AEG, the owner of various sports venues in Southern California, contracted with Levy Premium Foods to provide food and beverage services at those venues. Levy, in turn, contracted with Canvas to sell food, candy, and drinks in the aisles during events at the venues. Plaintiffs, who were purportedly employed by Canvas, sued AEG and Levy (defendants), claiming that defendants were co-employers with Canvas and therefore liable for Canvas’s alleged violation of various labor laws, including failure to pay a minimum wage and misclassifying plaintiffs as independent contractors.

Defendants obtained summary adjudication of plaintiffs’ cause of action based on Labor Code section 226.8, which imposes a penalty of up to $25,000 per violation against an employer who “engages in” an act of “willful misclassification” of a worker. The trial court reasoned that even if defendants were plaintiffs’ employers along with Canvas, they did not “engage in” willful misclassification because they did not classify Canvas’s workers at all.

The Court of Appeal (Second District, Division Seven) issued an alternative writ after the filing of plaintiffs’ writ petition and defendants’ preliminary opposition, but the trial court declined to reconsider its ruling. Defendants then retained Horvitz & Levy LLP to assist in preparing defendants’ formal return and to present oral argument. The return added a new argument that the trial court’s ruling was correct on an alternative legal ground – i.e., that section 226.8 does not create any private right of action.

The Court of Appeal held that Labor Code section 226.8 creates no private right of action, and denied plaintiff’s writ petition on that basis, leaving in place the trial court’s summary adjudication ruling in favor of defendants. The Court of Appeal further rejected plaintiffs’ argument that an employer may be held vicariously liable under section 226.8 based solely on the acts of a co-employer—an issue that will be relevant to plaintiffs’ remaining PAGA claim based on section 226.8 if that claim proceeds to trial. Finally, the court held that section 226.8 is not limited to employers who actually make the misclassification decision, but extends to joint employers when they have actual knowledge of and acquiesce in a co-employer’s willful misclassification of its employees.