Takeaway: California has some of the strictest wage payment laws in the country and recently made it harder for companies to treat workers as independent contractors. Yet even in California, an employer can avoid wage payment liability when it honestly believes that a worker was an independent contractor.
Walmart organized 10 photo shoots in San Francisco between July 2016 and August 2017 in which a women’s clothing model appeared through a talent management agency. The model worked for a total of 15 days during that time, in nonconsecutive increments of one or two days. She was photographed and measured at a casting meeting, and her information was passed on to a member of Walmart’s creative team.
Before each photo shoot, Walmart sent instructions to her regarding her clothing, hair, nails, makeup and general appearance. Walmart provided the clothing the model was to wear for the shoots, which included shoes, dresses, undergarments, swimwear and other items. Onsite stylists, producers, photographers, and other staff chose her outfits and told her how to pose. After the shoots, the model returned the garments to Walmart.
Walmart had a contract with the talent agency in which it agreed to pay the agency a daily flat rate for each day of modeling services. This flat rate included the pay to the model plus a commission to the talent agency. The contract required the talent agency to send Walmart invoices for the work, which were payable within 30 days. The contract specified that the talent agency and its staff were independent contractors.
Despite the terms of this contract, the model claimed that Walmart should have paid her immediately after each photo shoot ended, and filed a lawsuit in San Francisco Superior Court, claiming that Walmart violated the California Labor Code. She sought more than $540,000 in waiting-time penalties.
Walmart removed the case to federal court based on diversity of citizenship. It also filed a third-party complaint against the talent agency. Walmart then moved for summary judgment. The district court denied summary judgment on Walmart’s defense that the plaintiff was an independent contractor outside the protection of the relevant Labor Code provisions, concluding that the plaintiff had raised a triable question of fact about whether she was an employee.
However, the district court granted summary judgment on Walmart’s defense that there was a good-faith dispute about whether the plaintiff was an independent contractor, reasoning that the short length of time she worked for Walmart and the fact that she had also worked for other companies, among other factors, made it objectively reasonable for Walmart to believe she was not an employee.
The plaintiff appealed the decision to the 9th U.S. Circuit Court of Appeals. On appeal, the plaintiff argued that Walmart was foreclosed from raising a good-faith defense based on its misclassification of her status as an independent contractor, and its admission that she was entitled to the wages at issue, while only disputing when they were due.
The 9th Circuit recounted recent developments in California law restricting the classification of workers as independent contractors. A 1989 California Supreme Court decision defined independent contractor status based on whether the alleged employer had the right to control the worker in the manner and means of performing work. In 1996, the California Industrial Welfare Commission (IWC) expanded the instances in which employment status could apply to a worker.
Beginning in 2010, the California Supreme Court began reinterpreting the IWC rules to make it harder for a worker to qualify as an independent contractor. It created the ABC test, which requires that an independent contractor be (A) free from control in the performance of work, (B) perform work outside the usual course of the hiring entity’s business, and (C) be customarily engaged in the trade or occupation performed.
These decisions applied to the IWC wage and hour rules, but not to wage payment requirements. The California legislature enacted the ABC test into law in September 2019, which caused it to apply to the wage payment requirements, but that did not apply retroactively. Because the photo shoots occurred in 2016 and 2017, the ABC test did not apply to the claims against Walmart.
Because the model worked only a very short period of time for Walmart, and worked in the modeling trade, which is separate from Walmart’s usual course of business, Walmart had a good-faith argument as to her contractor status. The 9th Circuit thus upheld the dismissal of her claims.
Hill v. Walmart Inc., 9th Cir., No. 21-15180 (April 26, 2022).
Jeffrey Rhodes is an attorney with McInroy, Rigby & Rhodes LLP in Arlington, Va.