Contractor Misclassification … Class Action?

California Supreme Court Decides When Independent Newspaper Carriers May Challenge Their Classification as a Class

Class action suits challenging company-wide workplace practices and thus posing crippling damage amounts have become big business in California and across the country. See, e.g., our blogs “The Devil is in the Details: Employment Class Action Suits Can Hinge on a Court’s Choice of Definitions” and “Brinker Case Settles for $56 Million.”

One or a few workers suing for improper treatment can magnify the stakes of their claims dramatically if they can establish that their numerous fellow laborers should be included in the court action. Employment-related cases can become such “class actions” on the trial judge’s determination (“certification””) that including the group of persons subject to the alleged wrongdoing is more efficient than for one or more judges to separately handle each worker’s claims.

A finding of such “greater judicial efficiency” in handling employee claims as a group depends on numerous and often quite complicated factors. Among these are whether there are “predominant” common questions of law or fact between the employees purportedly affected, whether the named, proposed representative worker holds claims typical of the rest, and whether that representative worker can adequately represent the interests of the others.

A worker’s suit asserting a hiring company has erroneously labeled him or her as an independent contractor (as opposed to an employee) is common. A class action suit over the alleged improper classification of a larger group of workers as independent contractors would seem less likely since the higher courts have ruled the contractor-or-employee determination is a case-by-case proposition, dependent on numerous intersecting factors. Yet, the California Supreme Court has recently issued guidelines for certifying a class in such lawsuits. Ayala v. Antelope Valley Newspapers, 59 California Reports, fourth series (Cal.4th) 522 (June 30, 2014).

Defendant Antelope Valley publishes a daily. By standard form contract, it has retained independent carriers to deliver the paper to subscribers. Four of those carriers sued Antelope Valley in December, 2008, alleging the publisher should have classified them as employees and that it thus owed them overtime pay, reimbursement for expenses, and other standard California and federal benefits.

The four plaintiffs requested class certification, contending that form contracts and other factors made it more efficient to determine contractor or employee status all at once for the newspaper carriers Antelope Valley hired. Antelope Valley opposed certification, contending there were wide variations on how individual carriers performed their work, making a common decision for all such workers impossible.

The trial judge agreed with Antelope Valley and denied certification, concluding that resolving the carriers’ employee or contractor status would involve “highly individualized inquiries” and that the case-by-case issues predominated. 59 Cal.4th at 529.

The Supreme Court had a different view. California’s “common law” test focuses principally on “whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.” Emphasis supplied. The key is “whether the hirer ’retains all necessary control’ over its operations,” not whether the hirer actually asserts that control. 59 Cal.4th at 531. The Supreme Court concluded that Antelope Valley’s use of form contracts for retaining its carriers could allow the trial judge to decide whether the publisher’s “right to control” – whether great or small – was sufficiently uniform to permit a class wide assessment.

The trial judge’s error, the Court found, was in asking the wrong questions: whether Antelope Valley’s actual assertion of the right to control was adequately uniform with its carriers and whether the carriers as a whole experienced an actual pervasive control on the manner and means of delivering papers. Although that judge found “considerable variation” in the degree the publisher actually asserted control and that there was no actual pervasive control, the Supreme Court declared both conclusions were irrelevant to the class certification issue. 59 Cal.4th at 534.

Common law determination of employee or independent contractor status does not depend solely on whether the hiring person or entity has a right to control. The Court pointed out (59 Cal.4th at 532) there are numerous secondary factors, including:

● whether the one performing the 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 hiring party (principal) or by a specialist without supervision; ● the skill required in the particular occupation; ● whether the principal or 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; and ● whether or not the parties believe they are creating the relationship of employer-employee.

While a certification decision on employee or independent contractor status would involve evaluation of whether each of the many factors could be assessed on a class wide basis, the Supreme Court suggested the trial judge might short-cut the process since, in previously published decisions, “the hirer’s right of control, ‘together with the skill which is required in the occupation, is often of almost conclusive weight.’” 59 Cal.4th at 539.

It will ultimately remain in the trial judge’s discretion to determine certification in this case, on whether common or individual factors “predominate.” That decision may ultimately turn on the relative effectiveness of the lawyers arguing for their clients’ opposing positions. However, there would seem a significant prospect of certification here as Antelope Valley used form agreements for its carriers and as the level of skill to perform newspaper delivery is low.

For assistance on independent contractor and employee classification issues, contact one of our attorneys Tim Bowles, Cindy Bamforth or Helena Kobrin.

See also:

Classifying Workers, Employees or Independent Contractors?” “Independent Contractors and Employees” and “Independent or Employed? Classifying Workers Correctly is a Case-by-Case Challenge

 

 

 

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