9th Circ. Says HR Firm May Be Joint Employer, Owe Wages

Unpaid minimum wage an overtime claims against the payroll company for a maid service company were recently revived by the Ninth Circuit. The claims were brought back because a California federal judge wrongly ignored evidence that the payroll manager was a joint employer.

An appellate panel held in a nonprecedential opinion issued Thursday that Barrett Business Services Inc.'s expressed authority to fire and discipline maids gave it sufficient control over working conditions to establish the firm as a joint employer bearing joint liability for violations of the California Labor Code.

"The district court ... erred in concluding as a matter of law that BBSI did not establish a common law employment relationship with plaintiffs," the panel said. "We reverse the district court's grant of summary judgment to BBSI."

In a complaint most recently amended in March 2016, workers accused Merry Maids, its franchisee MM 879 Inc. and payroll and benefits manager BBSI of failing to pay them for time traveling between clients' houses, underpaying for overtime work, and failing to provide unbroken breaks or accurate wage statements in violation of the California Labor Code.

U.S. District Judge Troy L. Nunley tossed those claims and entered judgment in favor of Merry Maids and BBSI, which the employees characterized as a "mere shell" of MM 879, in May 2021. Judge Nunley held that the workers failed to indicate that Merry Maids or BBSI functioned as joint employers alongside MM 879.

That finding, the panel held on Thursday, incorrectly interpreted the three-pronged test established by the California Supreme Court in its 2010 decision in Martinez v. Combs.

Under the Martinez test, parties are considered joint employers if they control workers' wages, hours or working conditions, if they permit employees to work, or if they explicitly engage workers to perform tasks.

MM 879's employees, the panel held, introduced sufficient evidence to raise questions about whether BBSI controlled their working conditions or engaged them to work.

Specifically, the panel pointed to an application for co-employment presented to workers, in which workers were told that BBSI reserved the right to discipline or fire them without cause, and an employee handbook that explicitly named BBSI as a joint employer.

"Such characterization, standing alone, is not necessarily enough to create an employment relationship," the panel said, "but it is evidence of such a relationship."

The panel therefore revived wage and hour claims against BBSI, and remanded those claims back to the district court.

The panel did, however, affirm the lower court's decision to toss claims against Merry Maids. The franchise agreement between MM 879 and Merry Maids, the panel said, gave franchisees sole authority to establish and implement pay practices. Merry Maids had no control over MM 879's working conditions, the court held, and therefore bore no liability for any Labor Code violations.

Counsel for the workers, Brett Sutton, expressed his delight with the revival of claims against BBSI on Friday.

"We are pleased with the decision of the court of appeals against BBSI and look forward to moving the case forward to a successful conclusion in the district court," Sutton said.

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