Law360
June 29, 2015
Law360, New York (June 29, 2015, 11:28 AM ET) — For years, class actions have been filed on behalf of truck drivers against the trucking companies who employ and misclassify them as independent contractors when they are indeed employees. These trucking companies fail to provide meal breaks or rest periods to their truck drivers, deduct business expenses from their drivers’ paychecks and do not pay overtime, all under the guise that the drivers are not entitled to these protections because they are independent contractors.
Because of these trucking companies’ alleged misconduct, countless truck drivers have started filing both individual actions and class actions against their respective employers, and have been awarded both unpaid wages and penalties. As such, the latest trend for these trucking companies to avoid paying wages due to their employees has been to file for bankruptcy. Filing for bankruptcy stays any pending litigation and prevents employees from receiving what they are owed. While it is true that employees have so-called priority claims under bankruptcy laws, they pail in comparison to the ability to collect damages outside of bankruptcy court.
Wage-and-hour attorneys who represent these truck drivers should not be discouraged however. These employers may think that filing for bankruptcy is an easy way of taking care of their debts and discouraging employees from pursuing the wages stolen from them, but there are other avenues plaintiffs’ attorneys can take in order to make sure their clients are paid by their employers.
In order to ensure the client is not stonewalled by an eventual bankruptcy filing, attorneys should contemplate who exactly qualifies as the employer of the client truck driver. Under both California and federal law, it is not only the trucking company that would qualify as an employer and thus be liable for unpaid wages; individuals involved with the trucking company can likewise be seen as an employer and can be held liable for unpaid wages.
The most effective way to litigate claims for wages against individual employers is through federal law. The Fair Labor Standards Act, which holds employers liable for unpaid wages, defines employer as “any person acting directly or indirectly in the interest of an employer in relation to an employee …” (29 U.S.C Section 203(d).)
Courts have generally held that this definition of employer should be interpreted broadly to hold individuals such as managers and officers personally liable as employers if the individual has some degree of control over the corporate employer’s operations. The FLSA provides an independent ground for the individual’s liability separate from the corporate employer’s. Indeed, the Ninth Circuit in Boucher v. Shaw (9th Cir. 2009) 572 F.3d 1087, has held that the definition of employer under the FLSA “is not limited by the common law concept of ‘employer,’ but is to be given an expansive interpretation in order to effectuate the FLSA’s broad remedial purposes.” As such, a truck driver can sue an individual employer who is responsible for failing to pay employees under the FLSA. Moreover, whether a corporate employer has filed for bankruptcy is of no consequence when considering the personal liability of an individual employer, precisely because the FLSA provides an independent ground for liability of officers and managers. (Boucher, supra, 572 F.3d at 1092.)
The status of an officer or manager as an individual employer has not been so cut-and-dry under California law. Previously, under Reynolds v. Bement (2005) 36 Cal.4th 1075, the California Supreme Court defined “employer” strictly according to agency principles, and held that the California Labor Code did not impose liability on individual corporate agents such as officers or managers acting within the scope of their agency. Reynolds, however, was abrogated by Martinez v. Combs (2010) 49 Cal 4th 35, which holds that an “employer” under the California Labor Code is one who: (1) exercises control over the wages, hours or working conditions of employees, (2) suffers or permits employees to work or (3) engages employees, thereby creates a common law employment relationship.
As such, under recent California law, including Martinez and Guerrero v. Superior Court (2013) 213 Cal.App.4th 912, an employer under the California Labor Code may be a corporation, an individual (including but not limited to an owner of a closely held company, or a corporate officer or director), or any other person or entity that meets one of the three enumerated tests in Martinez. Thus, an individual corporate agent acting within the scope of his or her agency, such as a CEO, officer or even a supervisor, who also exercises control over the wages, hours or working conditions of employees, or who also engages, suffers or permits employees to work, is an employer under the California Labor Code. If that person permits employees to work without proper compensation pursuant to the California Labor Code, then that person is individually liable to the employee for any unpaid wages.
Indeed, Guerrero v. Superior Court makes it clear that California law permits multiple “employers” to be liable for California Labor Code violations. As such, an attorney wanting to file a class action complaint for California Labor Code violations against a corporate employer would be wise to investigate which individuals control the employees’ wages, hours or working conditions, or essentially negotiates and hires the employees to work, and name that individual as a second employer defendant.
Finally, employment class actions often include a cause of action under the Private Attorney’s General Act of 2004 (Labor Code, Section 2698 et seq.), and this gem of California law should not be overlooked when filing a suit against corporate and individual employers. PAGA permits private enforcement of California Labor Code violations by enabling employees to seek statutory penalties for California Labor Code violations from “[a]ny employer or other person acting on behalf of an employer,” which California courts have seen as a phrase conceivably broad enough to include corporate officers and agents in some cases.
In a nutshell, plaintiffs’ attorneys with truck driver clients who wish to pursue class actions against giant trucking companies should not be discouraged by the recent trend of these corporations attempting to dodge their responsibilities by filing for bankruptcy. At the outset, the attorney should investigate whether any individuals employed by the trucking company, such as a supervisor, manager or even the CEO, fulfills the “employer” definition under Martinez v. Combs. The attorney should then name that individual as a defendant under the theory that the individual is an employer. This can be done pursuant to causes of action under the FLSA, California Labor Code and/or PAGA.
—By Brian S. Kabateck and Tsolik Kazandjian, Kabateck LLP
Brian Kabateck is the founding and managing partner of Kabateck LLP and is located in the firm’s Los Angeles office. Kabateck is a former president of the Consumer Attorneys of California.
Tsolik Kazandjian is an associate in Kabateck LLP’s Los Angeles office.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
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