Smith v. 9W Halo Western OpCo L.P.

Background

Kenneth C. Smith worked as a non-exempt, hourly employee for 9W Halo Western OpCo L.P., doing business as Angelica, from approximately November 9, 2017, through May 6, 2019. He asserted eight California-law causes of action concerning meal periods, rest periods, wages, vacation pay, wage statements, final wages, unfair competition, and the Private Attorneys General Act (PAGA).

Smith alleged that several entities, including 9W Halo OpCo L.P., 9W Halo GP LLC, and 9W Halo Intermediate Holdings L.P., were Angelica’s joint employers. He alleged that the entities owned, operated, or controlled Angelica and had the ability to control working conditions, wages, and hours. The three entities moved to dismiss the third amended complaint and asked to be dismissed with prejudice. Alternatively, they sought dismissal of the PAGA claim as untimely.

Rule 12(b)(6) Standard

The court applied Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. A complaint must provide enough factual content to make liability plausible, rather than relying on legal conclusions or formulaic statements. Generally, dismissal is without prejudice unless amendment could not cure the problem or other circumstances justify denying amendment.

Undifferentiated Allegations

The court held that the third amended complaint failed to distinguish among the defendant entities. It grouped the entities together as the “Halo Entities” and did not explain each partnership defendant’s relationship to Smith or the putative class. It also did not provide factual allegations showing how the partnership defendants exercised control over Angelica or Smith’s employment.

Joint-Employer Allegations

Under California’s joint-employer standards, a defendant may qualify as an employer if it controls wages, hours, or working conditions; suffers or permits the employee to work; or engages the employee, creating a common-law employment relationship.

The court found that Smith did not sufficiently allege any of these bases. The complaint did not allege that the partnership defendants influenced the amount or manner of his pay, issued his paychecks, had power to hire or fire him, set his wages or hours, or directed when and where employees had to report. It also did not allege that they directed or supervised Smith at his worksite or set his pay. The court concluded that the allegations were conclusory and did not plausibly establish that any of the three entities was Smith’s joint employer.

The court noted that information submitted in opposition showed a relationship between Angelica and 9W Halo OpCo L.P. The information included that 9W Halo OpCo L.P.’s corporate name appeared on Angelica’s human-resources handbook and certain wage statements. The court found that these facts might support a joint-employer claim if included in a complaint, so it allowed one final amendment as to 9W Halo OpCo L.P. only.

PAGA Notice and Relation Back

PAGA claims have a one-year limitations period and require advance notice to the California Labor and Workforce Development Agency. Smith timely filed an original notice but did not amend it to identify the Halo Entities as liable parties until December 20, 2022, more than three years after his employment ended.

The court held that the amended notice did not relate back to the original notice under the allegations then pleaded because Smith had not plausibly shown that the partnership defendants were joint employers or that the original notice effectively informed them of the alleged violations. The court stated that relation back could apply if Smith’s amended complaint established a joint-employer relationship and showed that a late-added defendant had been effectively placed on notice by the original notice.

Disposition

The court granted defendants’ motion to dismiss. It dismissed 9W Halo GP LLC and 9W Halo Intermediate Holdings L.P. with prejudice. It dismissed 9W Halo OpCo L.P. without prejudice and granted Smith leave to amend to re-add that defendant with additional allegations supporting its joint-employer status with Angelica. The amendment had to be filed within 21 days, and no other parties or new claims could be added without permission from the court or consent of the defendant.