Goonewardene v. ADP, LLC, 6 Cal. 5th 817 (2019)

Sharmalene Goonewardene alleged claims against ADP (the payroll company used by her employer, Altour International Inc.) for wrongful termination, violation of the Labor Code, breach of contract, negligent misrepresentation and negligence. The trial court sustained ADP’s demurrer to the complaint without further leave to amend, and the Court of Appeal affirmed in part and reversed in part, holding that only the wrongful termination and Labor Code claims were properly dismissed. The Court of Appeal held that there were not sufficient facts alleged establishing an employment relationship between Goonewardene and on that basis affirmed dismissal of the Labor Code and FLSA violation claims. Similarly, ADP was not liable as a matter of law for either discrimination or wrongful termination in violation of public policy because of the absence of an employment relationship. As for the breach of contract claim, the Court of Appeal held that Goonewardene and other Altour employees were third-party beneficiaries of an agreement between Altour and ADP. The Court of Appeal also held that the negligent misrepresentation and professional negligence claims survived demurrer based on ADP’s alleged failure to properly calculate wages owed to Goonewardene.

In this opinion, the California Supreme Court reversed the Court of Appeal insofar as the lower Court held that the trial court erred in dismissing the causes of action for breach of contract, negligence and negligent misrepresentation. The Supreme Court unanimously determined that ADP was not a creditor beneficiary of the employment relationship between Altour and its employees or that ADP agreed to pay the wages that Altour owes to its employees out of ADP’s own funds. The Supreme Court further held that ADP owed no common law duty of care to Altour’s employees and thus could not be liable for alleged negligence.