Good-faith defense to the imposition of waiting-time penalties for freelancers

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California employers facing an attorney demand for waiting time penalties for allegedly failing to pay a freelancer on the employer’s next scheduled employee payday can take comfort from a recent Ninth Circuit Court of Appeals decision, Bijon Hill, Plaintiff-Appellant, v. Walmart Inc., No. 21-15180 (9th Cir. Apr. 26, 2022). Hill involved a print model engaged for 15 day-long non-consecutive photo shoots arranged by Walmart through a third-party agency. Though the agency contract specifically designated models as “independent contractors” and set out a specific payment schedule, Hill claimed she was an employee entitled to be paid on Walmart’s next regular payday. Though she was paid in full, she argued she was entitled to over a half-million dollars in waiting time penalties.

Following depositions and the exchange of written discovery, Walmart moved for summary judgment on two grounds: (1) that Hill was an independent contractor; and (2) that Walmart acted in good faith in its belief that Hill was an independent contractor. The district court denied summary judgment on the first ground but granted Walmart summary judgment on its “good faith” affirmative defense.

The appellate court affirmed the trial court’s summary judgment grant, first clarifying two important points:

  • Labor Code section 203 “wages” and “penalties” are only for employees, not freelancers; and
  • Violations of Section 203 are imposed for “willful” conduct.

These are important interpretations because the plaintiffs’ bar has been wildly successful arguing that Section 203 in essence imposes a kind of “strict liability” on businesses in which businesses were not permitted to challenge the actual status of freelancers or assert that the company had acted in good faith. The appellate court acknowledged that while Walmart had significant control over Hill’s modeling through the job locations, appearance, hours, poses, etc., there were many objective indicators of Walmart’s good-faith belief that the relationship was fairly characterized as that of an independent contractor: Hill arranged her own travel; there was no W-2; Hill worked for other companies, Hill’s work was for a short period. Thus, Hill was unable to create a factual dispute precluding summary judgment as to the good faith defense, and final judgment was for Walmart.

The takeaway from Hill is that the consensus view among federal district courts in California is that a good-faith mistake about a worker's employment status is a defense to the imposition of waiting-time penalties pursuant to Section 203. Though not dispositive, the Hill holding will be useful in convincing state superior courts to adopt the reasoning of their federal counterparts and permit use of the good faith defense.