A group of agricultural workers who sued a pair of strawberry marketers for unpaid wages have had their claims denied by the Ninth Circuit. The court upheld a previous ruling by a California federal court, stating that the companies were not liable for the workers’ pay. On appeal, the panel of judges determined that the companies did not have the necessary control over the farms to establish client employer liability under California law.^[1]

Filed in 2018, the workers alleged in their lawsuit that marketers Better Produce Inc. and Red Blossom Sales Inc. failed to pay wages under the Migrant and Seasonal Agricultural Worker Protection Act and California law. The district court, after a bench trial, concluded that Better Produce and Red Blossom were not joint employers under federal law or California common law because they did not supervise the workers’ activities on the farms.

Additionally, the district court held that the companies were not liable under California Labor Code Section 2810.3, which defines “client employer” as a business entity that obtains workers to perform labor within its usual course of business from a labor contractor. The court determined that since the workers did not work on the companies’ premises, the section did not apply.

“This is because the key issue under § 2810.3 concerns where the Plaintiffs-Appellants did the work of harvesting the strawberries,” the panel said.

The Ninth Circuit panel noted that while Better Produce and Red Blossom, as marketers, held master leases to the farmlands and sent personnel to the farms for quality control purposes, the workers did not perform work that fell within the companies’ regular course of business. The court clarified that California law makes a company liable if it uses financially unstable subcontractors to provide workers on its premises. However, the law does not extend liability for workers’ wages when the work is performed elsewhere, even if the workers are producing a product essential to the company’s business.

“[The] Marketers’ obligation to ensure the safety of the products they sell does not render the farms a “worksite” of the Marketers,” said the panel.

In so finding, the Ninth Circuit affirmed the ruling that Better Produce Inc. and Red Blossom Sales Inc. were not responsible for paying the agricultural workers’ wages. The court concluded that the companies did not have sufficient control over the farms to establish liability under California law. The decision highlights the distinction between liability for work performed on a company’s premises versus work performed elsewhere.

Red Blossom Sales is represented by Effie F. Anastassiou of Anastassiou & Associates and by Jason Wade Kearnaghan, Richard J. Simmons and Nora Stilestein of Sheppard Mullin Richter & Hampton LLP. Better Produce is represented by Todd Christopher Hunt, Steven Katz of Constangy Brooks Smith & Prophete LLP and Vincent Martinez of Twitchell & Rice LLP.

Western Growers, Ventura County Agricultural Association, Grower-Shipper Association of Santa Barbara and San Luis Obispo Counties, Grower-Shipper Association of Central California, California Strawberry Commission, and the California Fresh Fruit Association filed an Amici Curiae brief prepared by Robert Hulteng, Damon Ott, and Alvin Arceo of Littler Mendelson P.C.

Veronica Melendez of the California Rural Legal Assistance Foundation, who is representing the workers, was quoted in a Law360 article about the case as saying they are considering their options, including changing the law, which is very much on-brand when the group gets a court decision they don’t like.

Western Growers and industry allies will oppose any efforts in the legislature to expand joint employer liability beyond that which Cal. Labor Code section 2810.3 was intended, when it was enacted in 2014.

[1] Luis Morales-Garcia v. Better Produce, Inc., 22-55119, in the U.S. Court of Appeals for the Ninth Circuit

NLRB General Counsel Jennifer Abruzzo recently issued a crucial internal memo outlining her stance on non-compete provisions in employment contracts and severance agreements. In the memo, Abruzzo states that such provisions generally violate the National Labor Relations Act (NLRA), except under specific circumstances.

Abruzzo asserts that overbroad non-compete agreements infringe upon employees’ rights under Section 7 of the NLRA, which safeguards their ability to collectively take action to improve working conditions. These agreements hinder employees from engaging in various activities, including threatening to resign collectively for better working conditions, concertedly seeking employment with local competitors to obtain improved conditions, and soliciting co-workers to join a local competitor as part of protected concerted activity.

According to the memo, overbroad non-compete provisions may unreasonably deter employees from exercising Section 7 rights, presumably when employees perceive these provisions as blocking their ability to quit or change jobs, thus limiting their access to alternative employment opportunities suitable to their qualifications, skills, and preferences regarding work type and location. The memo further notes that this denial of employment opportunities undermines workers’ ability to replace lost income in the event of termination due to exercising their statutory rights, weakens their bargaining power during labor disputes, and erodes the social ties and solidarity necessary for workplace improvements.

Abruzzo clarifies that there may be instances where non-compete agreements can be considered lawful, such as when they exclusively restrict managerial or ownership interests in competing businesses or valid independent-contractor relationships. She also acknowledges that limited circumstances could justify the infringement on employee rights by narrowly tailored non-compete agreements.

In addition, the memo highlights General Counsel Abruzzo’s commitment to interagency collaboration with other agencies to address restrictions on employee rights, particularly those impacting job mobility. The NLRB has previously established memoranda of understanding with the Federal Trade Commission and the Department of Justice’s Antitrust Division, both of which have expressed concerns about the anti-competitive effects of non-compete agreements.

General Counsel Abruzzo’s memo affirms the NLRB’s determination to protect employees’ rights to engage in concerted activities and take steps towards enhancing their working conditions. The memo emphasizes the need for employers to carefully consider the use of non-compete provisions to ensure compliance with the NLRA.

California has a strong public policy disfavoring employee non-compete agreements. Under California law, non-compete agreements are generally considered unenforceable and void, with limited exceptions.