Volkswagen Not Deemed Joint Employer of Car Dealership Workers

Three sales professionals at car dealerships in California could not bring wage and hour claims against Volkswagen under California law, a federal appeals court ruled. Wage and hour claims may only be brought against an employer, and the workers failed to show that Volkswagen was their joint employer, the court concluded.

Definition of Employer Under California Law

Under the California Labor Code, an employer "exercises control over the wages, hours or working conditions of any person" either "directly or indirectly, or through an agent or any other person."

The California Supreme Court has explained that to "employ" has three alternative definitions. It means, first, to exercise control over the wages, hours or working conditions; second, to suffer or permit to work; or third, to "engage" in such a way that an employment relationship is established.

The plaintiffs failed to adequately allege that Volkswagen exercised control over their wages, hours or working conditions, the court said. The plaintiffs' main argument was that Volkswagen controlled their wages by paying them incentive compensation for selling Volkswagen cars and for reaching a target score in a Volkswagen metric based on customer surveys. But the plaintiffs' complaint provided few details regarding how much they were compensated or whether the incentive payments were a material fraction of their compensation, the court noted. Without more information, the court said, the plaintiffs' allegations were not enough to allow them to bring the claim to trial. Control over wages requires more than just any impact on a worker's pay, the court said.

The plaintiffs also asserted that Volkswagen monitored their performance by disseminating consumer surveys. But the complaint indicated that Volkswagen simply used the surveys to determine incentive pay. To the extent the survey results affected day-to-day operations, that appeared to result from the dealerships' decision to rely upon the survey results, not from Volkswagen exercising control over salespeople, the court noted.

Finally, the plaintiffs argued that Volkswagen required salespeople to complete various certifications and trainings. These requirements, the court said, are actually quality control measures, which generally do not create a joint employment relationship.

The plaintiffs also failed to adequately allege that Volkswagen suffered or permitted them to work. They again pointed to Volkswagen's allegedly mandatory certifications and training. But with little information as to their frequency or content, these certifications and trainings seem more like conditions of employment focused on quality control, the court said. Such indirect and limited power over the plaintiff's ability to work at dealerships is not enough to meet the suffer or permit to work standard, the court concluded.

Finally, the plaintiffs failed to plausibly allege that Volkswagen "engaged" with them in a way that created an employment relationship. The California Supreme Court has explained that the test is whether the alleged employer 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 employees.

The plaintiffs' claims do not show that Volkswagen had a right to control the manner and means by which workers sell cars. And the plaintiffs did not allege that Volkswagen is involved in the details of the plaintiffs' day-to-day experiences at dealerships, the court said.

The trial court properly dismissed the claims against Volkswagen, the appeals court ruled.

Saavedra v. Volkswagen Group of America Inc., 9th Cir., No. 20-17327 (Dec. 6, 2021).

Professional Pointer: The test for joint employment is not always an easy one to apply. In two cases involving Shell Oil, one California appeals court has ruled that the company was the joint employer of service station workers, while another appeals court has ruled that the company was not the workers' employer.

Joanne Deschenaux, J.D., is a freelance writer in Annapolis, Md.