Filed 2/28/23 Schwade v. South Pasadena Rehabilitation Center LLC CA2/2
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
PATRICIA SCHWADE, B314052
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC694824)
v.
SOUTH PASADENA
REHABILITATION CENTER LLC
et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of
Los Angeles County. Amy D. Hogue, Judge. Affirmed.
Matern Law Group, Matthew J. Matern, Mikael H. Stahle,
Kiran Prasad and Irina A. Kirnosova for Plaintiff and Appellant.
Munger, Tolles & Olson, Joseph D. Lee, Margaret G.
Maraschino, Stephen A. Hylas and Jessica O. Laird for
Defendants and Respondents.
______________________________
Following the termination of her employment by South
Pasadena Care Center, LLC (Care Center) at its skilled nursing
facility (the facility), plaintiff and appellant Patricia Schwade
brought this action against Care Center and its owners, as well
as the former owners of the facility. The former owner
defendants1 moved for summary judgment (Code Civ. Proc.,
§ 437c), arguing that they were not plaintiff’s employer. The trial
court agreed and granted them summary judgment. Plaintiff
appeals, contending that the trial court erred in finding that the
former owner defendants were not plaintiff’s joint employers.
We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
I. The Parties
Rehab Center operated the facility in Pasadena on Mission
Street until August 2015. Brius Management was the manager
of Rehab Center before it ceased operations. Rechnitz is the chief
executive officer of Brius Management and an owner of Brius,
LLC, a separate entity.2
In August 2015, Rehab Center transferred operations of the
facility to Care Center. Care Center is a separate entity from
Rehab Center owned and controlled exclusively by Elliot Zemel
1
The former owner defendants include defendants and
respondents South Pasadena Rehabilitation Center, LLC (Rehab
Center), Brius Management Co. (Brius Management), Brius,
LLC, and Shlomo Rechnitz (Rechnitz).
2
While Rehab Center had a license with the California
Department of Public Health (CDPH), Rechnitz, Brius
Management, and Brius were not named on the license.
2
(Zemel) and Yehuda Schmukler (Schmukler), who were not
affiliated with Rehab Center.
II. Factual Background
A. Transfer of operations to Care Center
On August 10, 2015, Rehab Center transferred “operational
and financial responsibility” of the facility to Care Center
pursuant to a Management and Operations Transfer Agreement
(MOTA) signed by the parties. The MOTA was needed because
“California law requires a license from the State Department of
Public Health (CDPH) in order to operate or manage skilled
nursing facilities,” and Care Center had not yet obtained a
license. (California Advocates for Nursing Home Reform v.
Aragón (2021) 60 Cal.App.5th 500, 504 (Aragón).) The MOTA
required Care Center to submit a change of ownership
application with the CDPF, “pursuant to which [it would] obtain
its own license,” as mandated by California law.
Care Center filed its application shortly after the transfer
and received a license on November 23, 2015. On that date, the
MOTA expired.
While the transfer was processing, however, Rehab Center
remained on the facility’s license. The MOTA accordingly sought
to ensure that during the transition period, the facility was
operated “in compliance with the Lease and applicable law and in
a manner which does not jeopardize the health and welfare of the
residents of the [f]acility.” To achieve these purposes, the MOTA
delegated certain responsibilities to Care Center while also
providing that Rehab Center had a right to “confer and consult”
with Care Center on business matters related to the facility and,
as the law requires, remained “ultimately responsible for the
daily operational decisions and the care delivered to the residents
3
at the [f]acility,” while the MOTA was in effect.3 The MOTA
expressly provided that Rehab Center’s “ultimate responsibility
shall not relieve [Care Center] from its obligations” under the
MOTA.
Care Center’s obligations also included hiring “all
employees whom [Care Center] determine[d] to be necessary to
effectively and efficiently operate the [f]acility,”4 and
responsibility over “all aspects of administration of employees,
including hiring, training, supervision, and termination.” Thus,
the MOTA required Care Center to provide benefits, maintain
payroll, issue paychecks, and withhold taxes for employees. In
contrast, the MOTA required Rehab Center to “terminate all of
the [f]acility employees . . . on the day immediately prior to
[August 10, 2015].”
Rehab Center adhered to this requirement and ceased all
operations and terminated all of its employees on August 9, 2015.
According to the former owner defendants, as of August 9, 2015,
Rehab Center had no operational or financial involvement with
the facility or with Care Center, and no Rehab Center employee
3
This provision parallels the basic requirements of
California law. (See, e.g., Aragón, supra, 60 Cal.App.5th at
p. 510 [“the licensee is still ultimately responsible” for a facility
“even if management companies are running the day-to-day
operations”].)
4
Regarding employment, Care Center advised Rehab Center
that it “intend[ed] to offer employment to at least 2/3 of the
employees of the [f]acility”; “in reliance on such statements
[Rehab Center and Care Center] agreed that a closure notice”
would not be provided.
4
worked at or for the facility. Rather, Care Center made all
decisions regarding employment at the facility after that day,
including who to hire and fire.
According to plaintiff, certain text messages between Amy
Johnson (Johnson), the vice president of regional operations for
Rockport Healthcare Services (Rockport)5 and the person most
qualified to testify on behalf of Brius Management and Brius, and
Zemel evidence the former owner defendants’ continued
involvement in the day-to-day operations of the facility. These
text messages concern the transferring of nurses from one
location to the facility. Plaintiff also contends that “Rehab
Center supplied Care Center employees, including [plaintiff],
with the employee handbook it had implemented when it was the
sole owner and operator of the [f]acility.”
B. Care Center employs plaintiff
On or about September 1, 2015, Care Center hired plaintiff
to work at the facility.6 It employed her until it terminated her
employment in May 2017. During that entire period, Care
Center controlled all aspects of plaintiff’s employment.
5
Rockport provides administrative services to various skilled
nursing facilities. Johnson declared that before August 10, 2015,
Rockport provided such services to Rehab Center, including its
assistance with winding down Rehab Center’s operations.
Plaintiff’s assertion that Johnson was the vice president of Rehab
Center is misleading and wholly unsupported by the appellate
record.
6
At her deposition, plaintiff admitted that she does not
recall communicating with anyone from Rehab Center; nor can
she identify anyone who worked for Rehab Center.
5
1. Recruitment
In August 2015, Care Center’s owners, Zemel and
Schmukler, recruited plaintiff and her colleagues from an
unrelated nursing facility. Care Center hired the group “as a
team” after taking them on a tour of the facility.
2. Hiring
Care Center’s first administrator, Dolores Diehl (Diehl),
told plaintiff that she was hired. Either Diehl or Care Center’s
director of staff development informed plaintiff of her salary.
3. Onboarding
Care Center employees gave plaintiff a two-day orientation,
during which she received policies and training materials. Those
materials identify Care Center as the issuing entity.
Plaintiff later signed other documents, including Care
Center’s employee handbook, although plaintiff denies that she
received the handbook. Plaintiff is unaware of anyone besides
Care Center issuing such documents or implementing policies
governing her employment.
4. Supervision
Diehl (and later, her replacement Mr. Tucker) was
plaintiff’s supervisor. If plaintiff had issues, such as problems
with a colleague, she took them to Diehl or Mr. Tucker. She
knows of nobody else she would have told of such issues.
5. Pay
Care Center collected plaintiff’s time records and provided
her with paychecks. These records all identify Care Center as
plaintiff’s employer, and plaintiff is not aware of any other entity
that paid her or tracked her hours. If her paycheck did not come
or she missed a meal break, she would have informed Diehl or
6
Mr. Tucker, or “the bookkeeper” who “worked for Zemel and
Schmukler.”
6. Materials
Care Center provided plaintiff with a phone, a printer-
photocopier, and other supplies she used to work. It also gave
her a name tag, which her Care Center supervisor required her to
wear.
7. Assignments, Scheduling, and Performance
Review
Care Center employees trained plaintiff, set her work
schedule, assigned her work, responded to her time off requests,
and evaluated her performance.
8. Termination of employment
On or around May 5, 2017, Mr. Tucker, on behalf of Care
Center, terminated plaintiff’s employment. Plaintiff knows of no
one else involved in that decision or who had authority to
terminate her.
9. Plaintiff identifies Care Center as her employer
After plaintiff’s employment was terminated, she identified
Care Center as her sole employer on an unemployment
application and her resume. She never represented to a later
employer that she was employed at the facility by anyone other
than Care Center.
III. Procedural History
A. Pleadings
On February 16, 2018, plaintiff initiated this lawsuit,
asserting individual and class claims under the Labor Code
against Care Center, Zemel, and Schmukler, as well as Rechnitz,
Brius Management, and Brius. A year later, she added Rehab
Center as a Doe defendant.
7
As is relevant to the issues in this appeal, the first
amended complaint, which is the operative pleading, alleges that
the former owner defendants and Care Center were plaintiff’s
joint employers, formed an integrated enterprise, and/or were
alter egos of one another during the transitionary period when
plaintiff was first hired and when Rehab Center was the sole
license holder.
B. Motion for summary judgment
On October 23, 2020, the former owner defendants moved
for summary judgment on the ground that they were not
plaintiff’s employer.
C. Plaintiff’s opposition
On March 2, 2021, plaintiff filed her opposition to the
motion for summary judgment. Her principal contention was
that there was a triable issue of fact regarding the former owner
defendants’ status as her employer, as an integrated enterprise
and as alter egos.
Her opposition identified and discussed certain evidence,
including Johnson’s text messages with Zemel and copies of
employee handbooks. But, plaintiff’s counsel failed to attach to
her declaration copies of those text messages and handbooks,
both of which were exhibits to particular deposition transcripts.
Plaintiff also omitted evidence supporting her claim that the
former owner defendants were liable based upon theories of
integrated enterprise and alter ego, even though that evidence
was discussed in her opposition brief and in her supporting
separate statement.
D. Reply
On March 16, 2021, the former owner defendants filed their
reply brief, noting that plaintiff had failed to attach copies of
8
evidence referenced in the opposition brief and separate
statement. The movants nonetheless addressed those exhibits in
their reply brief, arguing why they did not raise a triable issue of
material fact.
E. Plaintiff’s file a notice of errata
On April 8, 2021, the day before the scheduled hearing,
plaintiff filed a notice of errata and attached the four omitted
exhibits for the trial court to review. Plaintiff requested that the
trial court continue the hearing on the motion “to consider the
attached exhibits and provide [the former owner defendants] with
the opportunity to address” them.
F. Trial court order and judgment
At the April 9, 2021, hearing, the trial court stated that it
had received the notice of errata and asked whether the former
owner defendants had received the filing. Counsel responded:
“And just for the purposes of putting it on the record, we do object
to the newly-submitted evidence as untimely and would move to
strike the notice of errata for that reason and in violation of due
process rights. [¶] But we’re also prepared to discuss it, Your
Honor, which is why we don’t think these new documents make a
difference.”
The trial court then inquired as to how the exhibits “would
raise a triable issue of fact.” Plaintiff responded that the
evidence created triable issues on the former owner defendants’
“rights and ability and, indeed, obligation under the law to
control the operations and the management decisions” at the
facility. She also contended that the MOTA evidenced Rehab
Center’s control over the “day-to-day operational decisions.”
After taking the matter under submission, partly to review
the omitted evidence, the trial court granted the former owner
9
defendants’ motion. In a 28-page order, the trial court found it
undisputed that the former owner defendants did not employ
plaintiff. And, plaintiff could not show an employment
relationship under a joint employer, integrated enterprise, or
alter ego theory. In so doing, the trial court sustained the former
owner defendants’ objection to several documents that plaintiff
filed late, including an employee handbook and Johnson’s text
messages with Zemel. But, the trial court went on to consider the
late-filed evidence: “Even if the documents were admissible, the
Court concludes they do not raise a triable issue of whether [the
former owner defendants] exercised control over [plaintiff’s]
wages, hours, or working conditions, suffered or permitted her to
work, or engaged her.”
Judgment was entered on May 18, 2021.
G. Appeal
This timely appeal ensued.
DISCUSSION
I. Late-filed Evidence in Support of Plaintiff’s Opposition
The parties devote much of their appellate briefs to the
question of whether the trial court properly refused to consider
plaintiff’s late-filed evidence. We need not decide this issue.
Notwithstanding plaintiff’s argument to the contrary, it is
evident from both the reporter’s transcript and the trial court’s
lengthy and detailed minute order that it did consider the
belatedly filed evidence.7 We too consider the evidence that was
belatedly filed with the trial court.
7
Curiously, plaintiff also concedes in her opening brief that
the trial court “explicitly addressed” the evidence in its order
granting summary judgment.
10
II. Trial Court Properly Granted Summary Judgment
A. Standard of review
“Summary judgment is subject to de novo review. To
analyze the issues, ‘we follow the traditional three-step analysis.
“We first identify the issues framed by the pleadings, since it is
these allegations to which the motion must respond. Secondly,
we determine whether the moving party has established facts
which negate the opponents’ claim and justify a judgment in the
movant’s favor. Finally, if the summary judgment motion prima
facie justifies a judgment, we determine whether the opposition
demonstrates the existence of a triable, material factual issue.
[Citation.]” [Citation.]’ [Citation.]” (Kaney v. Custance (2022) 74
Cal.App.5th 201, 213.)
“In ‘reviewing the trial court’s decision to grant summary
judgment, we liberally construe the evidence in support of the
party opposing summary judgment and resolve all doubts about
the evidence in that party’s favor. [Citation.]’ [Citation.] ‘[W]e
must draw from the evidence all reasonable inferences in the
light most favorable to the party opposing summary judgment.
[Citation.]’ [Citation.]” (Kaney v. Custance, supra,
74 Cal.App.5th at p. 213.)
B. No evidence that the former owner defendants were
plaintiff’s employer
As set forth above, plaintiff’s claims stem from alleged
violations of the Labor Code. “[N]o generally applicable rule of
law imposes on anyone other than an employer a duty to pay
wages.” (Martinez v. Combs (2010) 49 Cal.4th 35, 49 (Martinez).)
Accordingly, to maintain each of her causes of action, plaintiff
was required to show that each of the former owner defendants
was her employer. (Taylor v. Financial Casualty & Surety, Inc.
11
(2021) 67 Cal.App.5th 966, 984 (Taylor); see Cal. Code Regs., tit.
8, § 11050, subd. 2(E).)
To establish an employment relationship, plaintiff was
required to introduce evidence that each of the former owner
defendants (1) “exercise[d] control over [her] wages, hours, or
working conditions;” (2) engaged her, thereby creating a common
law employment relationship; or (3) “suffer[ed] or permit[ted]”
her to work. (Martinez, supra, 49 Cal.4th at p. 64.)
1. None of the former owner defendants exercised
control over plaintiff’s wages, hours, or working conditions
Under the “control” test, a plaintiff must show that the
defendant had the right to exercise control over her employment.
(See Ayala v. Antelope Valley Newspapers, Inc. (2014) 59 Cal.4th
522, 531.) “What matters is whether the hirer ‘retains all
necessary control’ over its operations.” (Ibid.) In Martinez, for
example, the California Supreme Court held that farm workers
were not jointly employed by produce merchants because the
farmer alone “hired and fired plaintiffs, trained and supervised
them, determined their rate and manner of pay . . . , and set their
hours, telling them when and where to report to work and when
to take breaks.” (Martinez, supra, 49 Cal.4th at p. 72.)
The same is true here. As set forth above, Care Center
alone recruited plaintiff, hired her, onboarded and trained her,
set her schedule and addressed her time off requests, set
workplace policies, assigned her tasks, supervised her and
reviewed her performance, set her pay, provided her paychecks,
12
required her to wear a name tag, provided her materials to do her
job, and ultimately exercised its authority to terminate her.8
Thus, plaintiff failed to raise a triable issue of fact
regarding the “control” test. (See Martinez, supra, 49 Cal.4th at
p. 71 [affirming summary judgment for defendant where “[t]he
undisputed facts . . . show that another entity alone controlled
plaintiffs’ wages, hours and working conditions”]; Curry v.
Equilon Enterprises, LLC (2018) 23 Cal.App.5th 289, 302–303
(Curry) [where another entity “was responsible for hiring, firing,
disciplining, training, and compensating” the plaintiff-employee,
“had control over [the plaintiff-employee’s] wages and hours,” and
controlled “the tasks [the plaintiff-employee] was made to
perform, and the conditions in which she performed them,” the
defendant “ha[d] met its burden of establishing there [was] not a
triable issue of fact concerning [defendant] being [the plaintiff-
employee’s] employer”].)
On appeal, plaintiff suggests that a few particular
documents—namely, Care Center’s handbook, some
9
mischaracterized text messages, and the MOTA —created a
8
Although arguably not dispositive, we note that plaintiff
specifically conceded that she could not identify any admissible
evidence of any of the former owner defendants hiring her,
paying her, controlling her working conditions, or suffering or
permitting her to work. (See Martinez, supra, 49 Cal.4th at p. 76
[ “[n]o evidence suggest[ed] [the farmer’s] employees viewed the
field representatives as their supervisors or believed they owed
their obedience to anyone but [the farmer] and his foremen”].)
9
The MOTA is discussed at length in section 2.a., infra.
13
triable issue. However, none of those documents are sufficient to
establish that Rehab Center or any other former owner defendant
10
controlled plaintiff’s employment.
a. Handbook
At most, the record shows that Care Center used a
handbook that was similar to the one Rehab Center had
previously used, and that Johnson, who was never employed by
Rehab Center, sent the handbook to Zemel before the sale
because a “union representative asked for it.” There was no
evidence, however, that Rehab Center required or even suggested
that Care Center use its prior policies. Thus, as the trial court
correctly held, “[e]ven assuming Care Center did use Rehab
Center’s employee handbook, this fact does not raise a triable
issue as to whether Rehab Center exercised control over
[plaintiff’s] wages, hours, or working conditions.”
This is quite different from the cases that plaintiff cites,
each of which involved an entity that imposed or enforced
policies. (Castaneda v. Ensign Group, Inc. (2014) 229
Cal.App.4th 1015, 1022 (Castaneda) [parent provided “policy and
training videos” that subsidiary was required to show to
employees]; Estrada v. FedEx Ground Package System, Inc.
(2007) 154 Cal.App.4th 1, 11–12 [FedEx controlled “every
10
As noted during oral argument, plaintiff often conflates the
former owner defendants by referring to them collectively and
generically throughout her briefs as “Defendants.” She does not
explain or argue how these documents demonstrate that each of
the four former owner defendants was her joint employer.
14
exquisite detail of the drivers’ performance, including the color of
their socks and the style of their hair”].)
b. Text messages
Plaintiff relies heavily upon a late-2016 text message
exchange between Zemel, Care Center’s owner, and Johnson.
Johnson is repeatedly and incorrectly described as “Rehab
Center’s Vice President of Operations.” However, plaintiff cites
no evidence that Johnson ever held this role or was ever
employed by Rehab Center, and the undisputed evidence
establishes that she simply was not.11 Thus, text messages sent
by Johnson do not compel a finding that Rehab Center had
control over plaintiff’s employment.
In any event, the text messages do not show Rehab Center
exercising any control over plaintiff because the messages have
nothing to do with her. Rather, they related to Care Center’s
recruitment of a handful of third-party nurses from an unrelated
facility, over a year after plaintiff was hired and long after Rehab
Center had ceased all operations.12
The text messages also do not show that Rehab Center had
an unexercised “right” to control Care Center’s employees more
11
Johnson testified that she worked for Rockport, a separate
entity that provides services to many different nursing facilities.
She previously provided these services at the facility prior to its
sale.
12
Plaintiff’s assertion that “the text messages showed that
Rehab Center was transferring employees from its other locations
to the Facility” is not supported by any evidence. In fact, plaintiff
directs us to no evidence that Rehab Center ever had any other
locations.
15
broadly. (See Ayala v. Antelope Valley Newspapers, Inc., supra,
59 Cal.4th at p. 531.) Johnson’s messages merely mention a
“friendly agreement,” and indicate to Zemel that there was one
nurse from an unrelated facility that Johnson would “rather
[Care Center] not take.” These messages, at most, frame a
request, and do not assert some control that Johnson had the
authority to exercise. Nothing in the record shows that Johnson,
on behalf of the former owner defendants, had power over Zemel
or anyone else at Care Center over a year after the transition of
operational control of the facility had been completed. In fact,
Zemel testified that Care Center alone had power to determine
who to hire and fire after the sale.
2. None of the former owner defendants meets the
common law test as plaintiff’s employer
The California Supreme Court has explained that under
“traditional common law principles” that apply in determining
whether an employment relationship exists, courts have long
“emphasized ‘the control exercised by the employer over the
employee’s performance of employment duties.’” (Patterson v.
Domino’s Pizza, LLC (2014) 60 Cal.4th 474, 499 (Patterson).)
Like the “control” test, which is derived from the wage orders, the
common law “requires ‘a comprehensive and immediate level of
‘day-to-day’ authority’ over matters such as hiring, firing,
direction, supervision, and discipline of the employee.” (Ibid.)
As with the control test, plaintiff has not introduced and
cannot introduce evidence that any of the former owner
defendants had control over her own “hiring, firing, direction,
supervision, and discipline.” (Patterson, supra, 60 Cal.4th at
p. 499 [ruling that in the absence of evidence of such control,
“Domino’s lacked the general control of an ‘employer’ . . . over
16
relevant day-to-day aspects of the employment”’].) In the absence
of such evidence, none of the former owner defendants meets the
common law test as plaintiff’s employer.
a. The MOTA does not establish that the
former owner defendants had control over plaintiff’s employment
Effectively conceding that she cannot establish actual
control over her employment by any of the former owner
defendants, plaintiff argues that she “was not required” to prove
this element because Rehab Center had a theoretical “right to
control” based on the MOTA provision giving Rehab Center “the
right to confer and consult with [Care Center]” on various
business “matters, concerning the operation of the [f]acility” for a
few months after the facility was transferred while Rehab Center
remained on the facility’s license. This argument, however,
misconstrues both the terms of the MOTA as well as the common
law employment test.
As an initial matter, far from granting Rehab Center a
right to control employees at the facility, the MOTA assigned all
such responsibility to Care Center. It expressly provided that
Rehab Center would terminate all of its own employees before the
transfer occurred. Thereafter, Care Center was responsible for
hiring “all employees whom [Care Center] determine[d] to be
necessary to effectively and efficiently operate the [f]acility.” The
MOTA also provided that Care Center “shall be responsible for
all aspects of administration of employees, including hiring,
training, supervision, and termination,” as well as for providing
all benefits, maintaining payroll records, issuing paychecks, and
withholding taxes for its employees at the facility. Plaintiff
admitted that she had no reason to believe that the terms of the
MOTA “impacted [her] job duties,” or her “working conditions”;
17
nor could she point to any evidence showing that Rehab Center’s
responsibility to ensure patient care resulted in any exercise of
control over her day-to-day work.
In addition, a party’s contractual right to oversee or ensure
quality control at a business generally is not sufficient to create a
triable fact that the party exercised control over the business’s
employees. (See, e.g., Curry, supra, 23 Cal.App.5th at pp. 294,
304; Salazar v. McDonald’s Corp. (9th Cir. 2019) 944 F.3d 1024,
1029–1030 [holding that McDonald’s did not employ its
franchisee’s employees because, although it had the ability to
provide oversight and quality control of its franchisee’s
restaurants, it did “not retain ‘a general right of control’ over
‘day-to-day aspects’ of work at the franchises,” and its
“involvement in its franchises and with workers at the franchises
. . . [did] not represent control over wages, hours, or working
conditions”]; Henderson v. Equilon Enterprises, LLC (2019) 40
Cal.App.5th 1111, 1115–1116, 1121, 1123.)
The cases cited by plaintiff prove the same point. For
example, in Medina v. Equilon Enterprises, LLC (2021) 68
Cal.App.5th 868, 878 (Medina), the court found a joint
employment relationship based upon significant evidence of the
putative joint employer’s power to control beyond its contractual
right to oversee or ensure quality control: the plaintiff testified
that the putative joint employer’s trainers had directly
threatened to fire him and had caused other station operators to
be fired. In other words, there was direct control over the
plaintiff’s employment. The contract also set forth “extremely
detailed technical instructions” that were mandatory for station
owners. (Id. at p. 879.)
18
In contrast here, there is no evidence of the former owner
defendants’ control over plaintiff’s employment. And, the terms
of the contract in Medina are a far cry from Rehab Center’s mere
ability to “confer and consult” under the MOTA.
Mattei v. Corporate Management Solutions, Inc. (2020) 52
Cal.App.5th 116 (Mattei) is also distinguishable. That case
involved a collective bargaining agreement where the signatory
(CMS) lent its status to a third party to allow the third party to
hire union crewmembers. (Id. at p. 120.) CMS was a defined
employer under the terms of the collective bargaining agreement
and bound to pay its employees on a timely basis. (Id. at p. 121.)
Nothing in the collective bargaining agreement “relieve[d]
signatories of their responsibility . . . when they ‘len[t]’ their
signatory status to a nonsignatory.” (Id. at p. 126.) Under these
circumstances, “CMS remained an employer with all concomitant
responsibilities imposed by that agreement.” (Id. at p. 127.)
There was also evidence of CMS participating in hiring
decisions, listing jobs associated with the production with the call
steward, identifying itself as a “joint producer,” administering
payroll, and collecting and paying union dues on behalf of
employees. (Mattei, supra, 52 Cal.App.5th at p. 128.)
Here, in contrast, the MOTA is not vague as to which entity
is responsible for employees, but rather expressly delegates “all
aspects” of administering employees to Care Center. There is no
agreement that adheres the former owner defendants to plaintiff
in any way.
Furthermore, no such evidence of actual control by Rehab
Center exists. In fact, other than repeatedly citing a single
MOTA provision providing for the right to “confer and consult,”
plaintiff points to no evidence showing that Rehab Center had a
19
right to control her employment. As the trial court correctly
explained, she only put forth the handbook and the text
messages, which, as set forth above, do not create a triable issue
that Rehab Center controlled her employment.
b. State licensing regulations did not give
Rehab Center the right to control plaintiff’s employment
The trial court also properly rejected plaintiff’s argument
that Rehab Center’s obligation to comply with patient care
regulations as the facility’s licensee somehow transformed Rehab
Center into the “employer” of all individuals who performed
services at the facility.
The Fifth District rejected a similar argument in a different
regulatory context in Taylor, supra, 67 Cal.App.5th at page 979.
There, the plaintiffs argued that a surety that contracted with
their direct employer, a bail bond company named Hotline, jointly
employed them because it retained certain regulatory
responsibilities, such as facing penalties if a defendant failed to
appear in court, and took actions related to those responsibilities,
such as performing audits, “ensur[ing] bond paperwork was in
order,” and seeking “status updates [from Hotline] on forfeitures.”
(Id. at pp. 989, 993, 1003.) The Taylor court held that nothing in
the regulations or contracts between Hotline and the surety gave
the surety “the right to control the means and manner of
Hotline’s employees day-to-day work.” (Id. at pp. 993, 996.)
Rather, the contracts gave Hotline “‘exclusive control’ over its
agency and employees” (id. at p. 992), and there was no evidence
“demonstrating [the surety] had input into the hiring, firing, or
payment of fugitive recovery personnel, dictated how such
personnel accomplished their work, or supervised that work.”
(Id. at p. 1003.)
20
The same is true here. The regulations cited by plaintiff
show only that while it was named on the license, Rehab Center
retained responsibility for ensuring a lawful level of patient care.
(See Taylor, supra, 67 Cal.App.5th at p. 989.) These regulatory
duties, however, did not give Rehab Center control over Care
Center’s employees. (See id. at p. 998.) Like the contract in
Taylor, the MOTA also disavows Rehab Center’s control over
employees, instead expressly delegating that responsibility to
Care Center.
Plaintiff incorrectly argues that Rehab Center was not
permitted to delegate its responsibility under California Code of
Regulations, title 22, section 72501 to provide adequate personnel
to ensure patient care. (See Aragón, supra, 60 Cal.App.5th at
pp. 511–512 [a licensee may lawfully delegate management of the
“day-to-day operations” of a skilled nursing facility to a
management company].)
In any event, plaintiff’s argument that a licensee’s duties
are “nondelegable” has no bearing on employer status. As the
trial court correctly explained, Rehab Center’s nondelegable
duties related to its potential liability “in a private action under
the patients’ bill of rights,” not in a private action by Care
Center’s employees under the Labor Code. (See, e.g., California
Assn. of Health Facilities v. Department of Health Services (1997)
16 Cal.4th 284, 302.)
Plaintiff’s contention that Rehab Center had the “motive” to
control Care Center’s employees is equally irrelevant. Not only
did plaintiff fail to raise this argument below (Mundy v. Lenc
(2012) 203 Cal.App.4th 1401, 1406 [failure to raise a point in the
trial court constitutes a waiver on appeal]), but she cites no
California law that confers “employer” status on an entity that
21
could be “motivated” to care about the performance of another
entity’s employees. (Benach v. County of Los Angeles (2007) 149
Cal.App.4th 836, 852.)
Citing Medina, supra, 68 Cal.App.5th 868, plaintiff argues
that Rehab Center imposed “extremely detailed technical
instructions” regarding patient care on workers at the facility
based on various state regulations that apply to skilled nursing
facilities. But nothing in Medina suggests that the existence of
state-imposed regulations governing the operation of a nursing
facility can establish the requisite control over that facility’s
workers and establish an employment relationship—especially
when the law provides that a licensee subject to those regulations
may retain a management company to operate its facility, which
can, in turn, hire its own employees. (See Aragón, supra,
60 Cal.App.5th at p. 504.)
Finally, Guerrero v. Superior Court (2013) 213 Cal.App.4th
912 does not compel a different result. In that case, the
petitioner was employed to provide in-home support services to
eligible recipients in Sonoma County (County) under the In-Home
Support Services Act (IHSS). (Id. at p. 917.) She was not paid
for services she rendered to a program recipient, “despite a
comprehensive scheme of federal and California statutes,
implemented within the County through enactment of local
ordinances that spell out the responsibilities of County and the
Sonoma County In-Home Supportive Services Public Authority
(Public Authority) for establishing and monitoring IHSS
providers’ wages, hours, and conditions of employment.” (Ibid.)
The petitioner filed suit against the County and Public Authority;
they demurred, and the trial court sustained their demurrer
without leave to amend on the grounds that the County and
22
Public Authority were not her employers or joint employers. (Id.
at pp. 917–918.)
The Court of Appeal held that the trial court erred.
(Guerrero v. Superior Court, supra, 213 Cal.App.4th at p. 918.)
The court reasoned that because the County and Public Authority
exercised considerable control over the structure and conditions
of the petitioner’s employment, the petitioner’s pleading survived
the demurrer stage of the litigation. (Id. at pp. 937, 949.)
Here, in contrast, there is no comprehensive legislative
scheme (or anything for that matter) that gives the former owner
defendants control over the conditions of plaintiff’s employment.
And there is no evidence that they exercised any such control.
3. None of the former owner defendants suffered or
permitted plaintiff to work
Finally, the trial court correctly found that plaintiff did not
establish a triable issue under the “suffer or permit” test. “[T]he
basis of liability” under this test “is the defendant’s knowledge of
and failure to prevent the work from occurring.” (Martinez,
supra, 49 Cal.4th at p. 70; see also Futrell v. Payday California,
Inc. (2010) 190 Cal.App.4th 1419, 1434 [defendant was not the
plaintiff’s employer because there was no evidence that it “had
the power to either cause him to work or prevent him from
working”].)
Plaintiff did not address the “suffer or permit” test in the
trial court and has never before suggested that the former owner
defendants had the ability to “block” plaintiff from working.
Setting that procedural obstacle aside, the undisputed evidence
establishes that the former owner defendants were unable to
prevent plaintiff from working because, as set forth above, Rehab
23
Center ceased operations before plaintiff started working and had
no authority over plaintiff’s schedule or work.
Plaintiff continues to rely upon Johnson’s text messages,
arguing that they establish Rehab Center’s authority to prevent
Care Center’s employees from working. But nothing in these text
messages suggests that Johnson or Rehab Center had such
authority.
Plaintiff also argues that the “suffer or permit” test is
intended to reach “sham arrangements” where the actual
employer is a “straw man,” suggesting that there was some sort
of sham arrangement here. However, plaintiff cites no evidence
of a sham or that shows that Care Center is not a legitimate
employer. Rather, the undisputed evidence establishes that the
parties entered into the MOTA so that Rehab Center could
delegate to Care Center the responsibility to manage the facility
through a common, valid, and enforceable type of management
agreement. (See Aragón, supra, 60 Cal.App.5th at p. 504.)
C. Plaintiff failed to present a triable issue as to integrated
enterprise
Initially, we note that the parties dispute whether plaintiff
may rely upon the integrated enterprise theory. Assuming that
an integrated enterprise argument is available, “an employee
who seeks to hold” an entity liable for another entity’s actions
under an integrated enterprise theory bears a “heavy burden” to
show that the entities, which are “presumed to have separate
existences,” in fact “constitute a single employer.” (Laird v.
Capital Cities/ABC, Inc. (1998) 68 Cal.App.4th 727, 737 (Laird),
criticized on other grounds by Reid v. Google, Inc. (2010)
50 Cal.4th 512.) To meet that burden, plaintiff was required to
satisfy four prongs: (1) interrelation of operations; (2) common
24
management; (3) common ownership or financial control; and
(4) centralized control of labor relations. (Ibid.) Plaintiff did not
present evidence meeting any of them.
1. No evidence showing interrelation of operations
The interrelation of operations prong requires plaintiff to
show “‘“a degree”’” of control of Care Center’s operations “‘“that
exceeds the control normally exercised by a parent corporation”’”
over a subsidiary. (Maddock v. KB Homes, Inc. (C.D. Cal. 2007)
631 F.Supp.2d 1226, 1239 (Maddock).) Factors include whether a
parent company “kept [the subsidiary’s] books, issued its
paychecks, or paid its bills,” and whether the companies had
shared employees, headquarters, or office space. (Laird, supra,
68 Cal.App.4th at p. 739.)
None of these factors is present here. Not only are the
former owner defendants not a parent entity to Care Center, but
plaintiff offers no evidence that any of the former owner
defendants kept Care Center’s books, issued its paychecks, or
paid its bills.13 Indeed, after Rehab Center ceased operations on
August 9, 2015, it “neither had employees nor shared employees
with Care Center,” “did not share offices with Care Center,” did
13
Plaintiff claims that “Rehab Center presumably ‘paid the
bills’ ‘since the MOTA provided for it to “ensure that ‘the levels of
supplies and inventory at the Facility, including without
limitation, perishable food, non-perishable food, central supplies
linen, housekeeping and other supplies’ met requirements ‘under
applicable law.’” This argument omits the adjacent language
providing that Rehab Center was only obligated to supply the
facility on the day it was initially transferred to Care Center (“on
the Operations Transfer Date”).
25
not “receive any revenue from Care Center’s operations,” and had
no “access to Care Center’s financial information.”
Plaintiff’s argument that Rehab Center shared addresses
with Care Center because a corporate form listed the Mission
Street address is purely conclusory and unsupported by evidence.
The form does not show that Rehab Center operated out of that
address after selling the facility to Care Center.14 And, while
shared addresses can be a factor supporting interrelation of
operations, the cases plaintiff cites involved significant additional
evidence of interrelated operations not present here. (See Perry
Farms, Inc. v. Agricultural Labor Relations Bd. (1978)
86 Cal.App.3d 448, 465 [owner owned “all stock” in subsidiary,
“ma[de] all of the material decisions” for it, and “establish[ed] and
negotiate[d] the deals in which the two corporate entities
participate[d]”]; Taylor v. Shippers Transport Express, Inc. (C.D.
Cal., Sept. 30, 2014, No. CV 13-02092 BRO (PLAx)) 2014 U.S.
Dist. Lexis 180061 [one company managed the other’s accounts
payable, accounts receivable, and payroll]; Van Norman v.
Harman Management Corp. (N.D. Cal., July 6, 1995, No. C93-
2880 MHP) 1995 U.S. Dist. Lexis 9970 [one company kept the
other’s books and personnel records and issued its paychecks].)
Finally, plaintiff contends that Johnson’s text messages
“showed that Rehab Center was transferring employees from its
other locations to the Facility” without citing any evidence that
Rehab Center had any other locations. Not only is there no
evidence of such “other locations,” but, as set forth above,
14
Johnson testified at her deposition that she had no reason
to believe that Rehab Center maintained a business at the facility
address, now owned and operated by Care Center. She guessed
that the address on the form was a “typo.”
26
plaintiff merely speculates that Johnson’s messages were sent on
behalf of Rehab Center, which, at that time, had ceased all
operations. (See Silva v. See’s Candy Shops, Inc. (2016)
7 Cal.App.5th 235, 246 [“An ‘issue of fact . . . is not created by
“speculation, conjecture, imagination or guess work”’”], overruled
in part on other grounds in Donohue v. AMN Services, LLC (2021)
11 Cal.5th 58, 77.)
2. No evidence of common ownership, management,
or financial control
Even though common ownership is “never enough” on its
own, it is typically required of an integrated enterprise. (Laird,
supra, 68 Cal.App.4th at p. 738.) As the trial court correctly
found, there is no common ownership here.15 Since its inception,
Care Center has been solely and exclusively operated,
maintained and controlled by Zemel and Schmukler. Zemel and
Schmukler have no ownership interest in any of the former owner
defendant entities. Likewise, Rechnitz has no ownership interest
in Care Center; neither do Brius Management, Brius, or Rehab
Center. Plaintiff even admitted that she has “no information”
related to the alleged business relationships between the former
owner defendants and Care Center.
15
Plaintiff argues that a sublease agreement, under which
Care Center subleased the facility to Rehab Center while the
MOTA was in effect somehow shows common ownership or
management. But, as the sublease provides, Care Center entered
into that agreement so Rehab Center would “remain in legal
possession of the [f]acility so that [Rehab Center’s] license to
operate the [f]acility [would] remain in effect.” That does not
show that the former owner defendants and Care Center had
ownership or management in common.
27
Urging us to find a triable issue of fact, plaintiff again
relies upon mischaracterized text messages and a claim that
Rehab Center was obligated to provide the facility with supplies.
But she cannot dispute that Care Center has never shared
managers with any of the former owner defendants. Plaintiff
reported to Diehl and Mr. Tucker, who worked exclusively for
Care Center. And as noted above, none of the former owner
defendants had any financial control over Care Center—Rehab
Center did not “receive any revenue from Care Center’s
operations,” and had no “access to Care Center’s financial
information.”
3. No evidence of centralized control of labor relations
The last prong, centralized control of labor relations,
requires plaintiff to show that the former owner defendants
“control[led] the day-to-day employment decisions of” Care
Center and “made the final decisions regarding employment
matters related to [plaintiff].” (Laird, supra, 68 Cal.App.4th at
p. 738.) The trial court correctly concluded that plaintiff did not
show this factor. After all, the evidence shows that Care Center
alone controlled plaintiff’s day-to-day employment.
Other than continuing to mischaracterize Johnson’s text
messages, plaintiff again points to Rehab Center’s obligations
under the MOTA as evidence of centralized control. But a
general right to oversee operations is insufficient to show control
over plaintiff’s day-to-day employment. (See Maddock, supra,
631 F.Supp.2d at p. 1242 [“evidence that KB Home provided
unspecified guidance to management personnel . . . and helped
them to complete a ‘strategic plan’ does not demonstrate that KB
Home had any involvement in the day-to-day personnel
decisions”].)
28
D. Plaintiff failed to present a triable issue as to her alter
ego theory
Alter ego is “an extreme remedy, sparingly used.” (Sonora
Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 539
(Sonora Diamond).) Courts invoke the doctrine only in “narrowly
defined circumstances” where “one corporation uses another to
perpetrate fraud, circumvent a statute, or accomplish some other
wrongful or inequitable purpose.” (Gopal v. Kaiser Foundation
Health Plan, Inc. (2016) 248 Cal.App.4th 425, 431.) Establishing
liability based on an alter ego theory—to the extent such a theory
is even cognizable16— requires that the plaintiff demonstrate two
essential elements: (1) “a unity of interest and ownership
. . . [such] that the separate personalities of the corporation and
the [individual] do not in reality exist,” and (2) “an inequitable
result if the acts in question are treated as those of the
corporation alone.” (Sonora Diamond, supra, 83 Cal.App.4th at
pp. 538–539.) Without evidence of these elements, “the alter ego
doctrine cannot be invoked.” (Id. at p. 539.)
Here, plaintiff adduced no evidence of legal or equitable
ownership, which is dispositive on its own. (SEC v. Hickey (9th
Cir. 2003) 322 F.3d 1123, 1128 [“[o]wnership is a pre-requisite to
alter ego liability, and not a mere ‘factor’ or ‘guideline’”].)
Even if common ownership were not required, plaintiff’s
contention that Care Center is a “mere instrumentality” of Rehab
Center is without merit. That standard “envisions pervasive
16
As the trial court acknowledged, the doctrine may not apply
to Labor Code claims because the statutory scheme is broad
enough to impose liability on “other persons.” (See Atempa v.
Pedrazzani (2018) 27 Cal.App.5th 809, 824–826.) We express no
opinion on this issue.
29
control” that “‘dictates every facet of the subsidiary’s business—
from broad policy decisions to routine matters of day-to-day
operation.’” (Ranza v. Nike, Inc. (9th Cir. 2015) 793 F.3d 1059,
1073 (Ranza).) Plaintiff did not provide any such evidence. She
cannot show that Rehab Center and Care Center disregarded
corporate formalities or commingled funds. (See Sonora
Diamond, supra, 83 Cal.App.4th at p. 538 [listing factors].)
Instead, she cites only the same evidence—the MOTA, the
corporate form, the mischaracterized text messages, and the fact
that Care Center chose to use Rehab Center’s prior handbook.
None of these documents show that Rehab Center had any
control over Care Center at all, much less that it dictated every
facet of its business.
Plaintiff fares no better on the second prong. She presents
no evidence there would be an “inequitable result” if her sole
employer, Care Center, is treated as such. (Sonora Diamond,
supra, 83 Cal.App.4th at p. 538.) Her only argument is that
California’s wage-and-hour laws are important as a matter of
public policy. But no public policy supports requiring entities to
pay people they did not employ. And the type of case has no
effect on the alter ego analysis—the “‘“requisite element of fraud
under the alter ego theory must come from an inequitable use of
the corporate form itself as a sham, and not from the underlying
claim.”’” (MacRae v. HCR Manor Care Services, LLC (C.D. Cal.,
Sept. 14, 2017, No. SA CV 14-0715 DOC (RNB)) 2017 U.S. Dist.
Lexis 226097 p. *13.)
30
DISPOSITION
The judgment is affirmed. The former owner defendants
are entitled to costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.
_____________________, Acting P. J.
ASHMANN-GERST
We concur:
________________________, J.
CHAVEZ
________________________, J.
HOFFSTADT
31