One In The Same: Agricultural Grower Compels Staffing Agency Employees To Arbitration Without Having Its Own Arbitration Agreements

This week, the Second District Court of Appeal upheld an earlier decision that ruled a temporary staffing agency’s arbitration agreement with employees is enforceable in a dispute between the employees and the assigned agricultural employer. In Vasquez v. San Miguel Produce, Inc., two staffing agency employees brought forth a complaint alleging that they weren’t properly paid wages, given meal and rest breaks, provided wage statements or timely paid after termination. Rather than sue both the staffing agency and its client-employer, the employees elected to only name San Miguel Produce, the client-employer, as a Defendant. San Miguel Produce filed a cross-complaint seeking indemnification against the staffing agency, Employer’s Depot, Inc., arguing that they were an indispensable party to the suit. Further, San Miguel Produce sought to compel the employees to arbitration as the employees signed arbitration agreements with Employer’s Depot. The trial court denied San Miguel’s petition to compel arbitration as the agreements were signed.

The Second District Court of Appeal reversed the trial court’s decision and ruled the workers could not avoid arbitration by only suing San Miguel Produce, which was not a party to the agreement, for claims that were “based on the same facts and are inherently inseparable” from arbitrable claims against Employer’s Depot. The panel noted that the fact the employees did not name the staffing agency as a defendant in the suit was “inconsequential” and that the companies could compel arbitration of the claims because of their co-employer relationship to the workers and their identity-in-interest. Thus, the appellate court ordered the lower court to stay the lawsuit and order the parties to arbitrate the claims.

Counsel to Management:

While this ruling quoted an earlier California appellate decision, it is a good refresher to employers who hire staffing agencies, farm labor contractors (“FLC”) or vineyard management companies (“VMC”) to supply labor. If your company does not require outside labor to sign your company’s own arbitration agreements, it is imperative that your company ensure that the hired staffing agency does as Labor Code section 2810.3 states that a client employer is strictly and jointly responsible for a labor contractor’s (1) failure to pay wages, and, (2) failure to secure valid workers’ compensation coverage for workers supplied by the labor contractor. Given that client-employers are frequently targeted by plaintiffs as the “deep pocketed” defendant, they should be especially vigilant about ensuring that FLCs and VMCs they utilize are following all state and federal wage and hour laws and to avail itself to all options to protect itself if a dispute were to arrive.

Reminder to Post Annual Work-Related Injury and Illness Summaries Starting Feb. 1!

Employers in California are required to post their annual 2018 summaries of work-related illnesses and injuries. The summaries must be posted annually from February 1st through April 30th. You can read the Cal/OSHA News Release here.

NLRB Returns to Common Law Independent Contractor Test, Does Not Allow Shuttle Van Drivers To Unionize

Earlier this week, the National Labor Relations Board (“NLRB”) returned to its long-standing independent-contractor standard, reaffirming the NLRB’s adherence to the traditional common-law test. In doing so, the NLRB clarified the role “entrepreneurial opportunity” plays in its determination of independent-contractor status.

The case, SuperShuttle DFW, Inc., involved shuttle-van-driver franchisees of SuperShuttle who transport passengers to and from Dallas-Fort Worth Airport. The drivers each signed a Uniform Franchise Agreement with SuperShuttle, under which each driver paid a flat one-time initial fee, and then a flat weekly fee to maintain the franchise. A union seeking to represent the drivers filed a petition for a union election under the NLRA.

Here, the NLRB overruled prior cases, including its 2014 FedEx decision, which limited the importance of the workers' "entrepreneurial opportunity," and emphasized economic dependency and employer control. However, in this case, the NLRB applied the non-exhaustive, ten-factor common law agency test and found the drivers/franchisees to be independent contractors and not employees while emphasizing that in deciding independent contractor cases going forward, it will use the concept of "entrepreneurial opportunity for profit and loss" as an overarching interpretative device. As a result, the drivers had no rights under the Act and the petition for a union election was dismissed.

The NLRB considered the most important factors to be the drivers/franchisees’ leasing or ownership of their work vans, their method of compensation, and their nearly unfettered control over their daily work schedules and working conditions that provided the drivers/franchisees with “significant entrepreneurial opportunity” for economic gain. Specifically, the NLRB stated, “Entrepreneurial opportunity, like employer control, is a principle by which to evaluate the overall effect of the common-law factors on a putative contractor’s independence to pursue economic gain. Indeed, employer control and entrepreneurial opportunity are opposite sides of the same coin.” These factors, along with the absence of supervision and the parties’ understanding that the franchisees are independent contractors, resulted in the Board’s finding that the franchisees are not employees under the Act and, thus, cannot unionize.

Counsel To Management:

While this is a win for employers, this ruling does not overturn or alter California’s Dynamex ruling that toughened the test for companies to classify workers as independent contractors. Rather, this decision is limited to determining only if certain individuals are employees that can be represented by a union under the NRLA. However, future efforts to organize drivers for Uber, Lyft, FedEx or other employers who classify workers as contractors has now become more difficult.

Improper Background Checks for Job Applicants Leads to $2 Million Preliminary Approval of Class Action Settlement

On Monday, an Order for Preliminary Approval of a $2 million class action settlement was granted by the U.S. Central District of California. The case involves food giant, Performance Food Group, Inc., and thousands of job applicants who were allegedly presented with illegal background check authorization forms that sought sensitive personal information.

Plaintiff Jorge Perez (“Perez”) brought forth this suit in 2017 on behalf of himself and other similarity situated employees. When Perez applied for a job with Performance Food Group, he was asked to fill out disclosures and authorization forms to allow a background check. Perez alleged that the documents went beyond State and Federal requirements because the job application/background check materials requested disclosure of personal information such as driver’s license information, citizenship status, old addresses, and criminal and employment history. Specifically, Perez claimed this was improper and that the company violated the Federal Credit Reporting Act and several California state laws including the California Investigative Consumer Reporting Agencies Act and the California Consumer Credit Reporting Agencies Act. As you may recall and we previously reported here, as of January 1, 2018 California law prohibits employers with 5 or more employees from asking an employee about their conviction history before providing a conditional job offer to the applicant.

Prior to the dismissal of this case, the class action settlement must be approved by the Court at a final approval hearing. The settlement class could potentially exceed 32,000 individuals that applied for jobs with the company between August 18, 2012 and the date of preliminary approval, which was January 29, 2019. Per the terms of the Settlement Agreement, Perez was awarded $5,000, and each class member would be paid at least $44. Lopez’s counsel will receive a fee of nearly $500,000, or 25 percent of the settlement’s value.

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