Henderson v. Equilon Enters., LLC, A151626

• Decision Date: 08 October 2019
• Docket Number: A151626
• Citation: 40 Cal.App.5th 1111,253 Cal.Rptr.3d 738
• Court: California Court of Appeals Court of Appeals
• Parties: Billy R. HENDERSON, Plaintiff and Appellant, v. EQUILON ENTERPRISES, LLC, Defendant and Respondent.

40 Cal.App.5th 1111

253 Cal.Rptr.3d 738

Billy R. HENDERSON, Plaintiff and Appellant,

v.EQUILON ENTERPRISES, LLC, Defendant and Respondent.

A151626

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

Filed October 8, 2019

Bleau Fox, PLC, Samuel T. Rees, Los Angeles, Lichten & Liss-Riordan, P.C., Shannon E. Liss-Riordan, for Plaintiff and Appellant

Lafayette & Kumagai LLP, Gary T. Lafayette, Oakland, Syusan T. Kumagai, Barbara L. Lyons, Oakland, for Defendant and Respondent

Sanchez, J. Plaintiff and appellant Billy R. Henderson brought a civil action for wage and hour violations against defendant and respondent Equilon Enterprises, LLC, doing business as Shell Oil Products US (Shell), under a "joint employer" theory of liability. Henderson's causes of action consisted of failure to pay overtime compensation, failure to pay for missed break periods, and unfair business practices ( Bus. & Prof. Code, § 17200 ). The trial court found Shell was not Henderson's joint employer and granted Shell's motion for summary judgment. We affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

A. Procedural History

Henderson commenced this lawsuit as a class action in July 2010. The trial court stayed the action under the common law doctrine of exclusive concurrent jurisdiction due to the earlier filing of a related class action lawsuit. In April 2016, Henderson filed a second amended complaint removing the class action allegations and stating individual claims for unpaid wages, statutory wage and record-keeping penalties and interest, as well as restitution, injunctive, and declaratory relief under Business and Professions Code section 17200 et seq. Henderson alleged he had been employed as the station manager of several Shell-owned gasoline stations operated by Danville Petroleum, Inc. (Danville). He claimed he worked overtime and missed off-duty meal and rest breaks without receiving compensation. He further alleged that while he had been hired by Danville, Shell was liable as his "joint employer" because Shell "both directly and indirectly controlled the wages, hours or working conditions" of Danville's employees.

Shell moved for summary judgment, asserting it could not be held liable because Danville was Henderson's sole employer. (See Martinez v. Combs (2010) 49 Cal.4th 35, 49, 109 Cal.Rptr.3d 514, 231 P.3d 259 ( Martinez ) ["only an employer can be liable"].) Henderson settled his claims against Danville and opposed Shell's motion for summary judgment. After a hearing conducted on January 12, 2017, the trial court issued its opinion and order granting Shell's motion. Judgment in favor of Shell was entered on March 30, 2017. This appeal followed.

B. Relevant Facts

As the parties acknowledge in their appellate briefs, the relevant facts are largely undisputed. Danville is a California corporation formed in 1997. Danville is a third-party service station operator. Henderson worked as a station manager for Danville from approximately 1998 to 2008, when he was fired following an accusation of sexual harassment. Henderson managed as many as seven of Danville's Shell-branded gas stations between 2001 through 2008. During this time, he was never directly employed by Shell.

Prior to August 2003, Danville operated Shell-branded service stations as a franchisee under a Contractor Operated Retail Outlet (CORO) Agreement.¹ Under these franchise agreements, third-party operators like Danville ran convenience stores and/or car washes at Shell-branded gas stations, retaining the proceeds from those activities while selling fuel for Shell. Shell charged the operators a royalty on convenience store sales and paid the operator a set fee for each gallon of gasoline sold.

In 2003, Shell discontinued the CORO program and adopted a Multi-Site Operator (MSO Agreement) structure. Under the MSO Agreement, Shell supplied the stations with fuel products and set fuel prices. Danville facilitated the collection of customer payments for fuel purchases and the transmission of these payments to Shell. Shell compensated Danville for this service and reimbursed Danville for certain expenses. In connection with the fuel sale business, Danville also agreed to survey and report the fuel prices charged by competitors, change fuel prices as directed by Shell, keep the station open for specified hours, use specified equipment for recording and reporting all sale transactions to Shell, and abide by certain standards to protect the Shell brand. From August 2003 to 2008, Danville operated as many as 39 gas stations for Shell under an MSO Agreement, employing hundreds of people at those stations.

Danville and Shell also entered into a Multi-Site Non-Petroleum Facility Lease (MSO Lease) in connection with the operation of convenience stores, car washes, and quick service restaurants on Shell gas station sites. Under the MSO Lease, Danville operated these endeavors for its own benefit and was responsible for most of the associated expenses. Danville paid Shell a monthly rent for the leased facilities. The MSO Agreement and MSO Lease expressly disclaim any franchise relationship between Danville and Shell.

The MSO Agreement required Danville to comply with all applicable employment laws. Danville alone made decisions with respect to recruiting, interviewing, hiring, disciplining, promoting and terminating its employees. Danville had sole control over employee payroll functions, including whether employees would be deemed exempt from overtime regulations. Danville had its own employee handbook and set its own meal and break policies. Shell retained the right to ask Danville to "remove" an employee from a Shell-owned station "for good cause shown," but the MSO Agreement provided that Danville had sole authority to terminate its employees.²

The MSO Agreement also required Danville to operate gas stations in conformity with Shell's operational standards. Shell provided Danville with station operation manuals, including the MSO Site Operations Manual (MSO Manual), the Enhanced Customer Value Proposition Reference Guide (CVP Reference Guide), and the Health, Safety and Environmental Reference Manual (Blue Book). Danville directed its employees as to how to comply with the provisions of these manuals, and the record indicates that Danville never required Henderson to read the MSO Manual. While the standards in these manuals appear extensive, the CVP Reference Guide specifies, among other things, that Danville "may use different methods [or] frequencies [than] those recommended here."

Both Danville and Shell conducted station inspections. Shell's inspections were referred to as "CVP inspections." Shell's representatives would give their inspection reports to Danville, and Danville would discuss any concerns with Henderson. Shell's representatives did not directly tell Henderson or other station employees how to perform their work. Danville performed its own audits of the convenience stores managed by Henderson. Henderson was instructed by Danville to contact Danville representatives for any questions about operating his stations. Shell was not involved in the decision to terminate Henderson's employment.

DISCUSSION

I. Standard of Review

The standard for reviewing a grant of summary judgment is well established. Summary judgment is appropriate if "there is no triable issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." ( Code Civ. Proc., § 437c, subd. (c).) To meet its initial burden in moving for summary judgment, a defendant must present evidence that either "conclusively negate[s] an element of the plaintiff's cause of action" or "show[s] that the plaintiff does not possess, and cannot reasonably obtain," evidence necessary to establish at least one element of the cause of action. ( Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 853–854, 107 Cal.Rptr.2d 841, 24 P.3d 493.) Once the defendant satisfies its initial burden, "the burden shifts to the plaintiff ... to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto." ( Code Civ. Proc., § 437c, subd. (p)(2).) When considering an appeal from a grant of summary judgment, we independently review the record, "liberally construing the evidence in support of the party opposing summary judgment and resolving doubts concerning the evidence in favor of that party." ( Miller v. Department of Corrections (2005) 36 Cal.4th 446, 460, 30 Cal.Rptr.3d 797, 115 P.3d 77.)

II. Joint Employment Relationships in Wage and Hour Claims

Henderson's wage and hour claims are based on the Industrial Welfare Commission's (IWC) wage order No. 7-2001 ( Cal. Code Regs., tit. 8, § 11070 (Wage Order No. 7).) Wage Order No. 7 defines "Employer" as a person or business "who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person." ( Cal. Code Regs., tit. 8, § 11070, subd. 2(F).) An "Employee" is defined as "any person employed by an employer." (Id. , subd. 2(E).) "Employ" is defined as "engag[ing], suffer[ing], or permit[ting] to work." (Id. , subd. 2(D).)

In Martinez , the Supreme Court evaluated wage and hour claims brought by seasonal agricultural workers against a farmer who was their direct employer and two of the produce merchants through whom the farmer sold his strawberries. ( Martinez , supra , 49 Cal.4th at p. 48, 109 Cal.Rptr.3d 514, 231 P.3d 259.) The plaintiffs' suit was predicated on a theory that both the farmer and the produce merchants were their joint employers. The plaintiffs argued that in an action for unpaid and overtime wages under Labor Code section 1194, the court should look to the alternative definitions of "employ" and "employer" as set forth in IWC Wage Order No. 14 to determine who is a potentially liable employer. ( Martinez , at p. 51, 109 Cal.Rptr.3d 514, 231 P.3d 259 ). The Supreme Court examined "the question of how employment...