intent of the lawmakers
so as to effectuate the purpose of the statute.” (Day v. City of Fontana (2001)
25 Cal.4th 268, 272 [105 Cal.Rptr.2d 457, 19 P.3d 1196].) In this search for
what the Legislature meant, “[t]he statutory language itself is the most
reliable indicator, so we start with the statute’s words, assigning them their
usual and ordinary meanings, and construing them in context. If the words
themselves are not ambiguous, we presume the Legislature meant what it
said, and the statute’s plain meaning governs. On the other hand, if the
language allows more than one reasonable construction, we may look to such
aids as the legislative history of the measure and maxims of statutory
construction. In cases of uncertain meaning, we may also consider the
consequences of a particular interpretation, including its impact on public
policy.” (Wells v. One20ne Learning Foundation (2006) 39 Cal.4th 1164, 1190
[48 Cal.Rptr.3d 108, 141 P.3d 225].)
B. The Parties’Arguments.
The uncertainty surrounding the definition of the employment relationship
in actions under section 1194 has led the parties to offer several diverse
arguments. Those arguments, and our conclusions, may be summarized as
follows:
Plaintiffs contend the language and history of section 1194 show the
Legislature intended generally to defer to the IWC’s regulatory definitions of
the employment relationship in its wage orders. Plaintiffs would give those
definitions sweeping breadth. Specifically, plaintiffs argue defendants “suf-
fer [ed], or permitted plaintiffs] to work” (Wage Order No. 14, Cal. Code
Regs., tit. 8, § 11140, subd. 2(C)), because defendants knew Munoz would
need to hire workers to fulfill his contracts with defendants, and that
defendants thus, in some sense, suffered or permitted plaintiffs to work for
their benefit. Plaintiffs further argue defendants “exercise[d] control over
[plaintiffs’] wages, hours, or working conditions” (Wage Order No. 14, Cal.
Code Regs., tit. 8, § 11140, subd. 2(F)), because defendants, under the terms
of their contracts with Munoz, controlled the remittance to him of his share of
the proceeds of sale, and thus a portion of the income from which he paid his
employees.
Defendants, in opposition, cite our decision in Reynolds, supra, 36 Cal.4th
1075, where we looked to the common law to define employment in a suit
158 Cal.App.4th 1612, 1625-1629 [71 Cal.Rptr.3d 222]); and the workers’ compensation law
(§ 3200 et seq.; see, e.g., Kowalski v. Shell Oil Co. (1979) 23 Cal.3d 168, 174-175 [151
Cal.Rptr. 671, 588 P.2d 811]).
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under section 1194 seeking to hold the directors and officers of a corporation
liable for its employees’ unpaid overtime compensation. (Reynolds, at
pp. 1086-1087.) Alternatively, in the event Reynolds is distinguishable and
the wage order’s definitions do apply, defendants argue we should construe
the wage order as if it incorporated the federal “economic reality” definition
of employment developed in cases arising under the Fair Labor Standards Act
of 1938 (29 U.S.C. § 201 et seq.; FLSA; see Goldberg v. Whitaker House
Coop., supra, 366 U.S. 28, 33) and articulated in federal regulations promul-
gated under the FLSA (see 29 C.F.R. § 791.2 (2009)) and the Migrant and
Seasonal Agricultural Worker Protection Act (29 U.S.C. § 1801 et seq.;
29 C.F.R. § 500.20(h)(5) (2009)).17
We hold as follows: In actions under section 1194 to recover unpaid
minimum wages, the IWC’s wage orders do generally define the employment
relationship, and thus who may be liable. An examination of the wage orders’
language, history and place in the context of California wage law, moreover,
makes clear that those orders do not incorporate the federal definition of
employment. Applying these conclusions to the facts of the case, we affirm
the Court of Appeal’s judgment.
C. Labor Code Section 1194.
As noted at the outset, the Legislature has not, within the four comers of
section 1194, either defined the employment relationship or identified the
persons who are liable under the statute for unpaid wages. We thus turn for
guidance to the statute’s context and legislative history. Section 1194 is the
direct successor of, and its operative language comes immediately from,
section 13 of the uncodified 1913 act (Stats. 1913, ch. 324, § 13, p. 637) that
created the IWC and delegated to it the power to fix minimum wages,
maximum hours and standard conditions of labor for workers in California.18
An examination of section 1194 in its statutory and historical context shows
unmistakably that the Legislature intended the IWC’s wage orders to define
the employment relationship in actions under the statute.
17 Plaintiffs disclaim any argument that defendants were their employers under federal or
common law.
18 Section 13 of the 1913 act provided: “Any employee receiving less than the legal
minimum wage applicable to such employee shall be entitled to recover in a civil action the
unpaid balance of the full amount of such minimum wage, together with costs of suit,
notwithstanding any agreement to work for such lesser wage.” (Stats. 1913, ch. 324, § 13,
p. 637.)
Today, Labor Code section 1194, subdivision (a) (set out in full at p. 49, ante), differs from
the original section 13 only in its coverage of all employees regardless of gender, thus
repealing an implicit limitation of the 1913 act (Stats. 1973, ch. 1007, § 8, p. 2004; Stats. 1972,
ch. 1122, § 13, p. 2156); in its provisions for overtime compensation (Stats, 1961, ch. 408, § 3,
p. 1479), attorney fees and interest (Stats. 1991, ch. 825, § 2, p. 3666); and in the relocation of
the original statute’s final clause (“notwithstanding . . .”) to the beginning (ibid.).
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The act creating the IWC (the 1913 act) joined a wave of minimum wage
legislation that swept the nation in the second decade of the 20th century. No
state’s law provided for a minimum wage before 1912. By the end of 1913,
however, nine states had enacted such laws, motivated by widespread public
recognition of the low wages, long hours, and poor working conditions under
which women and children often labored. By 1919, another five states,
the District of Columbia and Puerto Rico had followed. (Brandéis, Labor
Legislation: Minimum WageLegislation in 3 History of Labor in the United
States 1896-1932 (Commons edit. 1935) pp. 501, 507 (Brandéis).) These
states took a variety of approaches to the problem. For example, two states
(Mass, and Neb.) enacted voluntary minimum wage laws, and one state
(Utah) set a minimum wage by statute. Other states, including California,
went much further by directing commissions to study labor conditions and to
set minimum wages based on the cost of living, and by making the failure to
pay the minimum wage a crime. (Brandéis, supra, at p. 502; Note, Woman’s
Work (1913) 3 Am. Lab. Legis. Rev. 433, 434-473.) These states did not
follow a federal model,19 as Congress would not enact the FLSA (29 U.S.C.
§201 et seq.) until 1938.
In California specifically, calls to enact a minimum wage followed 1911
legislation prohibiting some child labor and regulating the hours women and
children could be required to work (Stats. 1911, chs. 116, 258 & 456,
pp. 282, 437, 910), and a comprehensive 1912 report by the State Bureau of
Labor Statistics on wages, hours and labor conditions throughout the state.
The report showed, among other things, that approximately 40 percent of
working women earned less than $9 per week. (State Bur. of Lab. Statistics,
15th Biennial Rep., 1911-1912 (1912) pp. 100-101, 458.) “Although inter-
pretations of this evidence varied widely, most experts thought that these
wages were unreasonably low. The bureau itself considered them below a
decent standard of living—‘many women were living below any normal
standard, and . . . such subnormal living was having a most disastrous effect ”on the health and morals of the women workers.’ (Hundley, supra, 29 Pac.
Hist. Rev. at pp. 272-273, fn. omitted, quoting IWC, What California Has
Done to Protect the Women Workers (May 1927) p. 5.) Although the 1911
legislation had nearly eliminated unpermitted child labor, the bureau reported
that minors from 12 to 16 years old working with permits still constituted just
under 1 percent of the workforce. (State Bur. of Lab. Statistics, 15th Biennial
Rep., supra, at pp. 21, 24.) The bureau did not report working minors’ wages.
19California’s minimum wage law was based on a proposal originally drafted by the
National Consumers’ League for use in Oregon. (Brandéis, in 3 History of Labor in the United
States, supra, at p. 514; Hundley, Katherine Philips Edson and the Fight for the California
Minimum Wage, 1912-1923 (1960) 29 Pac. Hist. Rev. 271, 274 (Hundley).)
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The 1913 Legislature addressed these continuing problems by creating the
IWC and delegating to it broad authority to regulate the hours, wages and
labor conditions of women and minors (Stats. 1913, ch. 324, p. 632), and by
proposing to the voters a successful constitutional amendment confirming the
Legislature’s authority to proceed in that manner.20 The argument in favor of
the proposed constitutional amendment informed the voters that “[i]n 1911
bills were passed controlling the hours of women’s and children’s work, and
it was obvious that the work was less than half done unless the other two
minimum rules of industrial life were also made to protect this weakest and
most helpless class: that is, that the safety and the sanitary conditions in
which women worked should be controlled, and, what was more important,
that they should be certain of a living wage—a wage that insures for them the
necessary shelter, wholesome food and sufficient clothing.” (Ballot Pamp.,
Gen. Elec. (Nov. 3, 1914) argument in favor of Assem. Const. Amend.
No. 90, p. 29.) On this point, the ballot pamphlet cited the findings of the
State Bureau of Labor Statistics and expressed concern that substandard
wages frequently led to ill health and moral degeneracy. (Ibid.)
The IWC’s initial statutory duty under the 1913 act was to “ascertain the
wages paid, the hours and conditions of labor and employment in the various
occupations, trades, and industries in which women and minors are employed
in the State of California, and to make investigations into the comfort, health,
safety and welfare of such women and minors.” (Stats. 1913, ch. 324, § 3,
subd. (a), p. 633.) To assist the IWC in this work, the Legislature gave the
commission broad investigatory powers, including free access to places of
business and employment (id., § 3, subd. (b), par. 2, p. 633), as well as the
authority to demand reports and information under oath (id., § 3, subd. (b),
par. 1, p. 633), to inspect records (id., § 3, subd. (b), par. 2, p. 633), and to
issue subpoenas requiring the appearance and sworn testimony of witnesses
(id., § 4, pp. 633-634). If, after investigation, the IWC determined that the
wages paid to women and minors in any industry were “inadequate to supply
the cost of proper living, or the hours or conditions of labor [were] prejudicial
to the health, morals or welfare of the workers,” the IWC was to convene a
20 Former article XX, section 17 1/2, of the California Constitution provided: “The
legislature may, by appropriate legislation, provide for the establishment of a minimum wage
for women and minors and may provide for the comfort, health, safety and general welfare of
any and all employees. No provision of this constitution shall be construed as a limitation upon
the authority of the legislature to confer upon any commission now or hereafter created, such
power and authority as the legislature may deem requisite to carry out the provisions of this
section.” (Added by Assem. Const. Amend. No. 90 (1913 Reg. Sess.), as approved by voters
(Prop. 44), Gen. Elec. (Nov. 3, 1914).)
Today, article XIV, section 1, of the California Constitution declares on the same point that
“[t]he Legislature may provide for minimum wages and for the general welfare of employees
and for those purposes may confer on a commission legislative, executive, and judicial
powers.” (Added by Assem. Const. Amend. No. 40 (1975-1976 Reg. Sess.), as approved by
voters (Prop. 14), Primary Elec. (June 8, 1976).)
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“ ” ‘wage board’ of employers and employees. (Id,., § 5, p. 634.) Based on the
wage board’s report and recommendations, and following a public hearing,
the commission was to issue wage orders fixing for each industry “[a]
minimum wage to be paid to women and minors . . . adequate to supply . . .
the necessary cost of proper living and to maintain [their] health and welfare”
(id., § 6, subd. (a), par. 1, p. 634), the maximum hours of work, and the
standard conditions of labor (id., subd. (a), pars. 2-3, pp. 634-635).
Today, the laws defining the IWC’s powers and duties remain essentially
the same as in 1913,21 with a few important exceptions: First, the voters have
amended the state Constitution to confirm the Legislature’s authority to
confer on the IWC “legislative, executive, and judicial powers.” (Cal. Const.,
art. XIV, § 1, italics added [added by Assem. Const. Amend. No. 40
(1975-1976 Reg. Sess.), as approved by voters (Prop. 14), Primary Elec.
(June 8, 1976)]; see Industrial Welfare Com. v. Superior Court (1980) 27
Cal.3d 690, 701 [166 Cal.Rptr. 331, 613 P.2d 579].) Second, the Legislature
has expanded the IWC’s jurisdiction to include all employees, male and
female, in response to federal legislation barring employment discrimination
because of sex (tit. VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e
et seq.). (See Stats. 1973, ch. 1007, § 8, p. 2004; Stats. 1972, ch. 1122, § 13,
p. 2156; see generally Industrial Welfare Com. v. Superior Court, supra, at
pp. 700-701.) Third, “while retaining the authorizing language of [the 1913
act],” the Legislature has “restated the commission’s responsibility in even
broader terms” (Industrial Welfare Com. v. Superior Court, supra, at
pp. 701-702), charging the IWC with the “continuing duty” to ascertain the
wages, hours and labor conditions of “all employees in this state,” to
“investigate [their] health, safety, and welfare,” to “conduct a full review of
the adequacy of the minimum wage at least once every two years” (Lab. Code,
§ 1173), and to convene wage boards and adopt new wage orders if the
commission finds “that wages paid to employees may be inadequate to supply
the cost of proper living” (id., § 1178.5, subd. (a); see also id., § 1182).
Finally, while the amount of the minimum wage has in recent years been set
by statute (e.g., id., §§ 1182.11, 1182.12), specific employers and employees
still become subject to the minimum wage only through, and under the terms
of, the IWC’s applicable wage orders (id., § 1197).22
21 See, e.g., sections 1173 (duties of IWC), 1174—1174.5 (records and inspections), 1176
(witnesses and subpoenas), 1178-1180 (wage boards), 1181 (hearings), 1182 (wage orders).
22 Section 1197 provides that “[t]he minimum wage for employees fixed by the commission
is the minimum wage to be paid to employees, and the payment of a less wage than the
minimum so fixed is unlawful.” Consistently with section 1197, legislative acts setting the
minimum wage have taken effect through a general wage order modifying all others to
incorporate the current amount. (E.g., IWC wage order No. MW-2007; Cal. Code Regs., tit. 8,
§ 11000.)
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To ensure the IWC’s wage orders would be obeyed, the Legislature
included criminal, administrative and civil enforcement provisions in the
original 1913 act. The criminal enforcement provision declared that employ-
ers who failed to pay the minimum wage, as well as officers, agents and
other persons acting for such employers, would be guilty of misdemeanors.
(Stats. 1913, ch. 324, § 11, p. 636.) The administrative provision authorized
the IWC to “take all proceedings necessary to enforce” payment of the
minimum wage based on complaints filed by underpaid employees. (Id., § 14,
p. 637.) The civil provision—the immediate predecessor of Labor Code
section 1194—gave employees a private right of action to recover unpaid
minimum wages and invalidated agreements to work for less than the mini-
mum wage. (Stats. 1913, ch. 324, § 13, p. 637, quoted, ante, p. 52, fn. 18.)
More robust versions of these enforcement provisions appear in today’s
Labor Code. (See §§ 1193.5 [administrative enforcement], 1193.6, 1194,
1194.2 [civil actions], 1199 [criminal liability].)
The 1913 act did not give any employee the immediate right to receive a
minimum wage. Instead, the Legislature provided that implementation and
enforcement of the minimum wage would depend upon, and await, the IWC’s
issuance of wage orders governing specific industries and occupations. This
was the effect of section 11 of the 1913 act, which provided that “[t]he
minimum wage for women and minors fixed by said commission as in this
act provided, shall be the minimum wage to be paid to such employees, and
the payment to such employees of a less wage than the minimum so fixed
shall be unlawful. . . .” (Stats. 1913, ch. 324, § 11, p. 636.) Accordingly, the
essential predicate of each employer’s obligation to pay a minimum wage
was the IWC’s issuance of an applicable wage order fixing the minimum
wage for a particular industry or occupation. The applicable wage order also
provided the necessary legal basis for an action by an employee to recover
unpaid minimum wages. Section 13 of the 1913 act, the original civil liability
provision, permitted “[a]ny employee receiving less than the legal minimum
wage applicable to such employee ... to recover in a civil action the unpaid
balance of the full amount of such minimum wage . . . .” (Stats. 1913, ch. 324,
§ 13, p. 637, italics added.) The italicized phrase unambiguously referred to
the wage mandated by the terms of the applicable wage order, because
section 11 defined the wage “fixed by said commission” as “the minimum
wage to be paid” and its nonpayment as “unlawful.” (Stats. 1913, ch. 324,
§ 11, p. 636.)
Virtually the same statutory and regulatory structure remains in place
today. Under section 1197, “[t]he minimum wage for employees fixed by the
commission is the minimum wage to be paid to employees, and the payment
of a less wage than the minimum so fixed is unlawful.” Under section 1194,
“any employee receiving less than the legal minimum wage . . . applicable to
the employee is entitled to recover in a civil action the unpaid balance of the
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57
full amount of this minimum wage . . (id., subd. (a)). Accordingly, today,
as under the 1913 act, specific employers and employees become subject to
the minimum wage only under the terms of an applicable wage order, and an
employee who sues to recover unpaid minimum wages actually and necessar-
ily sues to enforce the wage order.
The newly created IWC moved diligently to exercise its broad delegated
powers. After investigating labor conditions in the fruit and vegetable canning
industry, the commission convened the first wage board in 1916 and later that
year issued its first wage order (IWC former wage order No. 1; see p. 50,
fn. 13, ante), making women and minors working in that industry the first
employees in California to receive a legally established minimum wage. By
the end of 1918, the commission had issued additional orders establishing
minimum wages in the mercantile, laundry, fish canning, fruit and vegetable
packing, and manufacturing industries, and in general and professional office
occupations. (IWC, Third Biennial Rep. (1919) pp. 9-11.) Today 18 wage
orders are in effect, 16 covering specific industries and occupations,23 one
covering all employees not covered by an industry or occupation order,24 and
a general minimum wage order amending all others to conform to the amount
of the minimum wage currently set by statute.25
D. How the IWC Has Defined the Employment Relationship.
The IWC’s first wage order, adopted in 1916, contained no separate
definition of the term “employ,” but various substantive provisions imposing
duties on employers began with language like that the IWC still uses today in
all of its industry and occupation wage orders to define the term. For
example: “No person, firm or corporation shall employ or suffer or permit
any woman or minor to work in the fruit and vegetable canning industry in
any occupation at time rates less than the following . . . .” (IWC former wage
order No. 1, § 2, italics added; see, e.g., Wage Order No. 14, Cal. Code Regs.,
tit. 8, § 11140, subd. 2(C) [“ ‘Employ’ means to engage, suffer, or permit to
worE' (italics added)].) The chosen language was especially apt in an order
intended to regulate the employment of women and minors because it was
already in use throughout the country in statutes regulating and prohibiting
child labor (and occasionally that of women),26 having been recommended
23 IWC wage orders Nos. 1-2001 to 16-2001 (Cal. Code Regs., tit. 8, §§ 11010-11160).
24 IWC wage order No. 17-2001, “Miscellaneous Employees” (Cal. Code Regs., tit. 8,
§ 11170).
25 IWC wage order No. MW-2007 (see Cal. Code Regs., tit. 8, § 11000; see, ante, at p. 55,
fn. 22).
26 Of the many decisions applying such statutes before 1916, some of the most notable
include Curtis & Gartside Co. v. Pigg (1913) 39 Okla. 31 [134 P. 1125, 1128-1129]; Pinoza v.
Northern Chair Co. (1913) 152 Wis. 473 [140 N.W. 84, 86]; Purtell v. Philadelphia & Reading
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58
for that purpose in several model child labor laws published between 1904
and 1912 (see Rutherford Food Corp. v. McComb (1947) 331 U.S. 722, 728,
fn. 7 [91 L.Ed. 1772, 67 S.Ct. 1473]). The language had been interpreted to
impose criminal liability for employing children, or civil liability for their
industrial injuries, even when no common law employment relationship
existed between the minor and the defendant, based on the defendant’s failure
to exercise reasonable care to prevent child labor from occurring.
Not requiring a common law master and servant relationship, the widely
used “employ, suffer or permit” standard reached irregular working arrange-
ments the proprietor of a business might otherwise disavow with impunity.
Courts applying such statutes before 1916 had imposed liability, for example,
on a manufacturer for industrial injuries suffered by a boy hired by his father
to oil machinery (Curtis & Gartside Co. v. Pigg, supra, 134 P. 1125, 1127),
and on a mining company for injuries to a boy paid by coal miners to carry
water (Purtell v. Philadelphia & Reading Coal & Iron Co., supra, 99 N.E.
899, 900-901).
Results such as these, while foreign to the common law, were generally
understood as appropriate under child labor statutes that included the “em-
ploy, suffer or permit” standard. As one state supreme court explained, “[i]f
the statute went no farther than to prohibit employment, then it could be
easily evaded by the claim that the child was not employed to do the work
which caused the injury, but that he did it of his own choice and at his own
risk; and if it prohibited only the employment and permitting a child to do
such things, then it might still be evaded by the claim that he was not
employed to do such work, nor was permission given him to do so. But the
statute goes farther, and makes use of a term even stronger than the term
‘permitted.’’It says that he shall be neither employed, permitted, nor suffered
to engage in certain works.” (Curtis & Gartside Co. v. Pigg, supra, 134 P.
1125, 1129.) The standard thus meant that the employer “shall not employ by
contract, nor shall he permit by acquiescence, nor suffer by a failure to
hinder.” (Ibid.) Similarly, another state supreme court rejected the employer’s
argument that the standard could “only apply when the relation of master and
servant actually exists.” (Purtell v. Philadelphia & Reading Coal & Iron Co.,
supra, 99 N.E. 899, 902.) “To put [such a] construction on this statute . . .
would leave the words ‘permitted or suffered to work’ practically without
meaning. It is the child’s working that is forbidden by the statute, and not his
hiring, and, while the statute does not require employers to police their
premises in order to prevent chance violations of the act, they owe the duty of
Coal & Iron Co. (1912) 256 HI. 110 [99 N.E. 899, 902]; Casperson v. Michaels (1911) 142 Ky.
314 [134 S.W. 200, 201]; State v. Rose (1910) 125 LA. 462 [51 So. 496, 497]; and
Commonwealth v. Beatty (1900) 15 Pa.Super. 5.
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using reasonable care to see that boys under the forbidden age are not
suffered or permitted to work there contrary to the statute.” (Ibid.)
The IWC’s separate definition of “employer” (i.e., a person who “employs
or exercises control over the wages, hours, or working conditions of any
person”)27 is only relatively recent, having first appeared in a 1947 order
regulating the manufacturing industry.28 The same language appears today in
all 16 of the IWC’s industry and occupation orders. Beginning with the word
“employs,” the definition logically incorporates the separate definition of
“employ” (i.e., “to engage, suffer, or permit to work”) as one alternative. The
remainder of the definition—“exercises control over . . . wages, hours, or
working conditions”—has no clearly identified, precisely literal statutory or
common law antecedent. About this language, however, one may safely make
three observations:
First, the scope of the IWC’s delegated authority is, and has always
been, over wages, hours and working conditions. (§§ 1173, 1178.5; see
Stats. 1913, ch. 324, §§ 3, 5 & 6, pp. 633-635.) For the IWC to adopt a
definition of “employer” that brings within its regulatory jurisdiction an entity
that controls any one of these aspects of the employment relationship makes
eminently good sense.
Second, phrased as it is in the alternative (i.e., “wages, hours, or working
conditions”),29 the language of the IWC’s “employer” definition has the
obvious utility of reaching situations in which multiple entities control
different aspects of the employment relationship, as when one entity, which
hires and pays workers, places them with other entities that supervise the
work. Consistently with this observation, the IWC has explained its decision
to include the language in one modem wage order as “specifically intended to
include both temporary employment agencies and employers who contract with
such agencies to obtain employees within the definition of ‘employer.’ ”30
Third, and finally, the IWC’s “employer” definition belongs to a set of
revisions intended to distinguish state wage law from its federal analogue, the
FLSA. We touched upon this point in Morillion v. Royal Packing Co., supra,
22 Cal.4th 575. In 1947, Congress limited the FLSA by enacting the
Portal-to-Portal Act of 1947 (29 U.S.C. § 252 et seq.), which relieved
employers of the obligation to compensate employees for time spent travel--
ling to the worksite, even in an employer’s vehicle, and for time spent in
27 Wage Order No. 14 (Cal. Code Regs., tit. 8, § 11140, subd. 2(F)).
28 IWC former wage order No. 1R, “Wages, Hours, and Working Conditions for Women and
Minors in the Manufacturing Industry” (June 1, 1947) section 2(f).
29 Wage Order No. 14 (Cal. Code Regs., tit. 8, § 11140, subd. 2(F), italics added).
30IWC, Statement as to the Basis for Wage Order No. 16 Regarding Certain On-site
Occupations in the Construction, Drilling, Mining, and Logging Industries (Jan. 2001) page 5.
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activities “preliminary to or postliminary” to work (id., § 254(a)(2)). In
response, the IWC, exercising its authority to provide employees with greater
protection than federal law affords (Morillion v. Royal Packing Co., supra, at
p. 592; see also Ramirez v. YosemiteWater Co. (1999) 20 Cal.4th 785, 795 [85
Cal.Rptr.2d 844, 978 P.2d 2]), revised its wage orders from 1947 forward to
define the term “hours worked” as meaning “the time during which an
employee is subject to the control of an employer, . . . including] all the time
the employee is suffered or permitted to work, whether or not required to do
so.”31 At the same time, the IWC defined “employer” as meaning “any
person .. . who directly or indirectly, or through an agent or any other person,
employs or exercises control over the wages, hours, or working conditions of
[an employee].”32 Noting this history, defendant Combs argues the IWC’s
1947 changes were intended solely to expand the definition of “hours
worked” and not also to affect the definition of “employer.” This is plainly
wrong, as the IWC could have redefined “hours worked” without also
redefining “employer.” One change did not logically compel the other.
E. Judicial Deference to the IWC’s Orders.
The Legislature and the voters have repeatedly demanded the courts’
deference to the IWC’s authority and orders. In the original 1913 act, the
Legislature narrowly confined the scope of judicial review of the commis-
sion’s orders, making its findings of fact conclusive in the absence of fraud
and declaring that the minimum wage fixed by the commission was “pre-
sumed to be reasonable and lawful.” (Stats. 1913, ch. 324, § 12, p. 636; see
now Lab. Code, §§ 1185 [IWC’s orders “shall be valid and operative”], 1187
[IWC’s findings of fact are conclusive in the absence of fraud].) At the same
time, as noted, the Legislature enacted and successfully proposed to the
voters a constitutional amendment approving the IWC’s creation and provid-
ing that no part of the state Constitution would be construed as limiting the
Legislature’s authority in the matter. (Cal. Const., former article XX, section
17 1/2; see, ante, at p. 54, fn. 20.) The ballot argument in favor of the
measure explained the Assembly had proposed the amendment “to make sure
that after the commission’s work is done, its findings and rulings can not be
assailed and made useless by the state courts declaring this [the 1913] act
unconstitutional.” (Ballot Pamp., supra, argument in favor of Assem. Const.
Amend. No. 90, p. 29.) In 1949, the Legislature provided that the IWC’s
orders “shall be valid and operative” and exempt from the Administrative
Procedure Act (Gov. Code, § 11340 et seq.). (Lab. Code, § 1185; Stats. 1949,
ch. 1454, § 12, p. 2538, as amended.) In 1976, as noted, the voters again
31 IWC former wage order No. 1R, section 2(h), italics added; see, e.g., Wage Order No. 14
(Cal. Code Regs., tit. 8, § 11140, subd. 2(G)).
32 IWC former wage order No. 1R, italics added; see, e.g., Wage Order No. 14 (Cal. Code
Regs., tit. 8, § 11140, subd. 2(F)).
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amended the Constitution to confirm in even stronger terms that “[t]he
Legislature may provide for minimum wages and for the general welfare of
employees and for those purposes may confer on a commission legislative,
executive, and judicial powers.” (Cal. Const., art. XTV, § 1, italics added; see,
ante, p. 54, fn. 20; see generally Industrial Welfare Com. v. Superior Court,
supra, 27 Cal.3d 690, 701.)
Obeying these formal expressions of legislative and voter intent, the courts
have shown the IWC’s wage orders extraordinary deference, both in uphold-
ing their validity and in enforcing their specific terms. Concerning the wage
orders’ validity, “[judicial authorities have repeatedly emphasized that in
fulfilling its broad statutory mandate, the IWC engages in a quasi-legislative
endeavor, a task which necessarily and properly requires the commission’s
exercise of a considerable degree of policy-making judgment and discretion.”
(Industrial Welfare Com. v. Superior Court, supra, 27 Cal.3d 690, 702.)
“Because of the quasi-legislative nature of the IWC’s authority, the judiciary
has recognized that its review of the commission’s wage orders is properly
circumscribed. ... ‘A reviewing court does not superimpose its own policy
judgment upon a quasi-legislative agency in the absence of an arbitrary
decision ....’” (Ibid., quoting Rivera v. Division of Industrial Welfare (1968)
265 Cal.App.2d 576, 594 [71 Cal.Rptr. 739]) “Moreover, past decisions . . .
teach that in light of the remedial nature of the legislative enactments
authorizing the regulation of wages, hours and working conditions for the
protection and benefit of employees, the statutory provisions are to be
liberally construed with an eye to promoting such protection.” (Industrial
Welfare Com. v. Superior Court, supra, at p. 702.)
Concerning the specific terms of wage orders, we have explained that
“[t]he power to fix [the minimum\ wage does not confine the [IWC\ to that
single act. It may adopt rules to make it effective.” (Cal. Drive-in Restaurant
Assn. v. Clark (1943) 22 Cal.2d 287, 303 [140 P.2d 657], italics added.) “The
power to provide safeguards to insure the receipt of the minimum wage and
to prevent evasion and subterfuge, is necessarily an implied power flowing
from the power to fix a minimum wage delegated to the commission. [][] It is
true that an administrative agency may not, under the guise of its rule making
power, abridge or enlarge its authority or exceed the powers given to it by the
statute, the source of its power. [Citations.] However, ‘the authority of an
administrative board or officer ... to adopt reasonable rules and regulations
which are deemed necessary to the due and efficient exercise of the powers
expressly granted cannot be questioned. This authority is implied from the ”power granted.’ (Id., at pp. 302-303, quoting Bank of Italy v. Johnson (1926)
200 Cal. 1, 20 [251 P. 784].)
Consistently with these deferential principles of review, we have
repeatedly enforced definitional provisions the IWC has deemed necessary, in
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62
the exercise of its statutory and constitutional authority (§ 1173; Cal. Const.,
art. XIV, § 1), to make its wage orders effective, to ensure that wages are
actually received, and to prevent evasion and subterfuge. (Cal. Drive-in
Restaurant Assn. v. Clark, supra, 22 Cal.2d 287, 302-303.) Such provisions
have, for example, excluded restaurant servers’ tips”from the legal minimum “wage (id., at p. 290); defined ‘[h]ours worked’ as including “the time
during which an employee is subject to the control of an employer,” even if
travelling on the employer’s bus and not actually working (e.g., Wage Order
No. 14, Cal. Code Regs., tit. 8, § 11140, subd. 2(G); see Morillion v. Royal “Packing Co., supra, 22 Cal.4th 575, 581-595); and required that an ‘[o]ut-
”side salesperson,’ to be exempt from overtime compensation,33 must “regu-
larly work[] more than half the working time away from the employer’s place
of business” in sales activities (IWC wage order No. 7-2001, Cal. Code Regs.,
tit. 8, § 11070, subd. (2)(J); see Ramirez v. Yosemite Water Co., supra, 20
Cal.4th 785, 794-803). Such provisions constitute valid exercises of the
IWC’s authority because, and to the extent, they have “a direct relation to
minimum wages” (Cal. Drive-in Restaurant Assn. v. Clark, supra, at p. 302)
and are reasonably necessary to effectuate the purposes of the statute (see
Ramirez v. Yosemite Water Co., supra, 20 Cal.4th 785, 800; see also Cal.
Drive-in Restaurant Assn. v. Clark, supra, at p. 302). Courts must enforce
such provisions in wage actions because, as we have explained, an employee
who sues to recover unpaid minimum wages under section 1194 actually sues
to enforce the applicable wage order. Only by deferring to wage orders’
definitional provisions do we truly apply section 1194 according to its terms
by enforcing the “legal minimum wage” (id., subd. (a)).
F. The Significance of Reynolds, supra, 36 Cal.4th 1075
Against this background we consider the significance of Reynolds, supra, 36
Cal.4th 1075, and whether that decision governs this case. In Reynolds we
looked to the common law rather than the applicable wage order to define
employment in an action under section 1194 seeking to hold a corporation’s
directors and officers personally liable for its employees’ unpaid overtime
compensation. (Reynolds, at pp. 1086-1088.) We conclude Reynolds does not
govern this case. Wage Order No. 14, and not the common law, properly
defines the employment relationship in this action under section 1194.
The plaintiff in Reynolds, supra, 36 Cal.4th 1075, worked for a corporation
that owned and operated automobile painting shops. He sued under section
1194 to recover unpaid overtime compensation allegedly due him under the
IWC’s applicable wage order. The plaintiff named as the defendants, in
addition to the corporation, eight of its officers and directors in their
33 Since 1961, section 1194 has provided a civil remedy for unpaid overtime compensation
on the same terms as unpaid minimum wages. (Stats. 1961, ch. 408, § 3, p. 1479.)
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individual capacities. The question before us on demurrer was whether the
plaintiff had stated a cause of action against the individual defendants. We
held he had not. (Reynolds, supra, 36 Cal.4th 1075, 1083, 1087-1088.)
We properly began our analysis in Reynolds, supra, 36 Cal.4th 1075, 1086,
by looking “to the IWC’s intent in promulgating the employer definition.”
The applicable wage order defined “employer” in precisely the same language
as all of the commission’s other industry and occupation orders. Thus,
“employer” meant “any person . . . who directly or indirectly, or through an
agent or any other person, employs or exercises control over the wages,
hours, or working conditions of any person.” (IWC wage order No. 9-2001,
Cal. Code Regs., tit. 8, § 11090, subd. 2(F).) Reasoning that “[t]he best
indicator of [the commission’s] intent is the language of the provision itself’
(Reynolds, at p. 1086), we accepted the plaintiffs’ concession that “the plain
language of Wage Order No. 9 defining employer does not expressly impose
liability under section 1194 on individual corporate agents” (Reynolds, at
p. 1086).34This reasoning sufficed to dispose of the Reynolds plaintiffs claim
because, as we have explained, a claim under section 1194 is in reality a
claim under the applicable wage order and thus subject to the order’s
definitional provisions.
Nevertheless, we went on in Reynolds, supra, 36 Cal.4th 1075, 1086-1087,
to state that the common law rather than the applicable wage order defined
the employment relationship for purposes of the plaintiff’s action under
section 1194. We reached this conclusion in two steps: First, we rejected the
suggestion that the Legislature had intended “to incorporate” the IWC’s
definitions into section 1194. {Reynolds, at p. 1086.) Second, we applied the
maxim of interpretation that “[a] statute will be construed in light of the ‘ “ ” ’common law unless the Legislature ‘clearly and unequivocally’ indi-
cates otherwise.” (Ibid., quoting California Assn, of Health Facilities v.
Department of Health Services (1997) 16 Cal.4th 284, 297 [65 Cal.Rptr.2d
872, 940 P.2d 323].) Elaborating on the latter point, we explained that when“ ‘a statute refer[s] to employees without defining the term . . . courts have ”generally applied the common law test of employment.’ (Reynolds, at
p. 1087, quoting Metropolitan WaterDist. v. Superior Court, supra, 32 Cal.4th
491, 500.) In a footnote, we added that the “plaintiff . . . ha[d] not persuaded
us that one may infer from the history and purposes of section 1194 a clear
legislative intent to depart, in the application of that statute, from the
common law understanding of who qualifies as an employer.” (Reynolds, at
p. 1087, fn. 8.)
34 While the DLSE had interpreted the IWC’s wage orders as sometimes imposing personal
liability on corporate agents, we accorded that interpretation no deference because it was
embodied in enforcement policies the department had not adopted in compliance with the
Administrative Procedure Act (Gov. Code, § 11340 et seq.). (Reynolds, supra, 36 Cal.4th 1075,
1088; see Tidewater Marine Western, Inc. v. Bradshaw, supra, 14 Cal.4th 557, 576-577.)
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As we have now shown, an examination of section 1194 in its full
historical and statutory context shows unmistakably that the Legislature
intended to defer to the IWC’s definition of the employment relationship in
actions under the statute. The Legislature has delegated to the IWC broad
authority over wages, hours and working conditions (§ 1173 et seq.), the
voters have repeatedly ratified that delegation (Cal. Const., art. XIV, § 1; see
id., former art. XX, § 17 1/2), and we have confirmed that “[t]he power to fix
[the minimum] wage does not confine the [IWC] to that single act. It may
adopt rules to make it effective” (Cal. Drive-in Restaurant Assn. v. Clark,
supra, 22 Cal.2d 287, 303). The power to adopt rules to make the minimum
wage effective includes the power to define the employment relationship as
necessary “to insure the receipt of the minimum wage and to prevent evasion
and subterfuge . . . .” (Id., at p. 302.) Finally, as we have explained, a worker
who sues under section 1194 for unpaid minimum wages actually sues to
enforce the applicable wage order. This is because the “legal minimum wage”
recoverable under section 1194 is “[t]he minimum wage . . . fixed by the
commission” (§ 1197) in the applicable wage order, even if that order merely
incorporates the amount currently set by statute, and because employers and
employees become subject to the minimum wage only through the applicable
wage order and according to its terms (§ 1197; see, ante, at pp. 55-57 &
fn. 22).
This is not to say the common law plays no role in the IWC’s definition of
the employment relationship. In fact, the IWC’s definition of employment
incorporates the common law definition as one alternative. As defined in the
“wage orders, ‘[e]mployer’ means any person . . . who . . . employs or
exercises control over the wages, hours, or working conditions of any
“person,” and ‘[e]mploy’ means to engage, suffer, or permit to work.” (Wage
Order No. 14, Cal. Code Regs., tit. 8, § 11140, subd. 2(C), (F), italics added.)
The verbs “to suffer” and “to permit,” as we have seen, are terms of art in
employment law. (See, ante, at p. 57 et seq.) In contrast, the verb “to engage”
has no other apparent meaning in the present context than its plain, ordinary
sense of “to employ,” that is, to create a common law employment relation-
ship.35 This conclusion makes sense because the IWC, even while extending
its regulatory protection to workers whose employment status the common
law did not recognize, could not have intended to withhold protection from
the regularly hired employees who undoubtedly comprise the vast majority of
the state’s workforce. To employ, then, under the IWC’s definition, has three
alternative definitions. It means: (a) to exercise control over the wages, hours
or working conditions, or (b) to suffer or permit to work, or (c) to engage,
thereby creating a common law employment relationship.
35 (See, e.g., Black’s Law Diet. (8th ed. 2004) p. 570, col. 1 [“engage, vb. To employ . .
(boldface omitted)].)
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While the common law definition of employment plays an important
role in the wage orders’ definition, and thus also in actions under section
1194, to apply only the common law definition while ignoring the rest of the
IWC’s broad regulatory definition would substantially impair the commis-
sion’s authority and the effectiveness of its wage orders. The commission, as
noted, has the power to adopt rules to make the minimum wage “effective”
by “preventing] evasion and subterfuge . . . .” (Cal. Drive-in Restaurant
Assn. v. Clark, supra, 22 Cal.2d 287, 303, 302.) We have repeatedly upheld
the commission’s exercise of this authority. (See, ante, at p. 61 et seq.)
Furthermore, language consistently used by the IWC to define the employ-
ment relationship, beginning with its first wage order in 1916 (“suffer, or
permit”),36 was commonly understood to reach irregular working arrange-
ments that fell outside the common law, having been drawn from statutes
governing child labor and occasionally that of women. (See, ante, at p. 57
et seq.) For the IWC, created as it was to regulate the employment of women
and minors, to use this language to define the employment relationship was
thus uniquely appropriate. To adopt such a definitional provision also lay
squarely within the IWC’s power, as the provision has “a direct relation to
minimum wages” (Cal. Drive-in Restaurant Assn. v. Clark, supra, at p. 302)
and is reasonably necessary to effectuate the purposes of the statute (see
Ramirez v. Yosemite Water Co., supra, 20 Cal.4th 785, 800; see also Cal.
Drive-in Restaurant Assn. v. Clark, supra, at p. 302). For a court to refuse to
enforce such a provision in a presumptively valid wage order (§ 1185) simply
because it differs from the common law would thus endanger the commis-
sion’s ability to achieve its statutory purposes.
One cannot overstate the impact of such a holding on the IWC’s powers.
Were we to define employment exclusively according to the common law in
civil actions for unpaid wages we would render the commission’s definitions
effectively meaningless. Concerned about such a result, we suggested in
Reynolds, supra, 36 Cal.4th 1075, 1088-1089, that the IWC’s definitions
might still play a role in administrative proceedings to recover unpaid
minimum wages (i.e., “Berman” hearings). (See § 98 et seq.; Cal. Code Regs.,
tit. 8, § 13501 et seq.) Since Reynolds, however, the Court of Appeal has
correctly observed that “[t]he distinction [between judicial and administrative
proceedings] may be an empty one, since Berman hearings are reviewed de
novo in superior court at [the] request of either party.” (Jones v. Gregory,
supra, 137 Cal.App.4th 798, 806.) The statutory trial de novo (see § 98.2) “is
neither a conventional appeal nor review of the Labor Commissioner’s
decision, but is rather a de novo trial of the wage dispute” (Murphy v. Kenneth
Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1116 [56 Cal.Rptr.3d 880, “155 P.3d 284]), and the court ‘hears the matter, not as an appellate court,
36 IWC former wage order No. 1, section 2; see, e.g., Wage Order No. 14 (Cal. Code Regs.,
tit. 8, § 11140, subd. 2(C)).
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66
but as a court of original jurisdiction, with full power to hear and determine it ”as if it had never been before the labor commissioner’’ (id., at
pp. 1116-1117, quoting Collier & Wallis, Ltd. v. Astor (1937) 9 Cal.2d 202,
205 [70 P.2d 171], italics added). In such a trial, a rule requiring courts in
wage cases to define employment according to the common law (i.e.,
Reynolds) would presumably apply, leaving the IWC’s definitions ultimately
unenforceable even in proceedings that begin as Berman hearings.
In sum, we hold that the applicable wage order’s definitions of the
employment relationship do apply in actions under section 1194. The opinion
in Reynolds, supra, 36 Cal.4th 1075, properly holds that the IWC’s definition
of “employer” does not impose liability on individual corporate agents acting
within the scope of their agency. (Reynolds, at p. 1086.) The opinion should
not be read more broadly than that.
G. The IWC’s Definition of the Employment Relationship Does Not
Incorporate Federal Law.
With this background, we may easily dispose of defendants’ argument that
the IWC’s wage orders should be construed as if their provisions defining the
employment relationship incorporated federal law. They do not.
In no sense is the IWC’s definition of the term “employ” based on
federal law. As we have explained, the IWC has used the phrase “suffer or
permit” in wage orders to define the employment relation since 1916,37
borrowing the phrase from the common, well-understood wording of contem-
porary child labor laws. (See, ante, at p. 57 et seq.) Not until 1938 did
Congress enact the FLSA, defining the term “employ” with similar language
(29 U.S.C. § 203(g), added by 52 Stat. 1060, § 3),38 and not until 1961 did
the United States Supreme Court engraft onto the language of the FLSA the
nonstatutory “economic reality” test for employment. (Goldberg v. Whitaker
House Coop., supra, 366 U.S. 28, 33.) Moreover, the federal test has
uniquely federal antecedents. While the high court in 1961 was aware the
phrase “suffer or permit” (29 U.S.C. § 203(g)) had been widely used in state
child labor laws (see Rutherford Food Corp. v. McComb, supra, 331 U.S. 722,
728 & fn. 7), the court derived the “economic reality” test not from that body
of law but rather from the language of a judicial decision defining employ-
ment for purposes of the federal tax and Social Security laws (United States v.
Silk (1947) 331 U.S. 704, 713 [91 L.Ed. 1757, 67 S.Ct. 1463]), which in turn
relied on a decision interpreting the National Labor Relations Act (29 U.S.C.
§ 151 et seq.; Board v. Hearst Publications (1944) 322 U.S. 111, 127-128
37 IWC former wage order No. 1, sections 1 through 5; see, e.g., Wage Order No. 14 (Cal.
Code Regs., tit. 8, § 11140, subd. 2(C)).
38 “ ‘Employ’ includes to suffer or permit to work.” (29 U.S.C. § 203(g).)
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67
[88 L.Ed. 1170, 64 S.Ct. 851]). (See Goldberg v. Whitaker House Coop.,
supra, at p. 33.) We see no reason to substitute this definition of employment,
which has no basis in California law, for definitions in wage orders regularly
adopted by the IWC.
Furthermore, the language used by the IWC in wage orders since 1947 to
define “employer”—“employs or exercises control over the wages, hours, or
working conditions of any person”39—does not appear anywhere in the FLSA
(29 U.S.C. § 201 et seq.) or its implementing regulations. One court has
suggested the wage orders’ definition of “employer” is “almost identical” to
the federal definition (Bureerong v. Uvawas (C.D.Cal. 1996) 922 F.Supp.
1450, 1470), but a comparison of the different state and federal definitions
does not confirm the observation.40 Instead, as noted (see, ante, at p. 59
et seq.), the wage orders’ language mirrors the scope of the IWC’s regulatory
authority over wages, hours and working conditions (§ 1173) and by its terms
imposes liability on multiple entities who divide among themselves control
over those different aspects of the employment relationship.
The IWC has on occasion deliberately incorporated federal law into its
wage orders. However, “where the IWC intended the FLSA to apply to wage
orders, it has specifically so stated.” (Morillion v. Royal Packing Co., supra,
22 Cal.4th 575, 592.) For example, IWC wage orders Nos. 1-2001 through
13-2001, 15-2001 and 16-2001 all expressly incorporate specific federal
regulations issued under the FLSA to define exempt executive, administrative
and/or professional employees.41 In contrast, the wage order applicable to this
case (Wage Order No. 14) and one other (IWC wage order No. 17-2001) do
not. The only reference to federal law in Wage Order No. 14 appears in a
42provision exempting individuals participating in national service programs
All wage orders contain a similar provision. No wage order, however,
incorporates federal law in defining the terms “employ” or “employer.”
39 IWC former wage order No. 1R, section 2(f); see, e.g., Wage Order No. 14 (Cal. Code
Regs., tit. 8, § 11140, subd. 2(F)).
“ 40 Under the FLSA, ‘[ejmployer’ includes any person acting directly or indirectly in the
interest of an employer in relation to an employee and includes a public agency, but does not
include any labor organization (other than when acting as an employer) or anyone acting in the
capacity of officer or agent of such labor organization.” (29 U.S.C. § 203(d).)
41 For example: “The activities constituting exempt work and non-exempt work [for
executive employees] shall be construed in the same manner as such items are construed in the
following regulations under the Fair Labor Standards Act effective as of the date of this order:
29 C.F.R. Sections 541.102, 541.104-111, and 541.115-116.” (IWC wage order No. 1-2001,
Cal. Code Regs., tit. 8, § 11010, subd. 1(A)(1)(e) [manufacturing industry].)
42 “The provisions of this order shall not apply to any individual participating in a national
service program, such as AmeriCorps, carried out using assistance provided under Section
12571 of Title 42 of the United States Code. (See Stats. 2000, ch. 365, amending Labor Code
Section 1171.)” (Wage Order No. 14, Cal. Code Regs., tit. 8, § 11140, subd. 1(E).)
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We have previously cautioned against “confounding federal and
state labor law” (Ramirez v. Yosemite Water Co., supra, 20 Cal.4th 785, 798)
and explained “that where the language or intent of state and federal labor
laws substantially differ, reliance on federal regulations or interpretations to
construe state regulations is misplaced” (ibid.; see also Morillion v. Royal
Packing Co., supra, 22 Cal.4th 575, 588). Courts must give the IWC’s wage
orders independent effect in order to protect the commission’s delegated
authority to enforce the state’s wage laws and, as appropriate, to provide
greater protection to workers than federal law affords.43 (See Morillion v.
Royal Packing Co., supra, 22 Cal.4th 575, 592; Ramirez v. Yosemite Water
Co., supra, 20 Cal.4th 785, 798.) We therefore apply the applicable wage
order according to its terms, having in mind its distinct language, history and
function in the context of state wage law.
H. Summary Judgment.
This case comes to us on review of a summary judgment. Defendants are
entitled to summary judgment only if “all the papers submitted show that
there is no triable issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.” (Code Civ. Proc., § 437c,
subd. (c).) To determine whether triable issues of fact do exist, we indepen-
dently review the record that was before the trial court when it ruled on
defendants’ motion. (Johnson v. American Standard, Inc. (2008) 43 Cal.4th
56, 64 [74 Cal.Rptr.3d 108, 179 P.3d 905]; State Dept. of Health Services v.
Superior Court (2003) 31 Cal.4th 1026, 1034-1035 [6 Cal.Rptr.3d 441,
79 P.3d 556].) In so doing, we view the evidence in the light most favorable
to plaintiffs as the losing parties, resolving evidentiary doubts and ambiguities
in their favor. (Johnson v. American Standard, Inc., supra, at p. 64.)
1. Plaintiffs’ claims under the wage laws.
We first consider plaintiffs’ claim that defendants are liable as employers
for plaintiffs’ unpaid minimum wages under section 1194 and Wage Order
No. 14 because defendants allegedly “suffer[ed], or permitted plaintiffs] to
work” and/or “exercise[d] control over [their] wages, hours, or working
conditions . . . .” (Wage Order No. 14, Cal. Code Regs., tit. 8, § 11140,
subd. 2(C), (F).)
43 No party to this case argues that federal law defines the employment relationship more
favorably to plaintiffs than Wage Order No. 14 defines it. Defendants, as noted, ask us to apply
federal law because they believe the federal definition to be potentially less favorable to
plaintiffs, and plaintiffs expressly disavow any argument that defendants were their employers
under federal law.
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” a. “[SJuffer, or permit to work.
The IWC, as we have seen, borrowed its definition of “employ”—“to
engage, suffer, or permit to work”44—in 1916 from the language of early
20th-century statutes prohibiting child labor. (See, ante, at p. 57 et seq.)
Statutes so phrased were generally understood to impose liability on the
proprietor of a business who knew child labor was occurring in the enterprise
but failed to prevent it, despite the absence of a common law employment
relationship. As courts had explained, the language meant “that [the propri-
etor] shall not employ by contract, nor shall he permit by acquiescence, nor
suffer by a failure to hinder.” (Curtis & Gartside Co. v. Pigg, supra, 134 P.
1125, 1129.) The language thus “cast[] a duty upon the owner or proprietor to
prevent the unlawful condition, and the liability rest[ed] upon principles
wholly distinct from those relating to master and servant. The basis of
liability is the owner’s failure to perform the duty of seeing to it that the pro-
hibited condition does not exist.” (People v. Sheffield Farms-Slawson-Decker
Co. (N.Y.App.Div. 1917) 180 A.D. 615 [167 N.Y.S. 958, 961, 36 N.Y Cr.
181], italics added, affd. (1918) 225 N.Y. 25 [121 N.E. 474, 477] [“the
omission to discover and prevent was a sufferance of the work”].)
We see no reason to refrain from giving the IWC’s definition of
“employ” its historical meaning. That meaning was well established when the
IWC first used the phrase “suffer, or permit” to define employment, and no
reason exists to believe the IWC intended another. Furthermore, the historical
meaning continues to be highly relevant today: A proprietor who knows that
persons are working in his or her business without having been formally
hired, or while being paid less than the minimum wage, clearly suffers or
permits that work by failing to prevent it, while having the power to do so.
Plaintiffs argue defendants Apio and Combs suffered or permitted plaintiffs
to work because defendants knew plaintiffs were working, and because
plaintiffs’ work benefited defendants. Concerning defendants’ knowledge,
plaintiffs note defendants were aware Munoz would need to hire labor to
supply strawberries to defendants, and that defendants’ field representatives
had observed Munoz’s employees at work. Plaintiffs also point out that
Munoz subleased the Océano and Zenon fields from Apio, which retained a
right to enter the leased property.
What is in dispute is the significance, under the wage order, of the
assertion that defendants benefited from plaintiffs’ labor. Certainly defendants
benefited in the sense that any purchaser of commodities benefits, however
44 Wage Order No. 14 (Cal. Code Regs., tit. 8, § 11140, subd. 2(C)).
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indirectly, from the labor of the supplier’s employees. However, the concept
of a benefit is neither a necessary nor a sufficient condition for liability under
the “suffer or permit” standard. Instead, as we have explained, the basis of
liability is the defendant’s knowledge of and failure to prevent the work from
occurring. (See, e.g., People v. Sheffield Farms-Slawson-Decker Co., supra,
167 N.Y.S. 958, 961 [“The basis of liability is the owner’s failure to perform
the duty of seeing to it that the prohibited condition does not exist.”], affd.
(1918) 225 N.Y. 25 [121 N.E. 474, 477] [“the omission to discover and
prevent was a sufferance of the work”]; Curtis & Gartside Co. v. Pigg, supra,
134 P. 1125, 1129 [the employer “shall not. . . permit by acquiescence, nor
suffer by a failure to hinder”].) Here, neither Apio nor Combs suffered or
permitted plaintiffs to work because neither had the power to prevent
plaintiffs from working. Munoz and his foremen had the exclusive power to
hire and fire his workers, to set their wages and hours, and to tell them when
and where to report to work. Perhaps Apio or Combs, by ceasing to buy
strawberries, might as a practical matter have forced Munoz to lay off
workers or to divert their labor to other projects, such as harvesting berries
for the other defendant, for Frozsun,45 or for Ramirez Brothers. But any
substantial purchaser of commodities might force similar choices on a
supplier by withdrawing its business. Such a business relationship, standing
alone, does not transform the purchaser into the employer of the supplier’s
workforce.
Plaintiffs’ interpretation of the wage order is also unreasonably broad. For
the same reason that defendants benefited from plaintiffs’ work, so too did the
grocery stores that purchased strawberries from defendants, and the consum-
ers who in turn purchased strawberries from the grocery stores. Had the IWC
intended to impose a rule capable of creating such potentially endless chains
of liability, one would expect the commission to have announced it in the
plainest terms after vigorous debate. Yet the concept of downstream benefit as
a sufficient basis for liability appears nowhere in the wage order’s definition
of “employ” or in the decisions interpreting the child labor statutes from
which the IWC borrowed the definition. We reject plaintiffs’ broad interpreta-
tion of the IWC’s definition of “employ” for this reason.
We also note that plaintiffs’ broad interpretation of the IWC’s definition of
“employ” would be difficult to justify as an appropriate exercise of the
commission’s power. The IWC’s power to define employment is, as we have
explained, not expressly granted in the act creating the commission but
merely implied, and thus extends only so far as necessary to permit the
45 Munoz’s contracts with Apio and Combs permitted him to sell freezer berries from the
Océano, Zenon and El Campo fields to a third party such as Frozsun. Munoz’s contract with
Apio expressly covered only fresh berries, and his contract with Combs was so interpreted by
the parties, as plaintiffs concede.
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commission effectively to exercise its expressly granted powers to regulate
wages, hours and working conditions. (Cal. Drive-in Restaurant Assn. v.
Clark, supra, 22 Cal.2d 287, 302.) “[A]n administrative agency may not,
under the guise of its rule making power, abridge or enlarge its authority or
exceed the powers given to it by the statute, the source of its power.” (Id., at
pp. 302-303.) Accordingly, regulations issued by an administrative agency
such as the IWC under a delegation of legislative power must be reasonably
necessary to effectuate the purposes of the statute. (Ramirez v. YosemiteWater
Co., supra, 20 Cal.4th 785, 800; Yamaha Corp. of America v. State Bd. of
Equalization (1998) 19 Cal.4th 1, 11 [78 Cal.Rptr.2d 1, 960 P.2d 1031].) That
the IWC has not, in nearly a century of administering the minimum wage,
seen fit to propose plaintiffs’ downstream-benefit theory of liability strongly
suggests the theory is not reasonably necessary to permit the commission to
discharge its statutory responsibilities. We also find significant that the single
rule of California law that even approaches the breadth of plaintiffs’ theory in
imposing liability for wages appears not in a wage order adopted by the IWC,
but in a statute enacted by the Legislature. (§ 2673.1, subd. (a).)46 These
considerations suggest that rules of liability as broad as those plaintiffs
advocate are appropriately left to the Legislature.
b. “[E]xercises control over . . . wages, hours, or working
conditions . . . .”
i. Defendant Apio.
Plaintiffs next argue that defendant Apio, through its contractual relation-
ship with Munoz, dominated his business financially and thus exercised
indirect control over his employees’ wages and hours.47 In making this
argument, plaintiffs seek to portray Munoz as a straw man, engaged by Apio
to shield itself from agricultural workers’ wage claims. Certainly Wage Order
No. 14’s definition of “employer,” which encompasses “any person . . . who
directly or indirectly, or through an agent or any other person, employs or
exercises control over the wages, hours, or working conditions of any
person,”48 is broad enough to reach through straw men and other sham
arrangements to impose liability for wages on the actual employer. The
undisputed facts, however, show that Munoz alone controlled plaintiffs’
wages, hours and working conditions.
46 “To ensure that employees are paid for all hours worked, a person engaged in garment
manufacturing, as defined in Section 2671, who contracts with another person for the
performance of garment manufacturing operations shall guarantee payment of the applicable
minimum wage and overtime compensation, as required by law, that are due from that other
person to its employees that perform those operations.” (§ 2673.1, subd. (a).)
47 Plaintiffs do not make the same argument against Combs, whose relationship with Munoz
was very similar to Apio’s.
48 Wage Order No. 14 (Cal. Code Regs., tit. 8, § 11140, subd. 2(F), italics added).
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Plaintiffs contend Apio indirectly controlled Munoz’s ability to pay his
employees because Apio unilaterally decided the amount of estimated net
proceeds to advance to Munoz as Pick-Pack payments, and because Apio
demanded that Munoz continue to harvest produce that would not produce a
net return. Apio’s right to set off its expenses, however, was simply an aspect
of its contractual relationship with Munoz. Munoz had made a profit from
the same relationship in prior years. Plaintiffs note that Apio reduced its
Pick-Pack payments below the $2 level initially set by contract as the end of
the season neared and the market deteriorated, but the contract unequivocally
permitted Apio to set off its expenses before remitting net proceeds. More-
over, nothing in the record shows that Apio ever compelled Munoz to harvest
on any occasion. Although Munoz had strong incentives to harvest fresh
market berries for Apio in order to repay Apio’s preseason advance and also
to make a profit for himself, he testified without contradiction that he, alone,
decided which fields to harvest on any given day and whether to harvest
strawberries for fresh market sale or for the freezer. So far as the record
discloses, negotiations between Apio and Munoz over the amount of fresh
market berries to be delivered took place in the field, after Munoz had already
informed Apio that he planned to harvest fresh market berries from the
Océano or Zenon field on a given day. While Munoz stated on May 27, 2000,
during the work stoppage in El Campo, that he could not pay his workers
because Apio was withholding payment, the undisputed facts show that Apio
had paid Munoz ahead of schedule and more than it was eventually deter-
mined to owe him.
More importantly, plaintiffs’ factual assertions do not establish that Apio’s
business relationship with Munoz allowed the company to exercise control
over Munoz’s employees’ wages and hours. In making the argument, plain-
tiffs ignore the following undisputed facts: First, Munoz operated a single,
integrated business operation, growing and harvesting strawberries for several
unrelated merchants and combining revenue from all sources with a personal
investment, in the hope of earning a profit at the end of the season. Munoz
paid his employees out of those combined revenues and assets. Second,
Munoz had losses unrelated to his business with Apio from his unsuccessful
business with Ramirez Brothers, who paid Munoz nothing during the 2000
season. Third, Munoz had substantial revenue from other sources on May 27,
2000. On that same day, Frozsun paid Munoz $149,340, bringing to $181,003
the amount it had paid him since April 29. This source of revenue continued
until August 12, by which date Frozsun had paid Munoz a total of $476,955.
Finally, Munoz alone, with the assistance of his foremen, hired and fired
plaintiffs, trained and supervised them, determined their rate and manner of
pay (hourly or piece rate), and set their hours, telling them when and where
to report to work and when to take breaks. Plaintiffs’ claim that Apio
dominated Munoz’s financial affairs cannot be reconciled with these facts.
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Taking a different approach not based on the applicable wage order,
plaintiffs attempt to compare this case with S. G. Borello & Sons, Inc. v.
Department of Industrial Relations (1989) 48 Cal.3d 341 [256 Cal.Rptr. 543,
769 P.2d 399] (S.G. Borello), in which we held that workers hired by a large
agricultural landowner under “sharefarmer” agreements were employees
rather than independent contractors for purposes of the workers’ compensa-
tion law. (§ 3200 et seq.) The sharefarmers, we found, “exhibit no character-
istics which might place them outside the Act’s intended coverage of
employees. They engage in no distinct trade or calling. They do not hold
themselves out in business. They perform typical farm labor for hire wher-
ever jobs are available. They invest nothing but personal service and hand
tools. They incur no opportunity for ‘profit’ or ‘loss’; like employees hired on
a piecework basis, they are simply paid by the size and grade of cucumbers
they pick. They rely solely on work in the fields for their subsistence and
livelihood.” (48 Cal.3d at pp. 357-358, fns. omitted.) Applying the common
law test of employment in light of the remedial purposes of the workers
compensation law, we reasonably concluded the sharefarmers were, “[with-
out doubt, ... a class of workers to whom the protection of the [workers’
compensation law] is intended to extend.” (Id., at p. 358, fn. omitted.)
Assuming the decision in S.G. Borello, supra, 48 Cal.3d 341, has any
relevance to wage claims, a point we do not decide, the case does not
advance plaintiffs’ argument. Plaintiffs are correct in that, if Munoz had been
Apio’s employee rather than an independent contractor, Munoz’s employees
arguably would also have been Apio’s employees; the determination that a
purported independent contractor is in fact an employee raises the strong
possibility, generally speaking, that the contractor and its employer jointly
employ the contractor’s employees. (Rinaldi v. Workers’ Comp. Appeals Bd.
(1991) 227 Cal.App.3d 756, 759 [278 Cal.Rptr. 105], and cases cited.) But
Munoz was not Apio’s employee. In contrast to the sharefarmer-employees in
S.G. Borello, Munoz held himself out in business, invested substantial capital
and equipment, employed over 180 workers, sold produce through four
unrelated merchants, enjoyed an opportunity for profit or loss dependent on
his business acumen and market conditions, and had indeed made a profit in
prior years operating in the same manner.
Next, plaintiffs argue Apio controlled their wages on June 8 or 9, 2000,
when Apio’s vice-president Tim Murphy cooperated with the DLSE and
Munoz to ensure that Munoz used Apio’s final advance of net proceeds to
pay his workers. (See, ante, at p. 47.) The argument fails. At that time, as
noted, Murphy gave Munoz a check for $77,662, Munoz endorsed the check
to the bank, and the bank immediately issued cashier’s checks payable to 71
employees whose names Munoz had provided. In so doing, Apio participated
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with the government in what amounts to a garnishment of money owed to
Munoz for the benefit of his employees. To hold on this basis that Apio
controlled plaintiffs’ wages would punish Apio for cooperating with the
DLSE’s attempt to enforce the wage laws and likely deter future cooperation
by others.
Viewing the undisputed evidence in the light most favorable to plaintiffs,
we find no basis for concluding Apio exercised control over plaintiffs’ wages
and hours.
ii. Defendant Combs.
Plaintiffs contend defendant Combs exercised control over their wages and
hours based on the events of May 27, 2000, at the El Campo field. On that
date, as noted (see, ante, at p. 46 et seq.), plaintiffs had been picking freezer
berries and stopped work to talk with Jose Serrano about unpaid wages. Juan
Ruiz, Combs’s agent, convinced some of Munoz’s employees to return to
work. According to plaintiff Asuncion Cruz, “Juan [Ruiz] . . . told us to keep
working and help Munoz. Juan told us not to worry and said he guaranteed
we would be paid as his boss had checks he was delivering to Isidro Munoz.”
Cruz “heard workers tell Juan they were concerned that the amount of the
check he brought with him would not be enough to pay everyone. Juan told
us not to worry as he would deliver even larger amounts of money from his
boss to Isidro Munoz the following week, and even more money the week
after that, which would be enough to pay us all.” Cruz’s declaration is
consistent with those of others who heard Ruiz speak; the record contains no
statements by Ruiz about what he said.
Based on this evidence, plaintiffs contend that “Combs offered [plaintiffs]
employment through its agent Ruiz.” Assuming for the sake of argument Ruiz
was acting as Combs’s agent in making the alleged statements,49 the evidence
in our view does not fairly support the inference that Ruiz offered plaintiffs
employment. Certainly a promise to pay a person for work would be an offer
of employment, as well as an exercise of control over wages and hours
sufficient to bring the promisor within the wage order’s definition of “em-
ployer.” (Wage Order No. 14, Cal. Code Regs., tit. 8, § 11140, subd. 2(F).)
But Ruiz did not offer plaintiffs employment with Combs. Instead, he asked
49 The question of agency is disputed. Combs’s principals declare that Ruiz was not hired by
the company as an employee until June 1, 2000, and that they have never authorized Ruiz to
make promises to growers’ employees on Combs’s behalf. Several witnesses, however,
including Munoz, his foreman Leon, and some of his employees, state that Ruiz frequently
visited the El Campo field on Combs’s behalf during the fresh berry harvest, which reached its
peak in April and May and ended before June, to check the quality of strawberries and explain
how they should be packed.
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plaintiffs to continue working to “help Munoz” and pointed out that Munoz
was not yet utterly without funds to pay them, as he was still receiving
payments from Combs. Plaintiffs’ declarations show they understood the
distinction, as they questioned Ruiz not about the terms of any hypothetical
work for Combs but about whether “the amount of the check [Ruiz had]
brought with him would ... be enough to pay everyone.” That plaintiffs were
not working for Combs on May 27 was also reasonably apparent in that they
were harvesting freezer berries in bulk rather than picking and packing fresh
berries for market sale. Again, plaintiffs understood the distinction and
“recognized Ruiz as ‘Juan,’ the person [they had seen] checking the straw-
berries ... for the company to whom Munoz delivered the market strawber-
ries we picked for sale.” (Italics added.)
For these reasons, we find plaintiffs’ argument lacks merit,
iii. Defendant Ruiz.
Relying on the same evidence, plaintiffs also contend that Ruiz personally
exercised control over their wages and hours and is thus personally liable as
an “employer” under section 1194 and Wage Order No. 14. The claim fails
under our holding in Reynolds, supra, 36 Cal.4th 1075, that the IWC’s
definition of “employer” does not impose liability on individual corporate
agents acting within the scope of their agency. (Reynolds, at p. 1086.)
Plaintiffs specifically allege in the operative complaint that Ruiz, in making
the alleged statements on May 27, 2000, was “acting in his capacity as agent
for [Combs] . . . .”
iv. Defendants Apio and Combs.
Plaintiffs contend that defendants Apio and Combs, through their field
representatives’ activities in the areas of quality control and contract compli-
ance, became joint employers of Munoz’s workers by “exercis[ing] control
over [their] . . . working conditions” within the meaning of Wage Order
No. 14. (Cal. Code Regs., tit. 8, § 11140, subd. 2(F).) Plaintiffs devote little
attention to the argument, but it deserves discussion.
As we have noted, picking and packing strawberries for fresh market sale
necessitated close communication during the harvest between defendants and
Munoz’s personnel. This is because market berries are packed in the field, as
they are picked, into the containers in which they will be sold to consumers,
often that same day or the next. The contract between Apio and Munoz
expressly provided for such activities, and Munoz operated in the same
manner with Combs, apparently as a matter of standard practice. (See, ante,
at p. 45.) Viewing the facts most favorably to plaintiffs, Apio sent its
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representatives Juan Toche and Manuel Cardenas to the field on days when
Munoz harvested fresh berries from the Océano and Zenon fields, and Combs
sent defendant Juan Ruiz when Munoz harvested berries from El Campo.
Apio’s and Combs’s representatives followed the same procedure: In the
morning, the representatives would explain to Munoz and his foremen how
the merchant wanted strawberries packed, and Munoz and his foremen would
demonstrate the packing style to the workers. For about an hour, the
representatives, together with Munoz and his foremen, would check the
packed containers as workers brought them from the field to the truck where
they would be loaded for shipping. While the representatives would generally
bring problems to the attention of Munoz and his foremen, they would also
sometimes speak directly to the workers, pointing out mistakes in packing
such as green or rotten berries. In the afternoon, the representatives would
return briefly to check the quality and quantity of berries in the loaded truck.
The question is whether this evidence raises a triable issue of fact as
to whether Apio and Combs exercised control over the working conditions of
Munoz’s employees. As we have explained, one of the reasons the IWC
defined “employer” in terms of exercising control was to reach situations in
which multiple entities control different aspects of the employment relation-
ship. This occurs, for example, when one entity (such as a temporary
employment agency) hires and pays a worker, and another entity supervises
the work. (See, ante, at pp. 59-60.) Supervision of the work, in the specific
sense of exercising control over how services are performed, is properly
viewed as one of the “working conditions” mentioned in the wage order. To
read the wage order in this way makes it consistent with other areas of the
law, in which control over how services are performed is an important,
perhaps even the principal, test for the existence of an employment relation-
ship. (See, e.g., Metropolitan Water Dist. v. Superior Court, supra, 32 Cal.4th
491, 512 [common law]; Tieberg v. Unemployment Ins. App. Bd. (1970) 2
Cal.3d 943, 946 [88 Cal.Rptr. 175, 471 P.2d 975] [unemployment insurance];
McFarland v. Voorheis-Trindle Co. (1959) 52 Cal.2d 698, 704 [343 P.2d 923]
[workers’ compensation].)
While the evidence indicates that Apio’s and Combs’s field representatives
spoke with Munoz’s employees about the manner in which strawberries were
to be packed, it does not indicate the field representatives ever supervised or
exercised control over his employees. No evidence suggests Munoz’s em-
ployees viewed the field representatives as their supervisors or believed they
owed their obedience to anyone but Munoz and his foremen. Plaintiffs,
relying on cases interpreting other bodies of law, argue the right to exercise
control over the manner in which work is performed is sufficient to prove the
existence of an employment relationship, whether or not the right is exer-
cised. (E.g., S.G. Borello, supra, 48 Cal.3d 341, 350; Tieberg v. Unemployment
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Ins. App. Bd., supra, 2 Cal.3d 943, 946.) But even assuming the same rule
applies here, Munoz’s contracts with Apio and Combs gave the merchants no
right to direct his employees’ work. Neither does any evidence in the record
suggest that anyone—Munoz, Apio, Combs, the merchants’ field representa-
tives, or plaintiffs—believed the merchants or their representatives had such a
right. Confusion on this point was not likely to arise, since Munoz and his
foremen were present when the field representatives interacted with Munoz’s
employees. For all of these reasons, we conclude the claim lacks merit.
2. Plaintiffs’ claims as purported third party beneficiaries.
Lastly, plaintiffs contend they are entitled to recover unpaid wages as third
party beneficiaries of the contract between Munoz and Apio. The claim has
no factual basis. Nowhere in its contract with Munoz did Apio undertake to
pay his employees under any set of conditions. There simply is no relevant
obligation to enforce.
In their contract, Apio and Munoz agreed that Munoz would be “solely
responsible for the selection, hiring, firing, supervision, assignment, direction,
setting of wages, hours, and working conditions” of his employees, among
other things. In addition, Munoz warranted that he would “comply with all
provisions of federal, state and local laws applicable to [his] farming opera-
tions, including, without limitation, labor . . . .” (Italics added.) Finally,
Munoz and Apio each agreed to indemnify the other from claims “concern-
ing ... the employment of individuals ... to perform such party’s functions
under this Agreement, including . . . matters pertaining to . . . wages . . . .”
(Italics added.) The plain import of these contractual provisions is that Munoz
agreed to pay his employees the wages required by law, assuming sole
responsibility in the matter, and to indemnify Apio if his employees sued
Apio for unpaid wages.
Apio contends plaintiffs cannot establish standing to enforce the contract
because no evidence shows the parties to the contract, Apio and Munoz,
intended to benefit plaintiffs. (See Hess v. Ford Motor Co. (2002) 27 Cal.4th
516, 524 [117 Cal.Rptr.2d 220, 41 P.3d 46]; Civ. Code, § 1559.) We need not
decide the point. Even if plaintiffs could establish standing, they would gain
thereby only the right to stand in Apio’s shoes and enforce the contract’s
terms by suing Munoz to compel him to pay their wages. This, Munoz’s
bankruptcy precludes. Nothing in the rules of law concerning third party
beneficiaries permits us to rewrite the contract to impose on Apio an
obligation to pay wages that it never undertook.
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III. Disposition
The judgment of the Court of Appeal is affirmed.
George, C. J., Kennard, J., Baxter, J., Chin, J., Moreno, J., and Corrigan, J.,
concurred.
Appellants’ petition for a rehearing was denied June 30, 2010, and on June
9, 2010, the opinion was modified to read as printed above.