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Class Action Defense Cases-Holmgren v. County of Los Angeles: California State Court Affirms Judgment Adverse To Class Action Plaintiffs Holding Engineers Of Firms Under Contract With County Were Not Common Law Employees Of County

Trial Court Properly Entered Judgment for Defense in Class Action by Engineers, Employed by Firms Working under Contract for County, because Engineers were not “Common Law Employees” of County California State Court Holds

Plaintiff-engineers filed a putative class action against the County of Los Angeles alleging that they had been designated improperly as employees of the independent contractors hired to perform work for the County, rather than as employees of the County itself. Holmgren v. County of Los Angeles, ___ Cal.App.4th ___, 71 Cal.Rptr.3d 611, 613 (Cal.App. 2008). As authorized by the California Government Code, Los Angeles outsourced engineering work to two firms: “The engineers were employees of the contracting firms and paid by the contracting firms, and all signed written acknowledgements that they were not employees of the County and not entitled to any of the benefits available to County employees.” Id., at 612. Nonetheless, plaintiffs filed the class action complaint alleging that they were “common law employees” of the County and, as such, entitled to benefits under the County’s retirement plan. Id., at 612-13. The “theme” of the class action complaint was that even though plaintiffs were paid by the independent contractor and designated as a contract employees, they had been “screened, interviewed, and effectively hired by the County; worked solely on County business; had [their] salary fixed by the County; [were] subject to the direct supervision and control of the County; and used County facilities, equipment and supplies to perform County business.” Id., at 613-14. The class action further alleged that plaintiffs performed the same work as, and worked side-by-side with, “recognized County employees,” but for lower pay and without receiving the benefits of County employees. Id., at 614. The trial court granted plaintiffs’ motion for class action treatment of the lawsuit, id., but decided three critical “threshold” issues in favor of the County that effectively eviscerated the class action, see id., at 614-15. Accordingly, plaintiffs stipulated to entry of judgment in favor of the County and appealed, id., at 615. The Court of Appeal affirmed, holding that the engineers were not County employees.

The facts underlying the class action claims were as follows: The County entered into “Master Agreements” with two firms for engineering services pursuant to which each firm would supply the County with the firm’s own employees, bill the County for work performed, and receive payment from the County. The Master Agreement provided that each firm was “solely liable” for the compensation and benefits of their employees, and expressly prohibited the County from soliciting the firms’ engineers. Holmgren, at 613. The named plaintiffs in the putative class action each acknowledged, in writing, that they were not County employees and that they “do not have and will not acquire any rights or salary benefits of any kind from the County of Los Angeles by virtue of my performance of work [for the County].” Id. and n.1. The class action alleged that plaintiffs were “temporary” or “leased” employees, entitled to County benefits, id., at 613.

The three threshold issues involved whether a statute of limitation barred any of the class action claims, whether plaintiffs were common law employees of the County entitled to salary benefits, and whether plaintiffs were common law employees of the County entitled to retirement benefits. Holmgren, at 614-15. The trial court ruled that a one-year limitations period applied and that it “began to run from the date each class member was first hired as a contractor or rehired by the County.” Id., at 614-15. With respect to the second issue, “the trial court ruled that County employment is not governed by the common law definition of employment, and that the class members were not entitled to salary benefits or protections provided to the County’s civil service employees.” Id., at 615. Finally, the trial court concluded that even if plaintiffs were deemed to be common law County employees, they were not entitled to retirement benefits. Id.

After summarizing California law governing counties, and Los Angeles County’s civil service system and County Employees Retirement Law, see Holmgren, at 616-17, the appellate court held that plaintiffs are not “common law employees” of the County because they were not paid by the County, nor was their compensation set by the Board of Supervisors. Id., at 618-19. The simple fact is that the County used plaintiffs as a cost-savings measure, in compliance with California law, id., at 619. Further, the appellate court readily dismissed plaintiffs’ theory of “substantial compliance” with the requirements of the civil service system. Id., at 620. The Court of Appeal explained that the doctrine of “substantial compliance” simply did not apply to the civil service statute, id. The Court also rejected the idea that “by operation of law, virtually everyone who performs any work at all for the County becomes a civil service employee.” Id., at 620-21. Accordingly, it affirmed the judgment in favor of the County, id., at 621.

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