Morales v. 22nd Dist. Agric. Ass'n
Morales v. 22nd Dist. Agric. Ass'n
Opinion of the Court
*87I.
INTRODUCTION
In this appeal, we must determine whether a state entity whose employees are exempt from state law requiring the payment of overtime compensation is nevertheless required to pay overtime compensation to such employees when the state entity jointly employs the employees with a non-state employer. Although we concluded in a prior appeal in this case that the matter should be remanded to the trial court to permit the plaintiffs to amend their complaint to attempt to state a cause of action premised on such a theory ( Morales v. 22nd Dist. Agricultural Assn. (2016)
II.
FACTUAL AND PROCEDURAL BACKGROUND
A. Proceedings in the case prior to our decision in Morales
Defendant 22nd District Agricultural Association of the State of California (the DAA) is a California agency that owns and manages the Del Mar Fairgrounds and the Del Mar Horsepark. Plaintiff Jose Luis Morales and a group of other seasonal *404employees of the DAA filed a putative class action alleging that the DAA failed to pay plaintiffs overtime compensation required *88by state law under Labor Code section 510
The trial court sustained, without leave to amend, the DAA's demurrer to plaintiffs' section 510 cause of action. After the trial court conditionally certified the case as a collective action, the DAA asserted an affirmative defense to plaintiffs' FLSA claim. Specifically, the DAA alleged that the employees were exempt from the FLSA overtime compensation requirements pursuant to a statutory exemption (
B. Morales
The primary issues on appeal in Morales related to plaintiffs' claim under the FLSA. ( Morales , supra , 1 Cal.App.5th at p. 513,
The Morales court also rejected plaintiffs' contention that the trial court erred in sustaining the DAA's demurrer to plaintiffs' section 510 claim. ( Morales , supra , 1 Cal.App.5th at p. 542,
*89In reaching this latter conclusion, the Morales court noted that plaintiffs contended that "the DAA is required to comply with section 510 when it loans out its employees to outside promoters to support 'interim events,' ... and charges the outside promoters the labor costs of employing the employees, plus a markup." ( Morales , supra , 1 Cal.App.5th at p. 542,
"We conclude that [plaintiffs] should be permitted to amend their section 510 claim since they have shown how they can potentially amend their complaint to state a valid claim under the joint employee doctrine. Accordingly, we reverse that part of the order sustaining the demurrer without leave to amend and direct the trial court to grant [plaintiffs] leave to amend the complaint. In so doing, we express no view as to the ultimate merits of [plaintiffs'] section 510 claim." ( Id. at pp. 543-544,206 Cal.Rptr.3d 1 .)
We remanded the matter to the trial court with directions to grant plaintiffs leave to amend their complaint. ( Morales , supra , 1 Cal.App.5th at pp. 543-544,
C. Plaintiffs' second amended complaint
On remand, plaintiffs filed a second amended complaint as a putative class action for the recovery of unpaid overtime compensation. In their second amended complaint, plaintiffs alleged that they had worked as joint employees of the DAA and certain "Outside Promoters." Plaintiffs further alleged that the DAA had failed to pay plaintiffs overtime compensation required by section 510, subdivision (a). Specifically, plaintiffs alleged the following:
"12. [DAA] employs numerous persons to whom [DAA] refers as '119-day Employees'.
"13. [DAA]'s 119-day Employees perform tasks such as cleaning out stables, manually sorting trash for recycling, digging and filling trenches, parking lot security, ticket-taking, etc.
"14. [DAA] loans out, leases, and/or seconds, its 119-day Employees to unaffiliated, private 'promoters' (hereinafter 'Outside Promoters') to support events (hereinafter 'Interim Events') such as gun shows, bridal bazaars, private parties, weddings, Christmas tree sales, hot tub sales, home and garden shows, etc.
*90"15. [DAA] charges the Outside Promoters the labor costs of employing the 119-day Employees, plus a 'markup'.
"16. When [DAA]'s 119-day Employees are loaned out, leased, and/or seconded, to perform work in support of Outside Promoters' Interim Events, the 119-day Employees are subject to the control of both [DAA] and the Outside Promoter.
"17. When [DAA]'s 119-day Employees are loaned out, leased, and/or seconded, to perform work in support of Outside Promoters' Interim Events, [DAA] is a joint employer with the Outside Promoters, and must therefore comply with Labor Code section 510, subdivision (a).
"18. Separate and in addition to the foregoing, when the 119-day Employees are loaned out, leased, and/or seconded, to perform work in support of Outside Promoters' Interim Events, the 119-day Employees are not directly employed by the State or any political subdivision thereof, for purposes of Wage Order No. 10.
"19. Many of [DAA]'s 119-day Employees work overtime hours in support of Outside Promoters' Interim Events.
"20. [DAA] does not pay its 119-day Employees any overtime compensation.
*406"21. [DAA]'s above-described policies and practices are in contravention of law.
"22. Each Plaintiff herein has been employed as a 119-day Employee at some point in time subsequent to 25 March 2010.
"23. Each Plaintiff herein is informed and believes he or she (as applicable) has performed work in support of Outside Promoters' Interim Events, and worked overtime hours in connection with such work."
Based on these allegations, plaintiffs brought a single cause of action for recovery of overtime compensation, attorney fees, and costs pursuant to section 510, subdivision (a) and section 1194, subdivision (a)
*91D. The DAA's demurrer
The DAA filed a demurrer to the second amended complaint. In its demurrer, the DAA argued that in Morales , this court concluded that it was exempt from paying overtime compensation as specified in section 510, subdivision (a). The DAA further argued that it was not liable to plaintiffs for overtime compensation under section 510, subdivision (a) by virtue of its alleged status as plaintiffs' joint employer. The DAA argued that Noe v. Superior Court (2015)
E. Plaintiffs' opposition
Plaintiffs filed an opposition in which they argued that the second amended complaint stated a cause of action for overtime violations under section 1194, subdivision (a), which, as the Noe court recognized, " 'imposes a duty on every employer (i.e., including all co-employers)," (boldface omitted) to ensure that that employees receive overtime compensation mandated by section 510, subdivision (a). Plaintiffs further argued that "[t]he Morales decision precludes [the DAA]'s current argument, because Morales held that plaintiffs' then-proposed amendment would state a claim if joint employment were to be properly pleaded." Finally, plaintiffs argued that "if [the trial court] were to conclude that Noe cannot be harmonized with Morales , [the trial court] would be required to follow Morales under the law-of-the case doctrine."
F. The trial court's ruling
After further briefing and a hearing,
"[The DAA] is exempt from the state overtime requirements of Labor Code section 510.
*407Morales [, supra , 1 Cal.App.5th at pp. 537-538,206 Cal.Rptr.3d 1 ] (citing Johnson [, supra ,174 Cal.App.4th 729 ,95 Cal.Rptr.3d 53 ] ). In an attempt to avoid this prohibition, paragraph 17 of the SAC alleges: '... [DAA] is a joint employer with the Outside Promoters, and must therefore comply with Labor Code section 510, subdivision (a).' However, there exists 'no authority for the proposition that a joint employer may be held liable for Labor Code violations committed by a *92cojoint employer based on principles of agency or joint and several liability. Rather, whether an employer is liable under the Labor Code depends on the duties imposed under the particular statute at issue.' Noe [, supra , 237 Cal.App.4th at pp. 333-334,187 Cal.Rptr.3d 836 ]. In short, the alleged joint employment of plaintiffs by the DAA and the private employers does not serve to transfer the liability of the private employers to the DAA. Labor Code section 510 does not contain language from which such joint liability can be inferred.
"Plaintiffs argue that the appellate decision in Morales issued after Noe , such that the Morales decision controls and constitutes 'law of the case.' This argument lacks merit. Morales does not hold that joint employers are jointly and severally liable for the wrongdoing of co-joint employers. Instead, the narrow issue that Morales decided was whether Plaintiffs could potentially amend their Complaint. Morales [, supra , at pp. 514, 542-543,206 Cal.Rptr.3d 1 ]. Although leave to amend was permitted, the appellate court 'express[ed] no view as to the ultimate merits of [plaintiffs'] section 510 claim.' Id. at 544 [206 Cal.Rptr.3d 1 ]." (Emphasis altered.)
The trial court thereafter entered a judgment in favor of the DAA.
G. The appeal
Plaintiffs timely appeal from the judgment.
III.
DISCUSSION
The trial court properly sustained the DAA's demurrer to plaintiffs' second amended complaint without leave to amend
Plaintiffs claim that the trial court erred in sustaining the DAA's demurrer to their second amended complaint without leave to amend. Specifically, plaintiffs contend that the trial court erred in concluding that the second amended complaint did not adequately state a claim against the DAA for overtime compensation pursuant to sections 510, subdivision (a) and 1194, subdivision (a).
*93A. Governing law and standard of review
1. The law governing demurrers and the standard of review
In Hamilton v. Greenwich Investors XXVI, LLC (2011)
"A demurrer tests the legal sufficiency of the complaint. We review the complaint de novo to determine whether it alleges facts sufficient to state a cause of action. For purposes of review, we accept *408as true all material facts alleged in the complaint, but not contentions, deductions or conclusions of fact or law. We also consider matters that may be judicially noticed. [Citation.] When a demurrer is sustained without leave to amend, 'we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm.' [Citation.] Plaintiff has the burden to show a reasonable possibility the complaint can be amended to state a cause of action." ( Id. at pp. 1608-1609,126 Cal.Rptr.3d 174 , fn. omitted.)
In considering a trial court's order sustaining a demurrer without leave to amend, " 'we review the trial court's result for error, and not its legal reasoning.' " ( Bains v. Moores (2009)
2. Relevant substantive law
Section 510, subdivision (a) provides:
"Eight hours of labor constitutes a day's work. Any work in excess of eight hours in one workday and any work in excess of 40 hours in any one workweek and the first eight hours worked on the seventh day of work in any one workweek shall be compensated at the rate of no less than one and one-half times the regular rate of pay for an employee."
Section 1194, subdivision (a) provides:
"Notwithstanding any agreement to work for a lesser wage, any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, including interest thereon, reasonable attorney's fees, and costs of suit."
While section 1194, subdivision (a) does not expressly state "who is liable" for a cause of action based on that statute ( *94Martinez v. Combs (2010)
Industrial Welfare Commission Wage Order 10-2001 (Wage Order No. 10)
*409"[T]he provisions of this order shall not apply to any employees directly employed by the State or any political subdivision thereof, including any city, county, or special district." ( Cal. Code Regs., tit. 8, § 11100(1)(C).)13
B. Plaintiffs may not hold the DAA liable for overtime compensation by virtue of the DAA's status as plaintiffs' joint employer
Plaintiffs claim that the trial court erred in sustaining the DAA's demurrer to their section 1194, subdivision (a) claim for overtime wages allegedly due under section 510, subdivision (a) by virtue of the DAA's status as plaintiffs' joint employer
*95Plaintiffs correctly note that the DAA does not dispute that they adequately alleged that the DAA is their joint employer. Thus, we assume for purposes of this decision that plaintiffs' second amended complaint adequately alleges that the DAA acted as their joint employer. Thus, the question we must determine is whether, under California law, the DAA may be held liable for overtime wages due under section 510, subdivision (a) when the DAA acted as plaintiffs' joint employer, even though this court concluded in Morales "public employees in the amusement and recreation industry are exempt from state overtime requirements." ( Morales , supra , 1 Cal.App.5th at p. 541,
In Morales , we concluded that the matter should be remanded to the trial court because the plaintiffs had "shown how they [could] potentially amend their complaint to state a valid claim under the joint employee doctrine." ( Morales, supra , 1 Cal.App.5th at p. 543,
To begin with, we are aware of no authority, and plaintiffs have cited none, in either this appeal or in Morales , that supports the counterintuitive proposition that a public employee who is not entitled to overtime compensation when employed solely by a public entity, is entitled to such overtime compensation from the public en tity *410when the employee is jointly employed by the public entity and a private entity.
Further, plaintiffs have offered no plausible reason why the DAA could nevertheless be liable for paying overtime compensation pursuant to *96section 510, subdivision (a) , when the DAA jointly employs the plaintiffs with Outside Promoters. The plaintiffs contend that the Morales court must have concluded that "[the DAA's] employees do not qualify as public employees performing exempt work when they are leased out to support private-sector businesses.' "
On the contrary, as the Morales court recognized, the Johnson court concluded that the sovereign powers cannon of statutory interpretation provided an additional and alternative basis for concluding that section 510, subdivision (a) did not apply to public employees. ( Morales , supra , 1 Cal.App.5th at p. 538,
*411The Morales court, in turn, based its interpretation of section 510 almost entirely on Wage Order No. 10, which broadly exempts state employees from overtime compensation irrespective of the nature of the employees' work . (See Cal. Code Regs., tit. 8, § 11100(1)(C) ["[T]he provisions of this order shall not apply to any employees directly employed by the State or any political subdivision thereof ... "].) The Morales court reasoned, "[W]hen it enacted section 510, the Legislature was aware that [Wage Order No. 10]
*97exempted public employees in the amusement and recreation industry from overtime compensation."
In sum, there is nothing in either Morales or Johnson indicating that public employees' exemption from section 510, subdivision (a) overtime compensation applies solely when the employees are performing work that furthers the sovereign purposes of the state. We therefore see no basis for concluding that the applicability of the public employees' exemption from section 510, subdivision (a) turns on the type of work they are performing. Stated differently, we see no basis for concluding, as plaintiffs contend, that public employees are exempt from the overtime compensation mandates of section 510, subdivision (a) if the employees are performing work that furthers the DAA's sovereign purposes, but that such employees become entitled to overtime compensation if they are performing work that furthers the interests of "Outside Promoters." On the contrary, as the Morales court concluded, without qualification, "[P]ublic employees in the amusement and recreation industry are exempt from state overtime requirements." ( Morales , supra , 1 Cal.App.5th at p. 541,
Finally, while both parties and the trial court extensively discussed Noe, supra,
C. The law-of-the-case doctrine does not mandate reversal
Plaintiffs claim that the law-of-the-case doctrine requires that we reverse the trial court's order sustaining the DAA's demurrer. Specifically, plaintiffs contend that the Morales court held that, if plaintiffs could adequately allege that the DAA was their joint employer, they would state a valid claim against the DAA for section 510, subdivision (a) overtime compensation and that the law-of-the-case doctrine requires that we adhere to this conclusion in this appeal.
1. Governing law
" ' "The decision of an appellate court, stating a rule of law necessary to the decision of the case, conclusively establishes that rule and makes it determinative of the rights of the same parties in any subsequent retrial or appeal in the same case." ' " ( Leider v. Lewis (2017)
In Morohoshi v. Pacific Home (2004)
"The law of the case doctrine applies to [the Supreme Court] even though the previous appeal was before the Court of Appeal, and it applies even though this court may conclude the previous Court of Appeal opinion was erroneous. [Citation.] 'Indeed, it is only when the former rule is deemed erroneous that the doctrine of the law of the case becomes at all important.' [Citation.] The doctrine is, we have recognized, harsh. [Citation.] Accordingly, we have declined to adhere to it where its application would result in an unjust decision, e.g., where there has been a manifest misapplication of existing principles resulting in substantial injustice .... The unjust decision exception does not apply when there is a mere disagreement with the prior appellate determination." ( Id. at p. 491-492,
2. Application
The trial court concluded that the law-of-the-case doctrine did not apply because the Morales court concluded only that the "[p]laintiffs could potentially amend their Complaint." (Italics added.) The trial court reasoned further, "Although leave to amend was permitted, the [ Morales ] court, 'express[ed] no view as to the ultimate merits of [plaintiffs'] section 510 claim.' " The DAA echoes this reasoning on appeal, contending, "[T]he issue that Morales decided was whether Plaintiffs could potentially amend their complaint." We agree with this reasoning. The Morales court did not expressly hold that, if plaintiffs could adequately allege that the DAA was their joint employer, they would state a valid claim against the DAA for section 510, subdivision (a) overtime compensation.
The two key portions of the Morales opinion are as follows. In a paragraph summarizing the plaintiffs' claim for overtime due under section 510, subdivision (a), the Morales court stated:
"We agree that section 510 does not apply to the DAA. Nevertheless, we conclude that the trial court erred in sustaining the demurrer without leave to amend because [plaintiffs] have shown how they can amend their complaint to allege a potentially valid claim for overtime compensation." ( Morales , supra , 1 Cal.App.5th at p. 538,206 Cal.Rptr.3d 1 .)
In addition, the final paragraph of a section of the opinion entitled "Leave to Amend," ( Morales , supra , 1 Cal.App.5th at p. 543,
*100"We conclude that [plaintiffs] should be permitted to amend their section 510 claim since they have shown how they can potentially amend their complaint to state a valid claim under the joint employee doctrine. Accordingly, we reverse that part of the order sustaining the demurrer without leave to amend and direct the trial court to grant [plaintiffs] leave to amend the complaint. In so doing, we express no view as to the ultimate merits of [plaintiffs'] section 510 claim." ( Id. at pp. 543-544,206 Cal.Rptr.3d 1 .)
In light of such equivocal language, we conclude that the Morales court did not hold that plaintiffs yet-to-be pleaded joint employment theory adequately stated a cause of action against the DAA. Even if we were to agree with plaintiffs that the Morales court did hold that exempt public employees could sue their public employer for overtime compensation to the extent *414the public employer jointly employed such employees with a private employer, the law-of-the-case doctrine would not require that this court adhere to this erroneous conclusion. ( Morohoshi , supra , 34 Cal.4th at pp. 491-492,
We explained in part III.B, ante , that the DAA cannot be liable for section 510, subdivision (a) overtime compensation when the DAA is an employee's joint employer with another entity. Further, neither of the two cases that we cited in Morales in support of our decision to remand the matter to permit the plaintiffs to amend their complaint to attempt to state a claim pursuant to the joint employment doctrine- Bonnette v. California Health & Welfare Agency (9th Cir. 1983)
*101Accordingly, we conclude that the law-of-the-case doctrine does not require that we reverse the trial court's order sustaining the demurrer.
D. Plaintiffs failed to adequately state a claim for overtime compensation based on the theory that the DAA is not their direct employer
IV.
DISPOSITION
The judgment is affirmed. In the interests of justice, each party is to bear its own costs on appeal.
WE CONCUR:
BENKE, Acting P. J.
IRION, J.
In an unpublished portion of this opinion, we conclude that plaintiffs have not adequately alleged a separate theory of overtime compensation liability against the state entity. (See pt. III.D, post .)
We base our description of the proceedings in the case prior to Morales on the "Factual and Procedural Background" section of that opinion. (See Morales , supra , 1 Cal.App.5th at pp. 513-514,
Unless otherwise specified, all subsequent statutory references are to the Labor Code.
The Morales court explained, "Under this exemption, an employee of an amusement or recreational establishment is not entitled to overtime compensation [mandated by the FLSA] if certain criteria are met." (Morales , supra , 1 Cal.App.5th at p. 513,
The Morales court relied on Johnson v. Arvin-Edison Water Storage Dist. (2009)
Section 1194, subdivision (a) provides a cause of action to employees to recover legally mandated overtime and minimum wage compensation. (See III.B, post .)
The second amended complaint contained a series of class action allegations through which plaintiffs asserted their claim on behalf of a class of similar situated "119-day employees."
While the DAA's argument suggested that Noe involved an employer that was exempt from the relevant labor law, Noe did not involve an exempt employer. (See Noe, supra , 237 Cal.App.4th at pp. 331-334,
The record does not contain a reporter's transcript from the hearing.
While this appeal was pending, we granted an application of the League of California Cities and California State Association of Counties (the League) to file an amicus brief on behalf of the DAA. We have considered the League's amicus brief, as well as the plaintiffs' answer to that brief, in determining the issues presented on appeal.
The Industrial Welfare Commission "ha[s] constitutional and statutory authority to adopt wage orders prescribing, among other things, maximum hours of employment for employees in California." (Morales , supra , 1 Cal.App.5th at p. 539,
The order specifies various rates of compensation to be paid based on the amount of overtime worked. (Cal. Code Regs., tit. 8, § 11100 (3)(A)(1)(a), (b), (c).)
It is undisputed that plaintiffs are employed in the amusement and recreation industry and would be subject to Wage Order No. 10, but for the public employee exemption. (See Morales , supra , 1 Cal.App.5th at p. 540,
As we explained in Morales , " 'Joint employment occurs when two or more persons engage the services of an employee in an enterprise in which the employee is subject to the control of both.' " (Morales , supra , 1 Cal.App.5th at p. 543,
We consider plaintiffs' additional claim that they have adequately stated a cause of action against the DAA under the theory that they are not "directly employed," (Wage Order No. 10) by the DAA in part III.D, post .
We address plaintiffs' argument that the law-of-the-case doctrine requires that we reverse the trial court's order in part III.C, post .
Whether the employee would be entitled to overtime compensation from the private entity is not a question presented in this appeal.
Plaintiffs advanced this same argument in the prior appeal. (See Morales , supra , 1 Cal.App.5th at p. 542,
The Johnson court was clear that the sovereign powers cannon of interpretation was not the exclusive basis for the court's conclusion that section 510 does not apply to public entities:
"As discussed above, the indicia of legislative intent lead to the conclusion that the District, as a public entity, is exempt from section[ ] 510 .... In any event, the District is also exempt under the 'sovereign powers' maxim." (Johnson , supra , 174 Cal.App.4th at p. 738,95 Cal.Rptr.3d 53 , italics added.)
As noted in footnote 5, ante , section 510, subdivision (a) does not refer to public entities or public employees.
The DAA and the trial court emphasize that the Noe court stated, "We are aware of no authority suggesting that, under California law, joint employers are generally treated 'as if they were each other's agents' or that joint employers are normally held jointly liable for Labor Code violation[s] committed by a coemployer." (Noe , supra , 237 Cal.App.4th at p. 332,
However, plaintiffs properly note that the Noe court suggested that a joint employer may be liable pursuant to section 1194 for a cojoint employers' wage violations. (See Noe , supra , 237 Cal.App.4th at p. 333,
The Serrano court disagreed with the Noe court's statement that certain provisions of the Labor Code impose liability on an employer for the acts of a joint employer "by virtue of employer status." (Compare Noe , supra , 237 Cal.App.4th at p. 334, fn.10,
While the trial court relied on Noe in sustaining the demurrer, we must affirm a judgment entered after an order sustaining a demurer if the order is correct on any theory. (Hendy , supra , 54 Cal.3d at p. 742,
While, plaintiffs did not refer to the law-of-the-case doctrine as a separately captioned argument in their opening brief, we conclude that the argument was adequately raised on appeal. To begin with, plaintiffs clearly raised the argument in the trial court, and the trial court expressly discussed the doctrine in its order. Further, plaintiffs asserted in their opening brief that "the law-of-case doctrine is fully applicable ...." In addition, plaintiffs' opening brief contained a section entitled, "The court's holding in Morales ." (Boldface & some capitalization omitted.) In that section, plaintiffs argued that Morales established that "[plaintiffs] then-proposed amendment would state a claim if joint employment were to be properly pleaded." Further, the DAA included a separately headed argument in its brief captioned, "Law of the case doctrine is not applicable." (Some capitalization omitted.) Finally, plaintiffs offered a separately captioned law-of-the-case argument in their reply brief. Under these circumstances, we conclude that plaintiffs adequately raised the contention that the law-of-the-case doctrine requires reversal of the trial court's order.
See footnote *, ante .
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