By Lisa Nagele 2014-07-01T00:00:00000-04:00
California newspaper carriers may bring a class action asserting they were misclassified as
independent contractors, but their overtime and break claims require individualized inquiries that
cannot be managed as a class, the California Supreme Court affirmed June 30 ( Ayala v. Antelope
Valley Newspapers, Inc. , 2014 BL 181910, Cal., S206874, 6/30/14 ).
Antelope Valley Newspapers Inc. publishes a daily newspaper and contracts with individual carriers
to deliver the paper to its subscribers. Three individual carriers filed an action claiming they were
misclassified as independent contractors and were actually employees entitled to overtime pay and
other wage and hour provisions under California law.
The only issue addressed on appeal was whether the case could proceed as a class action. The
carriers argued they should be permitted to bring a class claim, based in part on standardized
contracts the company entered into with all its carriers. Antelope Valley asserted that individual
variations in how carriers accomplished their work precluded resolution on a common basis.
The trial court denied class certification, concluding that the determination of workers’ status as
employees or independent contractors would require “heavily individualized inquiries” into the extent
of control Antelope Valley exercised over the carriers’ work. Furthermore, the carriers’ overtime and
break period claims “would require additional claim-specific individualized inquiries,” the trial court
held.
A state appeals court agreed with the trial court on the overtime and break period inquiries. However,
it reversed the trial court’s ruling on employee status, and the California Supreme Court affirmed. The
proper inquiry is not how much control the company actually exercises over the workers’ duties, but
whether the company has a legal right to control the work and whether that legal right is commonly
provable, wrote Justice Kathryn M. Werdegar for the state high court.
Predominant Common Question.
While several factors are considered in determining whether class certification is appropriate, the sole
factor at issue on appeal was whether the claim involved common questions of law or fact, the court
said. Thus, the relevant inquiry was “whether the operative legal principles, as applied to the facts of
the case, render the claims susceptible to resolution on a common basis,” Werdegar wrote.
The common law test to determine whether the carriers were employees or independent contractors
considers “whether the hirer ‘retains all necessary control’ over its operations,” the court explained,
citing S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341 (1989). And the
most convincing evidence of the right to control is the power to terminate workers without cause, the
court said.
In order to obtain class certification, there should be a common, or individual but manageable, way to
assess the company’s degree of control under the common law test, the court said. Here, the trial
court erred by focusing on variations in the degree to which the company exercised control over its
carriers, such as specifying delivery practices on how to fold or bind papers, the court said, whereas
the proper focus is on variations in the degree to which the company had the right to control the
carriers’ work.
In finding that a common question was presented, the supreme court relied on standardized contracts
that governed the relationship between the carriers and the company. These form contracts provided
similar terms for all carriers, such as what was to be delivered and the time and manner of delivery,
as well as the company’s right to discharge carriers without cause if it provided 30 days’ notice.
“At the certification stage, the importance of a form contract is not in what it says, but that the degree
of control it spells out is uniform across the class,” the court said.
Materiality of Secondary Factors Must Be Weighed.
In addition to the primary inquiry into the company’s right of control, the court also addressed
secondary, supplemental factors. These factors include the length of time for which the services are
expected to be performed and who provides the place of work.
In determining class certification, the court must consider the materiality of variations in secondary
factor, the court said. Some variations “may be of no consequence if they involve minor parts of the
overall calculus and common proof is available of key factors such as control, the skill involved, and the right to terminate at will.”
However, variations that make it difficult to prove significant factors on a common basis could make a
trial unmanageable even if other factors are common, the court said.
Implications for Workers and Employers.
If the carriers are found to be employees, Antelope Valley may owe them certain duties under
California law, the court said, but if the carriers are held to be independent contractors, the company
will not be liable.
“This is a major victory for workers who have been misclassified as independent contractors and are
denied essential work place protections,” said Aaron Kaufmann, an Oakland-based attorney who
argued a portion of the case to the supreme court as amicus curiae on behalf of the California
Employment Lawyers’ Association, a workers’ rights advocacy group.
“It is important that these misclassifications be challenged on a group basis, because individuals often
fear retaliation if they come forward on their own or they don’t have the resources to take on their
employer by themselves,” Kaufmann said in a June 30 statement.
However, questions still remain for employers. Jeremy Mittman, a management attorney with
Proskauer, said: “Many were expecting the Court to clarify which test is the proper one in determining
whether an independent contractor has been classified as such, so it’s somewhat disappointing that
the court did not address that issue.”
“While it’s tempting for the plaintiff’s bar to want to use the outcome … to advance their efforts in the
wage and hour class certification war, the decision is fairly limited in scope,” Mittman told Bloomberg
BNA June 30.
“Yes, the existence of a common agreement was found to support class certification, but it’s really
due to the unique nature of the test-which asks whether the hirer has the ‘right to control’ the worker.
But that right doesn’t even need to be exercised, so long as it exists on paper in an agreement. Most
employee tests or standards don’t operate that way. So, employers shouldn’t necessarily be shaking
in their boots today,” Mittman said.
Chief Justice Tani Cantil-Sakauye and Justices Joyce L. Kennard, Carol A. Corrigan, and Goodwin
Liu joined the majority opinion. Justice Marvin R. Baxter wrote a concurring opinion joined by Justice
Goodwin Liu. Justice Ming W. Chin also wrote a concurring opinion.
Callahan & Blaine of Santa Ana, Calif., represented the plaintiffs. Perkins Coie of Santa Monica, Calif.
represented Antelope Valley.
To contact the reporter on this story: Lisa Nagele in Washington at lnagele@bna.com
To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com
Chief Justice Tani Cantil-Sakauye and Justices Joyce L. Kennard, Carol A. Corrigan, and Goodwin
Liu joined the majority opinion. Justice Marvin R. Baxter wrote a concurring opinion joined by Justice
Goodwin Liu. Justice Ming W. Chin also wrote a concurring opinion.
Callahan & Blaine of Santa Ana, Calif., represented the plaintiffs. Perkins Coie of Santa Monica, Calif.
represented Antelope Valley.
To contact the reporter on this story: Lisa Nagele in Washington at lnagele@bna.com
To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com
Reproduced with permission. Published 7-1-2014. Copyright 2022 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bloombergindustry.com