Castaneda v. Ensign Group, Inc.
229 Cal. App. 4th 1015
Cal. Ct. App.2014Background
- Plaintiff John Castaneda, a certified nursing assistant at Cabrillo Rehabilitation and Care Center, sued The Ensign Group, Inc. (Ensign) for unpaid minimum and overtime wages as a class action, alleging Ensign was his employer and the corporate veil should be pierced.
- Ensign moved for summary judgment, arguing Cabrillo (not Ensign) hired, paid, scheduled, and supervised employees and that Ensign is merely a holding company with no employees.
- Ensign admitted it purchased Cabrillo in 2009 and owns all Cabrillo stock; payroll checks came from an entity called Ensign Facility Services, Inc. (EFS).
- Castaneda produced evidence showing centralized corporate control: shared offices, shared officers and managers, Ensign-provided policies, training, IT/timekeeping systems, recruitment, benefits administration, and involvement in discipline and pay-setting.
- Multiple Cabrillo staff testified or declared they were told they were hired or re-hired by Ensign and received Ensign handbooks; internal materials and SEC filings described Ensign’s centralized "service center" functions.
- The trial court granted summary judgment for Ensign; on appeal the Court of Appeal found triable issues of fact as to whether Ensign was an employer and reversed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Ensign is an "employer" under California law | Ensign owned Cabrillo and exercised operational control (payroll, policies, training, IT, discipline, benefits), so it employed or "suffered or permitted" work | Ensign is a holding company with no employees and Cabrillo independently controlled wages, hours, and working conditions | Reversed summary judgment; triable issues exist whether Ensign was an employer |
| Whether ownership alone makes Ensign liable as employer | Ownership plus evidence of operational control establishes employer liability | Ownership without control (as in Martinez) is insufficient | Ownership supports inference of control; different from Martinez where defendants did not own the employer |
| Whether written service/contractual labels control (e.g., EFS/Cabrillo agreement) | Labels are sham if actual conduct shows Ensign exercised control; look to substance over form | The contract designating Cabrillo employees as Cabrillo’s should prevail | Court treats written labels as non-dispositive when interwoven conduct indicates Ensign controlled employment aspects |
| Whether employee perceptions and documentary indicia matter | Employee testimony, pay stubs, signage, e-mail domains, and HR/payroll practices indicate Ensign acted as employer | Employee beliefs and incidental indicia cannot overcome corporate separateness as a matter of law | Employee belief and documentary indicia are relevant factors creating triable issues; credibility issues for trial |
Key Cases Cited
- Martinez v. Combs, 49 Cal.4th 35 (2010) (defines employer under California law and analyzes when multiple entities may be employers)
- S.G. Borello & Sons Inc. v. Department of Industrial Relations, 48 Cal.3d 341 (1989) (control over business operations is relevant to employer status)
- Guerrero v. Superior Court, 213 Cal.App.4th 912 (2013) (broad definition of employer includes entities that directly or indirectly exercise control over wages, hours, or working conditions)
- Estrada v. FedEx Ground Package System, Inc., 154 Cal.App.4th 1 (2007) (employee belief and company-imposed forms/logos are relevant factors in determining employer status)
- Futrell v. Payday California, Inc., 190 Cal.App.4th 1419 (2010) (labels in agreements will be ignored where conduct establishes a different relationship)
- Tieberg v. Unemployment Ins. App. Bd., 2 Cal.3d 943 (1970) (company assumption of pension/benefit responsibilities is a factor supporting employer status)