Morales v. 22nd Dist. Agric. Ass'n

25 Cal.App.5th 85

235 Cal.Rptr.3d 401

Jose Luis MORALES et al., Plaintiffs and Appellants,

v.22ND DISTRICT AGRICULTURAL ASSOCIATION, Defendant and Respondent.

D072378

Court of Appeal, Fourth District, Division 1, California.

Filed July 10, 2018

Certified for Partial Publication.^*

Law Offices of David J. Gallo and David J. Gallo, Del Mar, for Plaintiffs and Appellants.

Gordon & Rees, James J. McMullen, Jr., Matthew G. Kleiner, San Diego, and Justin M. Michitsch, Los Angeles, for Defendant and Respondent.

League of California Cities and California State Association of Counties, as Amicus Curiae on behalf of Defendant and Respondent.

AARON, J.

I.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) 1 Cal.App.5th 504, 542–544, 206 Cal.Rptr.3d 1 ( Morales )), we now conclude that such a cause of action would not be legally viable. We further conclude that the law-of-the-case doctrine does not require that we reverse the trial court's order sustaining a demurrer to the plaintiffs' second amended complaint.¹

II.FACTUAL AND PROCEDURAL BACKGROUND

A. Proceedings in the case prior to our decision in Morales²

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 employees of the DAA filed a putative class action alleging that the DAA failed to pay plaintiffs overtime compensation required by state law under Labor Code section 510³ and federal law under the Fair Labor Standards Act of 1938 ( 29 U.S.C. § 201 et seq. ) (FLSA).

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 ( 29 U.S.C. § 213(a)(3) ) commonly referred to as the "amusement exemption."⁴ The trial court held a jury trial on the DAA's affirmative defense to plaintiffs' FLSA claim. The jury rendered a verdict in favor of the DAA and the trial court entered a judgment in favor of the DAA. Plaintiffs timely appealed.

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, 206 Cal.Rptr.3d 1.) The Morales court concluded that the trial court properly granted judgment for the DAA on the FLSA claim. ( Ibid. ) The present appeal presents no issues with respect to that claim.

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, 206 Cal.Rptr.3d 1.) After reviewing relevant case law,⁵ statutory law, and administrative regulations, we concluded, "when section 510 and [W]age [O]rder No. 10-2001 are viewed together, the inescapable conclusion is that public employees in the amusement and recreation industry are exempt from state overtime requirements." ( Morales , supra , at p. 541, 206 Cal.Rptr.3d 1.) However, the Morales court concluded that the trial court erred in denying plaintiffs leave to amend to attempt to state a claim for section 510, subdivision (a) overtime "under the joint employee doctrine." ( Morales , at p. 543, 206 Cal.Rptr.3d 1.)

In 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, 206 Cal.Rptr.3d 1.) We further noted that "[plaintiffs] assert that they can amend the complaint to allege that when they work on interim events, the DAA is a joint employer with the outside promoters and must therefore comply with section 510." ( Id. at pp. 542–543, 206 Cal.Rptr.3d 1.) After observing that "where joint employment exists, all employers are individually responsible for compliance with the FLSA," ( id. at p. 543, 206 Cal.Rptr.3d 1 ) and that "joint employment is also recognized under California law," ( ibid. ) we concluded that plaintiffs should be granted leave to amend their complaint, reasoning:

"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, 206 Cal.Rptr.3d 1.)

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."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.

"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)⁶ on behalf of themselves and a putative class of "119 day employees."⁷

D. 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) 237 Cal.App.4th 316, 333–334, 187 Cal.Rptr.3d 836 ( Noe ) "confirms that the joint employer doctrine does not extend California's overtime laws to a joint employer who is otherwise exempt from that law."⁸

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 Moral...