Good News for California Employers Following a Difficult 2019 Legislative Session

On January 1, 2020, California businesses faced several new laws that may significantly impact business operations, including AB 5 (codifying the “ABC” test) and AB 51 (restricting the use of mandatory arbitration). On the positive side is a ruling from the California Court of Appeal that denied a former employee’s attempt to hold one business liable as a joint employer.

In St. Myers v. Dignity Health, plaintiff St. Myers worked as a nurse practitioner for a medical clinic owned and operated by Dignity Health. After resigning her employment, St. Myers sued Dignity Health and a company called Optum360 Services, Inc. for retaliation and construction discharge in violation of public policy. Optum360 provided revenue cycle services to Dignity Health.

No Joint Employment: the Court rejected St. Myers’ attempt to hold Optum360 liable as a joint employer. Noting that the determination of joint employer liability depends on “myriad facts surrounding the employment relationship in question,” the Court relied on the following facts to reject St. Myers’ joint employment claim: Optum360 did not:

(1) pay St. Myers’ salary, benefits, or Social Security taxes;

(2) own the equipment St. Myers used to perform her work;

(3) have the authority to hire, transfer, demote, discipline, or discharge St. Myers; or

(4) set St. Myers’ schedule or determine her amount of pay.

This decision is a good reminder for companies to evaluate their business-to-business relationships to determine what, if any, relationship they may have to the employees of their business partners.  

Nicholas Kanter is a Shareholder in our Employment Practice Group.