In Castaneda v. Ensign Group, Inc., ___ Cal.App.4th ___ (September 15, 2014), the California Court of Appeal (Second Appellate District, Division Six) reversed the order of the San Luis Obispo County Superior Court (Judge Harman) granting summary judgment in favor of defendant on plaintiff’s class action claims of unpaid minimum and overtime wages.
Plaintiff was a certified nursing assistant who filed a class action complaint against defendant, a holding corporation with no employees, for unpaid minimum and overtime wages. In doing so, plaintiff alleged that defendant was the “alter ego” of the nursing facility where he worked (and that was owned by the defendant holding corporation). Therefore, defendant’s “corporate veil should be pierced,” and it should be treated as his actual employer. Defendant filed a motion for summary judgment, arguing that it was “a holding company that has no employees and is not engaged in the direction, management or control of [the nursing facility] or its employees.” Instead, it said, the nursing facility “was an independent company with ‘a traditional management structure.’” In response, Plaintiff argued that defendant was properly classified as an employer because it controlled the nursing facility, including the “training, supervision, work requirements, working conditions, and employee benefits for the employees who work[ed] there.” In fact, plaintiff testified, when he began work at the nursing facility, he was advised that he was hired by defendant. The trial court sided with defendant, however, finding that no employment relationship existed between defendant and the putative class members. Therefore it granted summary judgment. Plaintiff appealed.
The appellate court disagreed, finding that if a corporation with no employees exercises some control over a corporation with employees that it owns, it may be considered those employees’ employer. First, the court noted that California’s “broad definition of an employer includes ‘any person . . . who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of [an employee].’” Thus, “[a]n entity that controls the business enterprise may be an employer even if it did not ‘directly hire, fire or supervise’ the employees.” The court then went on to cite the many examples of control that defendant exercised over the employees, including structural and management control, recruiting, payroll, a “seamless flow of corporate officers” between defendant and a cluster of companies that it owned, such as the nursing facility, control over the employees’ hours, and representations by defendant that it was the actual employer.