A wage lawsuit filed by someone else’s employees can name your company too. Under Martinez v. Combs, “To employ” under the wage orders “has three alternative definitions,” and a business that meets any one of them can be liable as an employer. Staffing arrangements add a second route: Labor Code section 2810.3 makes many client businesses share liability for unpaid wages of workers a labor contractor supplies. The defense depends on who actually controlled the work.
Who counts as an employer for a California wage claim?
Anyone who meets one of the three Martinez definitions.
The California Supreme Court read the wage orders’ definition of “employ” in 2010. In Martinez, it held that “To employ, then, under the IWC’s definition, has three alternative definitions. It means: (a) to exercise control over the wages, hours or working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a common law employment relationship.”
Each definition is a separate path to liability. A company can avoid the common law test and still be an employer if it controlled schedules or pay. The plaintiff’s lawyer only needs one, and the complaint will usually plead all three.
When does a customer or contracting partner become the employer?
Only when it controls the work, not just because it buys the product.
Martinez is itself a defense win. The plaintiffs picked strawberries for a grower who stopped paying them, and they sued the produce merchants who bought his crop. The Court found the merchants weren’t employers. On the “suffer or permit” definition, it explained that “neither Apio nor Combs suffered or permitted plaintiffs to work because neither had the power to prevent plaintiffs from working.” The grower and his foremen “had the exclusive power to hire and fire his workers, to set their wages and hours, and to tell them when and where to report to work.”
The Court also rejected the argument that buying power equals control. It wrote that “any substantial purchaser of commodities might force similar choices on a supplier by withdrawing its business. Such a business relationship, standing alone, does not transform the purchaser into the employer of the supplier’s workforce.”
That passage is the heart of most joint employer defenses. A company that sets quality standards, delivery schedules, or prices for a vendor isn’t automatically that vendor’s employer. The risk rises when the company’s own managers start directing the vendor’s workers day to day, approving their hours, or deciding who gets sent home.
Does the ABC test decide joint employment?
No. Courts apply Martinez to joint employer claims, not the ABC test.
The ABC test from the Dynamex decision, later codified in the Labor Code, decides whether a worker is an employee or an independent contractor. It doesn’t decide whether a second company shares liability for someone else’s employee. In Henderson v. Equilon Enterprises, LLC (2019) 40 Cal.App.5th 1111, a gas station attendant employed by a station operator sued the oil company that leased the station. The Court of Appeal held: “We conclude the Dynamex ABC test does not apply in the joint employment context, and the governing standard is found in Martinez.”
The court’s reasoning helps employers. A worker employed by another company has no reason to establish an independent business, so applying the ABC test “would result in the absurdity that a secondary business entity is deemed a joint employer merely because the plaintiff is already employed by the primary employer.” If a plaintiff’s brief tries to use the ABC test against a second company, Henderson is the answer.
What about staffing agencies and labor contractors?
A different rule applies, and it’s stricter. Section 2810.3 imposes shared liability for wages without any showing of control.
Under Labor Code section 2810.3, subdivision (b), “A client employer shall share with a labor contractor all civil legal responsibility and civil liability for all workers supplied by that labor contractor” for the payment of wages and for failing to secure workers’ compensation coverage. A “client employer” is a business that obtains workers from a labor contractor “to perform labor within its usual course of business,” and the statute defines that as “the regular and customary work of a business, performed within or upon the premises or worksite of the client employer.”
The exclusions are where many defenses start. The statute doesn’t apply to “A business entity with a workforce of fewer than 25 workers,” or to one “with five or fewer workers supplied by a labor contractor or labor contractors to the client employer at any given time.” Overtime-exempt managers and professionals aren’t covered workers. Work that isn’t part of the company’s regular business, or isn’t performed at its worksite, falls outside the statute’s “usual course of business” definition.
The contract still matters. Subdivision (g) lets a client employer enforce “otherwise lawful remedies against a labor contractor” by contract, which is why staffing agreements should include indemnity and proof of payroll compliance. But a waiver of the statute itself “is contrary to public policy, and is void and unenforceable.”
Can a franchisor be liable for what happens at a franchisee’s store?
Only if it controls the franchisee’s employment decisions. Brand standards alone aren’t enough.
In Patterson v. Domino’s Pizza, LLC (2014) 60 Cal.4th 474, a franchisee’s employee sued the franchisor over sexual harassment by a supervisor. The California Supreme Court held that a franchisor becomes potentially liable “only if it has retained or assumed a general right of control over factors such as hiring, direction, supervision, discipline, discharge, and relevant day-to-day aspects of the workplace behavior of the franchisee’s employees.” Domino’s won summary judgment, because the franchisee alone made the hiring and discipline decisions.
Patterson was a harassment case, but its control test lines up with the Martinez analysis for wage claims. A franchisor that requires uniform recipes and store hours is protecting its brand. One that dictates staffing levels, approves terminations, or runs the franchisee’s timekeeping is building a joint employer record.
| Relationship | Governing rule | Defense focus |
|---|---|---|
| Vendor or supplier’s workers | Martinez’s three definitions | No power to hire, fire, set pay, or direct daily work |
| Contractor’s employees on the company’s site | Martinez; Henderson (ABC test doesn’t apply) | Contractor controlled schedules and supervision |
| Workers from a staffing agency | Lab. Code § 2810.3 shared wage liability | Workforce-size and usual-course-of-business exclusions, plus contract indemnity |
| Franchisee’s employees | Patterson’s general right of control test | Franchisee alone made the hiring and firing decisions |
Steps to take once a joint employer claim arrives
- Put a litigation hold on the staffing, supply, or franchise agreements, the invoices and payment records, and every email or text between your managers and the other company’s workers.
- Calendar the response deadline on the complaint or demand, and send a tender of defense to the staffing agency, contractor, or franchisee under any indemnity clause, along with notice to any EPLI carrier.
- Identify which of your managers interacted with the workers, and make sure no one takes any action against them that could look like retaliation.
- Pull the documents that show who controlled the work: who hired and fired, who set schedules and pay, who kept the time records, and who could send a worker home.
- Talk to a lawyer before contacting the other company about the claim, changing how its workers are supervised, or agreeing to share any settlement.
Joint employer cases are often decided on paper before anyone testifies. Experienced employment defense attorneys in California gather the contracts and the supervision record early, because a clean record of who controlled the work is what supports summary judgment.
FAQ
Is a company liable for a staffing agency’s unpaid wages?
Often, yes. Labor Code section 2810.3 makes a client employer share liability for wages owed to workers a labor contractor supplies, if the work is within the client’s usual course of business. Businesses with fewer than 25 workers, or with five or fewer contractor-supplied workers at any given time, are excluded. The client can seek indemnity from the agency by contract.
Does setting quality standards make a company a joint employer?
Not by itself. In Martinez v. Combs, the Supreme Court held that a business relationship in which one company buys from another does not, standing alone, make the buyer the employer of the supplier’s workforce. Liability depends on control over wages, hours, or working conditions, or the power to prevent the work. Brand and quality standards usually fall short of that.
Can our company be liable for harassment of a contractor’s employee?
It depends on the facts. Under Patterson v. Domino’s, a franchisor faces liability only if it retained or assumed general control over personnel decisions and day-to-day workplace conduct. California’s harassment statute also reaches nonemployees in some settings, so a contractor’s worker harassed by your own staff raises separate questions. Have counsel review the specific relationship.
If your company has been named as a joint employer
If your company has been sued over wages or working conditions for workers employed by a staffing agency, contractor, or franchisee, the contracts and the daily supervision record usually decide whether your company belongs in the case. Rosenberger + Kawabata represents employers defending employment lawsuits and claims through its business litigation practice, including claims involving joint employer and client employer liability. Contact Rosenberger + Kawabata online for a confidential consultation, or call (310) 894-6921.
Sources
The decisions are Martinez v. Combs (2010) 49 Cal.4th 35; Henderson v. Equilon Enterprises, LLC (2019) 40 Cal.App.5th 1111; and Patterson v. Domino’s Pizza, LLC (2014) 60 Cal.4th 474. The statute is Labor Code section 2810.3.
This post is general information about California and federal employment law as of November 7, 2026. It is not legal advice, and reading it does not create an attorney-client relationship. Employment statutes, regulations, and court decisions change often, and the outcome of any claim depends on its facts. Past results do not guarantee future outcomes.