California
Supreme Court’s 2014-2015 term: Cases involving the workplace
By J.
Clark Kelso
 |
| Kelso |
In recent
years, government laws and regulations regulating the workplace have become
more prominent in policy and political discussions. Some state and local governments
have increased the minimum wage, an issue that will undoubtedly be part of the
2016 presidential contest. The definition of “employer” is being tested by new
types of business enterprises such as Uber. The National Labor Relations Board
has become a much more central and controversial regulator of the employment
marketplace. Stories are circulating about harsh workplace conditions abroad
and within the United States, including at such high-tech fliers as Amazon.
The
California Supreme Court dealt with a number of these issues during its 2014-2015
term. We start with a case dealing with the question of whether a franchisor
can be held vicariously liable for misconduct by a supervisor employed by a
franchisee, a question that requires the court to revisit what it means to be
an employer. Next, we review a decision applying the primary assumption of risk
doctrine to an employee who works in an inherently dangerous occupation. Our
third case involves the application of California “wage orders” in the context
of on-call employees. Finally, we have a case involving the definition of
causation in the context of a workers’ compensation claim.
The cases
present a mixed picture. The first two cases involve the application of
time-honored, common law principles. These cases tend to favor the employer’s
interests. The second two cases involve the application of statutory and
regulatory provisions, and these cases tend to favor the employee’s interests.
In all four cases – and this is the real message from this year’s decisions – the
court essentially sticks to the existing law, following common law principles
when there are no statutes or regulations in derogation, and fully embracing
such statutes or regulations when they exist.
Are you
my employer?
The
consumer retail environment in the United States is a complex tangle of
corporate relationships and contracts. One of the most common business
structures for retail sales, particularly under nationally known trade names,
is the franchise relationship.
To an
ordinary consumer on the street, it may look like you are buying your pizza
from Domino’s. But behind the name over the door, there is actually a detailed
franchise contract between Domino’s, the franchisor and a local small business
that operates the Domino’s outlet as a franchisee. Under the modern “business
format” model of franchising, the franchisee pays fees and royalties from sales
to the franchisor in return for the right to sell products or services using
the franchisor’s trade names and trademarks. The franchisee also agrees to
implement a detailed business plan that sets forth standards and procedures.
The plan usually encompasses such things as marketing, production, business
operations, information technology and administration.
The
benefits to the franchisor from this structure are substantial. It can focus
its attention upon raising capital and expanding the number of stores while
letting local businesses handle the time-intensive management of day-to-day
operations, including the hiring, management and firing of franchisee
employees. The franchisee, who is often an individual or small business
entrepreneur, gets the benefits of a nationally known product or service,
nationally proven processes and standards and the opportunity to grow the
business locally.
Given
this division of responsibilities, when someone is injured as a result of local
operations the question naturally arises whether the franchisee or franchisor
or both can be held legally responsible. In the context of product-related
injuries, the law generally makes both legally responsible based on reasoning
that traces from McPherson v. Buick through modern product liability
law. When an injury results from the wrongful conduct of a local employee, the
liability question has generally been analyzed under the law of agency where
the key question is whether the franchisee employee is also an employee of the
franchisor. That inquiry usually focuses on whether the purported employer has
sufficient control over the “manner and means” by which work is accomplished.
In a case
of first impression in California, the court held in Patterson v. Domino’s
Pizza, LLC, 60 Cal.4th 474 (2014) that a local supervisor was
not an employee of the franchisor in the context of a sexual harassment suit
brought by a former franchisee employee who claimed damages under the Fair
Employment and Housing Act and various common law causes of action. In so
holding, the court rejected the argument that the franchise agreement gave the
franchisor such pervasive control over business operations that the franchisor
must be found to be an employer. Instead, the court homed in more narrowly upon
those aspects of the franchise contract which gave the franchisor control and
those aspects which gave the franchisee control. Emphasizing that the contract
and the practice under the contract showed that the franchisee had control over
hiring, discipline and firing, and that the franchisor had no control over
those aspects of the business, the court affirmed a summary judgment in favor
of Domino’s.
The
decision in Patterson is a strong endorsement of the “business format”
model of franchising in which the franchisor can insulate itself from the
significant risks associated with local business practices involving employee
hiring, discipline and termination.
How dangerous
is this job?
Workplace
injuries have historically been a troubled subject for the common law. Recall
the so-called “unholy trinity” of tort defenses to workplace injuries that, in
the 19th century, denied compensation to the vast majority of employees injured
on the job. No matter the circumstances of the injury, employees usually lost
because of contributory negligence, the fellow-servant rule or assumption of
risk. The hurdles to tort compensation were so great that state legislatures
felt compelled to intercede on the workers’ behalf with statutory workers’
compensation systems.
Over
time, the unholy trinity receded from view. Contributory negligence was
replaced with comparative fault, the fellow-servant rule was limited by case
law and then by statute, and assumption of risk appeared to have merged into
comparative fault.
Sometimes,
however, old wine sitting in dusty bottles in the cellar can be rediscovered
and find favor with a new palate. That appears to be what is happening with
primary assumption of risk, which has reemerged as a significant defense in an
expanding set of circumstances. The modern reemergence began 23 years ago with Knight
v. Jewett, 3 Cal.4th 296 (1992), where the court held that the
plaintiff could not recover for injuries sustained from the ordinary
rough-and-tumble activities of a touch football game. For a while, Knight appeared to be limited to sports activities, but in Nalwa v. Cedar Fair,
L.P., 55 Cal.4th 1148 (2012), the court expressly expanded the
doctrine beyond sports to include commercially provided recreational activities
(in Nalwa, a customer was denied recovery for an injury suffered while
driving a bumper car at a fair).
During
this same period of time, the court recognized that the “firefighter’s rule” –
which bars firefighters and police officers from suing members of the public
for injuries resulting from fighting fires or engaging in law enforcement
activities – was actually a specific instance of primary assumption of risk. In Priebe v. Nelson, 39 Cal.4th 1112 (2006), the court extended
the firefighter’s rule to bar a worker in a veterinary kennel from suing the owner
of a dog that bit her.
This
year, in Gregory v. Cott, 59 Cal.4th 996 (2014), we see the
strands of these cases woven together into a more generalizable primary
assumption of risk defense. In Gregory, the plaintiff was employed by a
home health care agency. The defendant hired the agency to assist with the care
of his 85-year-old wife who suffered from Alzheimer’s disease, and the
plaintiff was given the assignment. The plaintiff was trained to care for
Alzheimer’s patients and knew they could be combative, violent and
unpredictable. One morning, while the plaintiff was washing a large knife at
the sink, the Alzheimer’s patient came up behind her, bumped her and caused her
to drop the knife, which seriously injured the plaintiff’s hand. The plaintiff
received a workers’ compensation recovery from her employer but wanted to
recover additional damages from the defendant in tort.
The court
held that primary assumption of risk barred the claim, describing the risk
presented to the plaintiff as an “inherent occupational hazard” (Id., 59
Cal.4th at 1001) which the plaintiff was “hire[d] … to handle” (Id., 59
Cal.4th at 1002). The court tries in various ways to limit the scope
of its holding, indicating that “[t]he rule we adopt today is limited to
professional home health care workers who are trained and employed by an
agency.” Id., 59 Cal.4th at 1008-09. However, efforts to
limit the logic of assumption of risk seem likely to fail. Certainly the trend
over the last 23 years has been to steadily expand the defense to additional
circumstances.
Did my
workplace cause my injury?
When
workers’ compensation systems were first created, the various stakeholder
interests forced a tradeoff in the rules of the game. The fault-based rules
from the tort system – along with the unholy trinity of defenses – were
discarded so that compensation for injuries could be more certain and swift. To
balance this employee gain, the levels of compensation that employees could
receive were reduced, and employers were protected from being sued in tort. So
employees traded lower levels of compensation for more certain and swift
payment. The precise elements of this balance are periodically reviewed and
adjusted by the Legislature as employers, employees and insurance companies
advocate for their interests.
In South
Coast Framing, Inc. v. Workers’ Compensation Appeals Board, 61 Cal.4th 291 (2015), the court reaffirmed one of the legal tradeoffs that benefited
employees. The employee in South Coast Framing was injured on the job
when he fell eight to 10 feet while working as a carpenter. His workers’
compensation physician prescribed various drugs to treat his injuries,
including several pain relievers and an antidepressant. His personal doctor
subsequently prescribed an anti-anxiety medicine and a sleep aid. Six months
later, his wife found him dead, and an autopsy concluded the death was an
accidental overdose from the combined toxic effects of the antidepressant, one
of the pain relievers, the anti-anxiety medicine and the sleep aid.
In light
of the fact that two of the four overdose drugs had been prescribed by the
employee’s personal physician, the question for the court was whether the
overdose was caused by or arose out of the workplace.
In the
law of torts, the causation standard requires a showing that the defendant’s
wrongful conduct was a “substantial factor” and “proximate cause” of the plaintiff’s
injury. The workers’ compensation standard is more generous, permitting
employees to recover so long as there is evidence that an injury arose out of
the employment or, equivalently, that employment was a contributing cause of
the injury.
The court
affirmed the workers’ compensation judge’s conclusion that causation was
satisfied on the facts presented. It was enough that the autopsy concluded that
all four of the prescribed drugs contributed to the death, even though the
autopsy could not assign any particular percentage contribution to each drug.
Alternatively, it was enough that the sleep aid drug prescribed by the
decedent’s personal physician had probably been prescribed because the decedent
was having trouble sleeping after his workplace injury. That connection was
sufficient for the employment injury to be a contributing cause of the
overdose.
There was
no new law in South Coast Framing. In essence, the court reaffirmed the
rule first adopted almost 100 years ago shortly after workers’ compensation was
adopted by the California Legislature. As noted above, the law of workers’
compensation is periodically reviewed and adjusted by the Legislature. That
makes this a field of law where it is particularly important for the court to
preserve the deals that are cut in the legislative process.
Can I get
paid to sleep?
The issue
of pay for sleep arose in the context of security employees who worked
overnight, on-call shifts. The employer in Mendiola v. CPS Security
Solutions, Inc., 60 Cal.4th 833 (2015), provided security at
construction work sites. Its employees were on active patrol during the day,
and it assigned employees to remain on-call at the work site throughout the
night (unless relieved by another employee) and to respond to any disturbances
as necessary. The employer made a trailer available to its employees at the
work site, which had some residential amenities such as a bed, bathroom,
kitchen, heating and air conditioning. The guards were paid hourly for active
patrol, but were not paid anything for on-call time at night unless they
actually had to conduct an investigation during that time or had to wait for
requested relief to arrive. Guards were paid for the actual time of an
investigation at night, but received a full eight hours of night compensation
if an investigation took more than three hours.
The court
held that these compensation provisions violated the applicable wage order
promulgated by the Industrial Welfare Commission. First, the court held that,
in light of the control exercised by the employer over the employee throughout
the on-call period, all of the on-call hours were compensable as “hours
worked.” Second, the court rejected an argument based on federal labor law that
permits an employer who requires employees to work a 24-hour shift and provides
adequate sleeping facilities to exclude eight hours for sleep time. According
to the court, there was no convincing evidence that the IWC intended to
incorporate the federal rule into the applicable state wage order.
It is not
clear from the court’s ruling how many industries might be affected by its
holding. California courts have interpreted a different wage order in the
context of ambulance drivers and attendants as allowing uncompensated eight-hour
sleep time during a 24-hour shift, and the court gave a lukewarm endorsement of
that rule in that specific job context. Given the complexity of the labor laws
and the 18 different wage orders issued by the IWC, employers with on-call
employees should check to make sure they are still in compliance after Mendiola.
J. Clark Kelso is a
professor at the University of the Pacific McGeorge School of Law and serves as
the federally appointed receiver responsible for California’s prison medical
care system. The views expressed in this article are solely the personal views
of the author.