256 | 2023 Cal-Peculiarities ©2023 Seyfarth Shaw LLP www.seyfarth.com “Conversion” not a viable theory of recovery. In 2019, the California Supreme Court did push back a bit on personal wage-and-hour liability by rejecting tort claims for conversion as a basis for seeking unpaid wages from an individual.457 Alter ego. In 2020, the Court of Appeal upheld a judgment of almost $500,000 for unpaid wages, attorney fees, and costs against a couple who owned a small travel company.458 These individual owners were found to be personally liable as alter egos. The Court of Appeal explained that that the alter ego doctrine arises when individual defendants have used “the corporate form unjustly and in derogation of the plaintiff’s interests. In certain circumstances the court will disregard the corporate entity and will hold the individual shareholders liable for the actions of the corporation.”459 Alter ego liability depends on (1) “such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist” and (2) whether “adherence to the fiction of separate existence would, under the circumstances, promote fraud or injustice.”460 Here, it was critical that the individual owners commingled personal and corporate assets, using corporate funds to pay their personal rent and using personal funds to pay the plaintiff’s salary. The evidence supported a finding of alter ego even though there was no evidence that the business was undercapitalized or was a mere shell or conduit for the individual defendants’ personal business. Garment industry. As of January 1, 2022, “Brand Guarantors”—companies sitting atop the garment supply chain—are liable for wage violations committed by their garment manufacturing suppliers, even if the ultimate seller of the garment has been completely unaware of any violation.461 In other words, clothing “brands” and holding companies—and even retailers—could now be jointly liable with the contractors from whom they purchase t-shirts, hats, or even belts to sell for the contractor’s wage and hour violations, and perhaps even for violations by the contractor’s subcontractor. Prudent employers might have their garment manufacturing vendors audited for wage and hour compliance. 7.21 Broadened Definition of Employer? 7.21.1 Joint employers In 2010, in Martinez v. Combs, the California Supreme Court held that the Wage Orders endorse a broad definition of “employer” that extends beyond the definition of “employer” ordinarily used in interpreting federal statutes (i.e., the common law definition). The California Wage Order definition of employer extends to anyone who (1) exercises control over wages, hours, or working conditions, (2) suffers or permits a worker to work, or (3) engages a worker to work, thereby creating a common law relationship.462 Martinez reaffirmed, however, that this definition of employer does not impose liability on individual corporate agents who were acting within the scope of their agency, even if this would leave workers without a remedy because their primary employer has gone bankrupt. In the case before it, Martinez found that merchants who purchased produce from a strawberry farmer were not the “employers” of the farmer’s agricultural workers where only the farmer had the power to hire and fire the workers, to set their wages and hours, and to tell them when and where to report to work. In 2012, the Court of Appeal, in Patterson v. Domino’s Pizza, further promoted a broad notion of employment liability. At issue was whether a pizza franchisor could be held liable for torts and FEHA violations perpetrated against a teenage pizza store employee by the manager of a pizza store franchisee.463 The Court of Appeal held that liability for the franchisor was possible, on the basis of a franchise contract that gave the franchisor extensive control over the pizza store franchise’s local operations, and on the basis of extra-contractual evidence suggesting that the franchisor exercised extensive local management control over the franchisee in areas including employee conduct and discipline. In 2014, the California Supreme Court reversed, albeit by a 4-3 vote, holding that uniform marketing and operational plans do not automatically make the franchisor liable for the
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