Plaintiffs are farmworkers who harvested strawberries in Santa Barbara County, California in 2016 and 2017. They were hired by three farms that grew the berries: Higuera Farms, Inc., Big F Company, Inc., and La Cuesta Farming Company, Inc. (“the Growers).

The fruit was then turned over to Red Blossom Sales, Inc. and Better Produce, Inc. (“the Marketers”) for distribution. The Marketers held master leases to the farmlands and subleased them to the Growers.

The Marketers were each licensed by the U.S. Department of Agriculture to sell produce as a “commission merchant.” Such a license is required for any entity that buys or sells more than 2,000 pounds of fresh or frozen fruits and vegetables in a given day. The Marketers entered into yearly marketing and sublease agreements with the Growers, which specified that the land would be used only to grow strawberries and that the Marketers retained the exclusive right to sell the strawberries to their retail customers.

Under their agreements, the Growers were responsible for preparing and cultivating the land and for supervising and controlling the workers. The Marketers provided the Growers with packaging materials, communicated with them about the quantity of the strawberries produced, and had the strawberries placed into containers with the Marketers’ labels on them. The Marketers retained the right to enter the lands to conduct inspections of the strawberries.

Red Blossom’s retail customers required Red Blossom to conduct additional food safety compliance inspections, including random food safety audits, and to pay for a third-party audit. The Growers conducted the actual farming operations and supervised the plaintiffs’ work.

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.

In 2018, the Growers stopped paying the workers, so they filed a class action lawsuit against both the Growers and the Marketers, alleging wage and hour violations, as joint employers under California and federal law. The Marketers were allegedly client employers under California Labor Code § 2810.3. While the proceedings were ongoing, the Growers filed for bankruptcy.

The parties agreed to bifurcate the trial, with all issues related to the Growers’ liability to be tried later by a jury. The Marketers’ liability was to be determined first in a bench trial. After a two-day bench trial the district court entered judgment in favor of the Marketers

The Plaintiffs’ appealed only with respect to the Marketers’ liability under Labor Code § 2810.3. The 9th Circuit Court of Appeals affirmed the district court and held that Plaintiffs’ were not performing labor within the Marketers’ “usual course of business” as defined by the statute in the published case of Morales-Garcia V. Better Produce, Inc.  2:18-cv-05118-SVW-JPR (June 2023).

This appeal concerns the application of a California labor law enacted in 2014 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.” Cal. Labor Code § 2810.3(a)(1)-(3), (6).

The California Legislature enacted § 2810.3 to establish a new form of liability for employers, termed “client employers,” who obtain workers from third-party contractors. The legislative history of the statute indicates that client employer liability was created to address the growing business model where a business uses a contractor to supply workers who are supervised and paid by the contractor, but appear to be employees of the business.

Under the statute, Cal. Labor Code § 2810.3(a)(1)-(3), (6), 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.”

The panel held that the Plaintiffs’ were not performing labor within the Marketers’ “usual course of business” as defined by the statute. That term is defined as “the regular and customary work of a business, performed within or upon the premises or worksite of the client employer.”

“By requiring the work to take place on the premises of the client employer, the legislature required that a client employer exercise some element of control over the place where the laborers work. Given the particular facts of this case, the panel concluded that the plaintiffs’ work took place on the farms where the strawberries were grown, not on the premises or worksites of the Marketers, and that the Marketers are therefore not liable as client employers under § 2810.3”.

Given the particular facts of this case, the 9th Circuit panel concluded that “Appellants’ work took place on the farms where the strawberries were grown, not on the premises or worksites of the Marketers. The Marketers are therefore not liable as client employers under California Labor Code § 2810.3.”

9th Circuit Limits Application of LC 2810.3 Protections For Farm Workers