Martinez v. Combs, No. S121552 (Cal. 5/20/2010)

• Decision Date: 20 May 2010
• Docket Number: No. S121552.,S121552.
• Parties: MIGUEL MARTINEZ et al., Plaintiffs and Appellants, v. CORKY N. COMBS et al., Defendants and Respondents.
• Court: California Supreme Court

Page 1

MIGUEL MARTINEZ et al., Plaintiffs and Appellants, v. CORKY N. COMBS et al., Defendants and Respondents.

No. S121552.

Supreme Court of California.

Filed May 20, 2010.

Appeal from the Superior Court of San Luis Obispo County, No. CV001029, Ct.App. 2/6 B161773, Earle Jeffrey Burke, Judge.

Law Offices of Talamantes/Villegas/Carrera, Mark Talamantes, Jennifer Reisch; California Rural Legal Assistance, Inc., William G. Hoerger, Michael C. Blank; California Rural Legal Assistance Foundation, Inc., and Julia Montgomery for Plaintiffs and Appellants.

Virginia Ruiz for Farmworker Justice, National Employment Law Project and United Farm Workers as Amici Curiae on behalf of Plaintiffs and Appellants.

Schneider & Wallace, Joshua Konecky and W.H. "Hank" Wilson IV for Centro Legal de La Raza, Golden Gate University Women's Employment Rights Clinic, The Katharine & George Alexander Community Law Center, The Legal Aid Foundation of Los Angeles, The Legal Aid Society of San Franciso-Employment Law Center and Neighborhood Services of Los Angeles County as Amici Curiae on behalf of Plaintiffs and Appellants.

Law Offices of Carroll & Scully, Donald C. Carroll and Charles P. Scully II for California Labor Federation, AFL-CIO as Amicus Curiae on behalf of Plaintiffs and Appellants.

Anastassiou & Associates, Jane E. Bednar and Effie F. Anastassiou for Defendant and Respondent Apio, Inc.

Western Growers Law Group, Noland, Hamerly, Etienne & Hoss and Terrence R. O'Connor for Defendants and Respondents Corky N. Combs and Larry D. Combs dba Combs Distribution Co., and Juan Ruiz.

Monte B. Lake for California Farm Bureau Federation, Agricultural Council of California, California Citrus Mutual, California Grape and Tree Fruit League, Grower-Shipper Association of Central California, Imperial Valley Vegetable Growers Association, Nisei Farmers League, Ventura County Agricultural Association, Western Growers Association and Wine Institute as Amici Curiae on behalf of Defendants and Respondents.

WERDEGAR, J.

Plaintiffs, seasonal agricultural workers, brought this action under Labor Code section 1194¹ and other theories to recover unpaid minimum wages. Plaintiffs contend the Industrial Welfare Commission's (IWC) wage order No. 14-2001, entitled "Order Regulating Wages, Hours, and Working Conditions in the Agricultural Occupations" (Cal. Code Regs., tit. 8, § 11140), commonly known as Wage Order No. 14, defines defendants as their employers for purposes of section 1194. The lower courts rejected the argument. We affirm.

I. Background

This case arises out of the strawberry farming operations of Isidro Munoz, Sr., who did business as Munoz & Sons (Munoz). Plaintiffs are seasonal agricultural workers whom Munoz employed during the 2000 strawberry season: Antonio Perez Cortes, Catarino Cortez, Otilio Cortez, Asuncion Cruz, Hilda Martinez and Miguel Martinez. Munoz, originally named as a defendant, has been granted a discharge in bankruptcy. The remaining defendants are two of the produce merchants through whom Munoz sold strawberries: Apio, Inc. (Apio), and Combs Distribution Co., together with its principals, Corky and Larry Combs, and its field representative Juan Ruiz (collectively Combs). Plaintiffs' separate action against a third merchant, Frozsun, Inc. (Frozsun), has been stayed pending the outcome of this action. A fourth merchant, Ramirez Brothers, has petitioned for bankruptcy.

During the 2000 season, Munoz grew and harvested strawberries in the Santa Maria Valley, which lies on the Central Coast along the border of San Luis Obispo and Santa Barbara Counties. Munoz farmed a total of 130 acres divided among four sites. He leased two 30-acre sites (the "Oceano" and "Zenon" fields) from defendant Apio and a 40-acre site (the "El Campo" field) from an unidentified third party.² Munoz had leased the Oceano and El Campo fields in prior years. He rented an additional 30-acre site (the "Santa Maria" field) from Ramirez Brothers. Munoz operated his business as a single, integrated concern, using his employees and equipment in all four fields, as needed, and combining his revenues and expenses. During the peak of the harvest, Munoz employed approximately 180 agricultural workers, three foremen (including his brother, Armando Munoz) and two office workers (including his son, Isidro Munoz, Jr.). Munoz owned his equipment, including trucks, tools and strawberry carts, and paid his own business expenses, including plants, fertilizer, pesticide, irrigation, fuel, packaging, and rent for additional trucks, a large tractor and field toilets. On the occasions when Apio and Combs paid Munoz's expenses in the first instance, they billed him. Both defendants, for example, charged Munoz for packaging that bore their companies' labels, and for refrigeration, and Apio charged Munoz for his portion of the cost of a shared irrigation system.

Munoz grew and harvested strawberries for two distinct markets: fresh sale to consumers in markets, and sale for processing (typically freezing). Fresh market and freezer berries are harvested differently. Fresh market berries cannot be too green or too ripe, and the calyx (sepals and stem) is left attached. Market berries are packed in the field, as they are picked, into the containers in which they will be sold to consumers, such as plastic baskets or clamshell boxes. Freezer berries, in contrast, are selected for advanced ripeness and packed in bulk into crates with the calyx removed. Munoz harvested strawberries for both markets from the same fields. He decided which fields to harvest on any given day, and whether to harvest for fresh market sale or the freezer, based largely on the need to pick fields every three days, informing the merchants of his schedule and taking into account their orders and the berries' condition.

The four produce merchants through which Munoz sold strawberries are not related to one another. Munoz had dealt profitably with defendant Apio for three years prior to 2000, and with defendant Combs for one. The principals of Ramirez Brothers were Munoz's personal friends. Apio, Combs and Ramirez Brothers dealt only in fresh market berries, and Frozsun dealt only in freezer berries. Apio, Combs and Frozsun each accepted berries from many independent growers, not just Munoz. Combs also sold beans for Munoz after the strawberry season ended.

Munoz had different contractual relationships with each merchant. Apio and Combs acted as produce brokers, selling Munoz's strawberries for a commission and remitting to him the net proceeds.³ Munoz retained title until sale. Both defendants, following a common practice of produce merchants on the Central Coast, advanced money to Munoz before the season began, in exchange for exclusive rights to fresh produce from designated fields. These advances were retired over the season from sales revenues. Apio and Combs handled payment differently. Combs agreed to remit the actual net proceeds of sale to Munoz within 21 days, in weekly payments, minus a deduction for loan repayment (30 percent), expenses such as packaging materials and cooling, and an 8 percent commission. Apio operated similarly and charged the same commission but, rather than making weekly payments to Munoz of actual net proceeds, paid him estimated net proceeds in the form of a weekly "Pick-Pack" payment that was initially set at $2.00 per carton but actually varied with the price of strawberries. Frozsun, which purchased strawberries exclusively for processing, paid Munoz on delivery the official "field price" posted by the Processing Strawberry Advisory Board of California. Munoz and Ramirez Brothers, being personal friends, conducted business without a written contract. Their understanding was that Munoz would pay for plants and labor and Ramirez Brothers would pay all other expenses, remitting net profits to Munoz after recovering their costs.

Munoz's financial resources for the 2000 season came from many sources. Much of his cash during the season came from sales proceeds, including at least $378,392 in Pick-Pack payments (estimated net proceeds) from Apio, $476,955 in net proceeds from Frozsun, and an unspecified amount from Combs. Munoz also invested at least $500,000 of his own funds and an unspecified amount of loan proceeds. The record does not identify all of Munoz's financing sources. Some financing, as noted, came from the produce merchants. Apio advanced Munoz $163,000, or $ 2,716 per acre for the Oceano and Zenon fields, and Combs advanced $80,000, or $2,000 per acre for El Campo. These advances were not intended to cover Munoz's actual costs for growing and harvesting strawberries, which were far higher.⁴ The vice-president of Apio described that company's advances as covering rent for the Oceano and Zenon fields. Frozsun agreed to make or facilitate a loan of up to $225,000 in exchange for the exclusive right to purchase freezer and cannery berries from all of Munoz's acreage. Munoz also received loans from personal friends and financing for equipment from Ford Motor Company and John Deere.

Munoz alone, with the assistance of his foremen, hired and fired his employees, trained them when necessary, told them when and where to report to work, when to start, stop and take breaks, provided their tools and equipment,⁵ set their wages, paid them, handled their payroll and taxes, and purchased their workers' compensation insurance.⁶

Munoz and his foremen also supervised his employees. Plaintiffs contend defendants Apio and Combs participated in the supervision, characterizing as supervision the activities of defendants' field representatives in the areas of quality control and contract compliance. We will return to this subject below. (See post, at p. 51 et seq.) Summarizing for present purposes, picking and packing strawberries for fresh market sale necessitated communication in the field, during the harvest, between defendants and Munoz's personnel. Both Apio and...