California Appellate Court Reverses Order Denying Class Certification of Newspaper Home Delivery Carriers’ Independent Contractor Misclassification Claims

In Ayala v. Antelope Valley Newspapers, Inc., Cal. Ct. App. Case No. B235484 (Certified for Publication Oct. 17, 2012), the plaintiffs had sought from the trial court an order certifying a class of newspaper home delivery carriers in a lawsuit alleging that the defendant newspaper company illegally misclassified them as independent contractors rather than employees in violation of California labor laws.  The defendant hired the plaintiffs to “assemble inserts, sections, pre-prints, samples, bags, and supplements and deliver the newspapers as directed by AVP to AVP’s customers,” and although they signed agreements categorizing them as independent contractors, the plaintiffs argued in their class certification motion that they really were employees, because the company in practice retained significant control over their work.  (Slip Op. at 3-4.)

The trial court denied class certification, finding that “there were numerous variations in how the carriers performed their jobs, and therefore common issues did not predominate.”  (Slip Op. at 2.)  Upon review, the Court of Appeal concluded that “the trial court erred in finding that the independent contractor-employee issue is not amenable to class treatment,” finding that the variations in how the carriers performed their jobs did not “present individual issues that preclude class certification.  Instead, because all of the carriers perform the same job under virtually identical contracts, those variations simply constitute common evidence that tends to show [the company’s] lack of control over certain aspects of the carriers’ work.”  (Slip Op. at 2.)  However, as to plaintiffs’ claims that the company failed to properly pay the employees overtime and failed to provide meal and rest breaks, the Court of Appeal found that the trial court properly concluded that these claims were not suitable for class treatment on the ground that “individual inquiries would have to be made to determine AVP’s liability as to each carrier.”  (Slip Op. at 2.)

As to the issue of whether class treatment was appropriate to the analysis of whether the plaintiffs were employees or independent contractors, the Court first discussed the leading California Supreme Court decision setting forth the test used to evaluate whether a particular worker is properly classified as an independent contractor or employee — S.G. Borello & Sons, Inc. v. Dept. of Indust. Rel., 48 Cal. 3d 341 (1989).  In that case, the Court stated that “[t]he principal test of an employment relationship is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired. . . .”  In addition to the “control” test, “secondary indicia” are also relevant, including “the right to discharge at will, without cause;” “whether the one performing services is engaged in a distinct occupation or business;” “the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;” “the skill required in the particular occupation;” “whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;” “the length of time for which the services are to be performed;” “the method of payment, whether by the time or by the job;” “whether or not the work is a part of the regular business of the principal;” “whether or not the parties believe they are creating the relationship of employer-employee;” “the alleged employee’s opportunity for profit or loss depending on his managerial skill;” “the alleged employee’s investment in equipment or materials required for his task, or his employment of helpers;” “the degree of permanence of the working relationship;” and “whether the service rendered is an integral part of the alleged employer’s business.”  (Slip Op. at 7-8.)

The parties presented conflicting evidence as to these factors, and the trial court relied on the defendant’s evidence to conclude that “no commonality exists regarding AVP’s right to control because individualized questions predominate as to who performs the services, when and where they perform the services, and how they perform the services.”  (Slip Op. at 17.)  The appellate court concluded that this was error, finding that

Simply put, much of AVP’s evidence, upon which the trial court relied, merely contradicts plaintiffs’ allegations that AVP had policies or requirements about how carriers must do their jobs.  The parties do not argue that some carriers operating under the form agreements are employees while others are not.  Both sides argue that AVP has policies that apply to all carriers.  The difference between the parties is the content of those policies.  Plaintiffs argue that the policies are ones that control the way in which the carriers accomplish their work; AVP argues the policies impose certain requirements about the result of the work but allow the carriers to determine manner and means used to accomplish that result.  While there may be conflicts in the evidence regarding whether the policies plaintiffs assert exist, the issue itself is common to the class.  Similarly, whether the policies that exist are ones that merely control the result, rather than control the manner and means used to accomplish that result, is an issue that is common to the class.

(Slip Op. at 18 (emphasis added).)  Based on this rationale, the Court ordered the trial court to certify the class as to the plaintiffs’ claims of failure to reimburse reasonable business expenses, unlawful deductions from wages, failure to provide itemized wage statements, failure to keep accurate payroll records, and violation of Business and Professions Code section 17200 (based upon the alleged violations of the Labor Code) unless the trial court “determines that individual issues predominate” as to some or all of these claims, “or that class treatment is not appropriate for other reasons.”  (Slip Op. at 22.)

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