In Martinez v. Combs (SC S121552A) (Cal. Supreme Court), the California Supreme Court recently issued a significant wage-and-hour decision that will have major consequences for employers and those who can be categorized as a supervisor.
Under Martinez, supervisors can now be liable for wage-and-hour violations if they "exercise control over the wages, hours or working conditions" or "suffer or permit to work" their employees. The Martinez holding represents a retreat from the Supreme Court's prior decision in Reynolds v. Bement (2005) 36 Cal.4th 1075 where the Court held that "employers," but not supervisors, can be liable for wage and hour violations. In Reynolds, the Court looked to common law to determine the nature of the employment relationship in resolving a Labor Code § 1194 claim.
The Martinez Court took a different approach in determining the employment relationship by stating "[a]s 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." "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."
The Martinez Court did not reverse Reynolds, but simply stated that the Reynolds opinion properly holds that the IWC's definition of "employer" does not impose liability on individual corporate agents acting within the scope of their agency. The Martinez Court acknowledged that the common law employment definition as discussed in Reynolds continues to play a role in the IWC's definition of the employment relationship. The "IWC's definition of employment incorporates the common law definition as one alternative."
The Martinez Court then analyzed whether the individuals sued were "employers" within the meaning of the wage orders. The defendants in this case were "merchants through whom Munoz [the grower] sold strawberries." The Court found none of the merchants were employers since they were, essentially, third party contractors.
Although the Court held in favor of these merchant defendants, Martinez will be remembered as a case that broadened the protections afforded to California employees. Employers will likely petition the IWC for a change in the definition of an employer so the impact of this case will further evolve over the next few years.