Employees Lose Labor Claim for Not Performing Labor Within Usual Course of Business

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Employees Lose Labor Code § 2810.3 Claim Where They Were Not Performing Labor Within The “Usual Course Of Business” Of The “Client Employer”

Morales-Garcia v. Better Produce, Inc., 2023 WL 3749314 (9th Cir. 2023)

In 2014, California enacted Labor Code § 2810.3 to protect workers whose labor has been outsourced to a labor provider. Under the statute, the outsourcing entity, known as a “client employer,” is liable for the laborers’ wages if the laborers’ work is within the outsourcers’ “usual course of business.”

In the present case, the plaintiffs are agricultural workers hired by strawberry growers (“the Growers”) to pick the fruit that was then turned over to the defendants – Red Blossom Sales, Inc. and Better Produce, Inc. (“the Marketers”) for distribution. The Marketers cooled and sold the berries principally to large retail grocery chains. The Marketers conducted their cooling and distribution operations on premises that were close to but separate from the farms.

As happens quite frequently with agricultural workers (and, hence, the need for Labor Code § 2810.3) the Growers stopped paying the plaintiffs and later filed for bankruptcy. The plaintiffs sued the Growers and the Marketers as joint employers under California and federal law. The plaintiffs also sued the Marketers as client employers under California Labor Code § 2810.3. The district court ruled for the Marketers on all theories. The plaintiffs appealed only with respect to the Marketers’ liability under § 2810.3.

On appeal, the Ninth Circuit affirmed, explaining that because the plaintiffs were not performing labor within the Marketers’ “usual course of business” – which is defined as “the regular and customary work of a business, performed within or upon the premises or worksite of the client employer Labor Code § 2810.3(a)(6) – the Marketers were not liable as client employers under California Labor Code § 2810.3.