Gonzales v. San Gabriel Transit

Filed 10/8/19
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
FRANCISCO GONZALES, B282377
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC536584)
v.
SAN GABRIEL TRANSIT, INC.,
et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of Los Angeles County,
Maren E. Nelson, Judge. Reversed and remanded with directions.
Law Offices of Thomas W. Falvey, Thomas W. Falvey, Armand R.
Kizirian and Michael H. Boyamian for Plaintiff and Appellant.
Dunn DeSantis Walt & Kendrick, James A. McFaul, Bradley A. Lebow
and Kevin V. DeSantis for Defendants and Respondents.
Appellant Francisco Gonzales formerly worked as a driver for
respondent San Gabriel Transit, Inc. (SGT), a company that coordinates with
public and private entities to arrange transportation services for passengers.
In February 2014, Gonzales filed this putative class action seeking to
represent over 550 drivers engaged by SGT as independent contractors from
February 2010 to the present. Among other things, Gonzales alleged that by
misclassifying drivers as independent contractors, SGT violated various
1
provisions of the Labor Code and the Industrial Welfare Commission’s (IWC)
2
wage orders, particularly Wage Order No. 9-2001 (codified at Cal. Code
Regs., tit. 8, § 11090 [Wage Order No. 9]), which governs the transportation
industry, and engaged in unlawful business practices under Business and
Professions Code section 17200 (17200). The trial court did not evaluate
individual causes of action. Rather, analyzing the action as a whole,
premised on terms contained in several lease agreements in effect during the
class period, the court found that Gonzales failed to demonstrate the
requisite community of interest or typicality among SGT drivers under the
then—prevailing legal test, and denied the motion for class certification.
While this appeal was pending, the California Supreme Court decided
Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903
1
Unspecified statutory references will be to the Labor Code.
2
The IWC is the state agency empowered to regulate wages, hours and
fundamental working conditions for California employees through wage
orders governing specific industries and occupations. (See Brinker
Restaurant Corp. v. Superior Court (2012) 53 Cal. 4th 1004, 1027 (Brinker).)
IWC Wage Order No. 9 regulates wages, hours, and working conditions in the
transportation industry. (Ramirez v. Yosemite Water Co. (1999) 20 Cal. 4th
785, 795.)
2
(Dynamex), in which it adopted the “ABC test” used in other jurisdictions to
streamline and provide consistency in analyzing the distinction between
3
employees and independent contractors for purposes of wage order claims.
We conclude that: (1) the ABC test adopted in Dynamex is retroactively
applicable to pending litigation on wage and hour claims; (2) the ABC test
applies with equal force to Labor Code claims that seek to enforce the
fundamental protections afforded by wage order provisions; and (3) statutory
claims alleging misclassification not directly premised on wage order
protections, and which do not fall within the generic category of “wage and
3
IWC wage orders “are constitutionally authorized, quasi-legislative
regulations that have the force of law. (See Cal. Const., art. XIV, § 1; Lab.
Code, §§ 1173, 1178, 1178.5, 1182, 1185; Industrial Welfare Com. v. Superior
Court (1980) 27 Cal. 3d 690, 700-703.)” (Dynamex, supra, 4 Cal.5th at p. 914,
fn. 3.) Given the quasi-legislative nature of IWC’s authority, courts afford
great deference to the IWC’s expressions of intent in enacting wage orders,
and repeatedly have enforced definitions the IWC has deemed necessary to
make wage orders effective. (Martinez v. Combs (2010) 49 Cal. 4th 35, 61
(Martinez); see Nordquist v. McGraw-Hill Broadcasting Co. (1995) 32
Cal. App. 4th 555, 561 (Nordquist); see also Dynamex, at pp. 915-916, 942
[reimbursement claims under section 2802, which enforces specific
requirements directly set forth in the wage orders].)
However, wage orders are not statutes and are not independently
actionable. (See Thurman v. Bayshore Transit Management, Inc. (2012) 203
Cal. App. 4th 1112, 1131–1132 (Thurman), disapproved on other grounds by
ZB, N.A. v. Superior Court of San Diego County (Sept. 12, 2019) __ Cal.5th
___, ___, fn. 8; 2019 WL4309684 *10].) Rather, wage order obligations are
imposed by Labor Code provisions requiring compliance with wage orders,
most of which do not define “employer” (Thurman, at p. 1132), and IWC
definitions are imported into the Labor Code provision. (See Martinez, supra,
49 Cal.4th at p. 64 [IWC employer definitions govern Labor Code section
1194, which creates private right of action to enforce minimum wage]; cf.,
Brinker, supra, 53 Cal.4th at p. 1027 [“[t]o the extent a wage order and a
statute overlap, [courts] will seek to harmonize them”].)
3
hour laws,” are appropriately analyzed under what has commonly been
known as the “Borello” test (referring to S.G. Borello and Sons, Inc. v.
4
Department of Industrial Relations (1989) 48 Cal. 3d 341 (Borello)).
Because the trial court did not have the benefit of the Dynamex
decision, we reverse and remand the matter with directions. On remand, the
trial court shall: (1) evaluate which alleged Labor Code claims enforce wage
order requirements, and which do not; (2) as to the Labor Code claims that
enforce wage order requirements, apply the ABC test as set forth in Dynamex
to determine whether the requirements of commonality and typicality for
purposes of certification of a class action are satisfied; (3) as to the Labor
Code claims that do not enforce wage order requirements, apply the Borello
test to determine whether the requirements of commonality and typicality for
purposes of certification of a class action are satisfied; (4) as to the derivative
claim under section 17200, apply the ABC or Borello test as appropriate for
the underlying alleged unlawful business practice; and (5) in the event the
court determines class certification is appropriate for any claims, complete
4
We note that shortly before this decision was filed, the Governor signed
Assembly Bill 5 (AB5) (added by Stats. 2019, ch. 296, § 1). It becomes
effective January 1, 2020. AB5 states “It is the intent of the Legislature in
enacting this act to [amend the Labor Code to add section 2750.3 and to
amend section 3351 to] codify the decision of the California Supreme Court in
Dynamex . . . [¶] [and] . . . to ensure workers who are currently exploited by
being misclassified as independent contractors instead of recognized as
employees have the basic rights and protections they deserve under the law,
including a minimum wage . . . . By codifying the California Supreme Court’s
landmark, unanimous Dynamex decision, this act restores . . . important
protections to potentially several million workers who have been denied . . .
basic workplace rights that all employees are entitled to under the law.” (Id.,
at section (1), subds. (d) & (e).) Though it appears our decision in this case is
consistent with AB5, we decide this case independently of that enactment.
4
the analysis by determining whether proceeding as a class action would be
superior to alternative methods of adjudication.
FACTUAL AND PROCEDURAL BACKGROUND
I. The Action
In the operative first amended complaint, Gonzales alleges that he and
a similarly situated class of SGT’s drivers during the four years immediately
preceding and during the pendency of this action were misclassified as
independent contractors in violation of the Labor Code, administrative
regulations and wage order provisions, and that SGT engaged in unfair
5
business practices.
Specifically, Gonzales alleged causes of action for (1) unpaid wages
(§ 1194); (2) failure to pay minimum wage (§§ 1194, 1194.2); (3) failure to pay
overtime compensation (§§ 1194, 510); (4) failure to provide meal and rest
breaks (§§ 226.7, 512); (5) failure to furnish accurate wage statements (§ 226);
(6) waiting time penalties (§§ 201-203); (7) failure to reimburse business
expenses (§ 2802, 226.8; Wage Order No. 9(B); (8) common law conversion;
(9) unfair business practices (§ 17200); (10) misclassification as independent
contractor (§ 226.8); (11) recovery for unlawful wage deductions (§§ 221, 223);
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(12) conversion (§ 450); and (13) accounting.
5
Although just one cause of action specifically alleges violation of a wage
order, the complaint as a whole contains broad allegations of wage order
violations, particularly Wage Order No. 9. As discussed below, some alleged
Labor Code claims, if established, would also constitute wage order
violations.
6
On appeal, Gonzales does not challenge the trial court’s ruling as it
relates to his common law claim for conversion or his common count for an
5
In January 2016, Gonzales filed a motion seeking class certification for
approximately 560 members of a class defined as “[a]ll non-employee Drivers,
or Lessees, of [SGT] from February 14, 2010 to the present (the class period)
who drove a taxicab or van and paid [SGT] a weekly vehicle lease.”
Alternatively, Gonzales proposed certification of three subclasses:
Subclass A: All non-employee Drivers, or Lessees, of SGT from
February 14, 2010 to the present who drove a taxicab or van, paid SGT
a weekly lease, and transported passengers in connection with Access
Paratransit Services, Inc.
Subclass B: All non-employee Drivers, or Lessees, of SGT from
February 14, 2010 to the present who drove a taxicab or van, paid SGT
a weekly vehicle lease, and transported school children in connection
with a school route; and
Subclass C: All other non-employee Drivers, or Lessees, of SGT from
February 14, 2010 to the present who drove a taxicab or van and paid
SGT a weekly vehicle lease.
The trial court denied the motion for class certification. Because we
reverse the trial court’s ruling and remand the case for reconsideration, we
summarize only those details necessary to make our remand instructions
clear.
II. SGT’s Business During the Class Period
SGT is a transportation company which facilitates traditional taxicab
passenger service. In addition, SGT maintains “house accounts,” i.e., service
contracts with school districts, cities and private entities (such as movie
accounting, the 8th and 13th causes of action, respectively. He has thus
forfeited any such challenge.
6
studios and hotels), to arrange transportation services for passengers. SGT
also coordinates with Access Paratransit Services, Inc. (Access), to provide
7
paratransit services for some individuals with disabilities, and with LA Taxi
Cooperative, Inc., dba Yellow Cab Co (LA Taxi), to provide drivers for school
routes for students with special needs in various school districts. SGT’s
drivers may drive Access or school routes, service house accounts, transport
passengers from Los Angeles International Airport (LAX) or within specific
geographic areas, or perform some combination of these services.
A. Taxi Service
With respect to taxi passenger service during the class period, SGT
used various overlapping models and written agreements with its drivers.
From February 2010 until January 2013, SGT: (1) entered into various
written agreements by which it “leased” taxicabs and equipment to drivers,
(2) operated general dispatch services, and (3) provided insurance, marketing
and other industry-related services to taxicab drivers who leased vehicles or
were owner-operators for general passenger services. Driver eligibility
required a valid California driver’s license and no special training. Beginning
in January 2013, SGT operated two general taxicab dispatch services,
available on differing bases, depending on whether the driver operates a Bell
Cab leased from SGT.
7
Access is a non-profit public benefit corporation formed by the Los
Angeles regional transportation planning authority and the Consolidated
Transportation Service Agency for Los Angeles County. Access facilitates the
provision of paratransit services to individuals with disabilities who are
unable to use other accessible public transportation.
7
Drivers could obtain passengers by “cash call” offers through SGT’s
dispatch service, being hailed down in the street, waiting at sanctioned
taxicab stands, or by fostering personal relationships with passengers who
would contact the driver directly. SGT also made house account runs
available to some drivers. Drivers whose customers paid in cash did not
share any portion of the fare or their tips with SGT. Drivers whose
customers paid by credit card, voucher, or coupon agreed to pay SGT
processing or administrative fees of up to 10 percent per fare.
B. Access Service
In February 2010, SGT began coordinating with Access to transport
paratransit passengers. Access drivers must satisfy specific criteria not
required of drivers who provide traditional taxicab service. These criteria,
established by Access but enforced by SGT, include undergoing background
checks and special training, wearing identification badges and uniforms
(clothing and shoes of specified colors), and agreeing to abide by a code of
conduct dictated by Access. Access determines fare rates for Access trips and
pays SGT. SGT, in turn, pays drivers after deducting a 10 percent fee to
cover SGT’s “waiting time” cost—the time from when an Access trip is taken
to when Access pays SGT for that trip.
C. School Runs
In coordination with LA Taxi, SGT also provides drivers for school runs
for students with special needs in various school districts. To be eligible to
service school runs, drivers must receive special training from LA Taxi, and
agree to abide by LA Taxi rules, school district requirements and adhere to
parental direction. LA Taxi sets the payment rate for school runs and pays
8
SGT directly. SGT then pays the driver, after deducting a 10 percent
8
processing fee.
D. LAX Service
Drivers who choose to transport passengers from LAX must satisfy
certain requirements and agree to comply with rules dictated by the Los
Angeles Department of Transportation (LADOT), and abide by LAX franchise
requirements. LAX drivers are dispatched to terminals by LAX employees,
not SGT.
E. IRS 1099 Forms
Before 2013, SGT did not issue IRS 1099 tax forms for drivers. In 2013,
SGT began to issue 1099 forms which reflect only amounts paid to drivers by
credit card and by Access. SGT has never issued W-2 forms for drivers.
III. SGT’s Contractual Agreements with Drivers
The trial court’s ruling is predicated heavily on distinctions between
the terms of several written agreements between SGT and drivers in effect
during the class period. It is sufficient here to state that the appellate record
contains five distinct “lease” agreements between SGT and its drivers which
differ in some respects as to the duties and obligations imposed on the drivers
and SGT, but all the agreements identify drivers as independent contractors.
8
According to an unwritten SGT policy, Access and school route drivers
may avoid paying the 10 percent processing fee if they are willing to wait up
to 60 days to be paid, until SGT has been paid by Access or LA Taxi.
9
IV. Gonzales’s Relationship with SGT
Gonzales drove for SGT during intermittent periods from mid-2005 to
September 2012. Over this period, he used five different vehicles. He leased
one cab from SGT, purchased three others, and subleased a fifth car from a
coworker. Gonzales always considered himself an employee of SGT, and
understood that his weekly “lease” payments ensured that he would continue
to receive work from SGT. At first Gonzales provided traditional taxicab
passenger service, but at some point he began driving Access routes almost
exclusively. Gonzales alleged that, as an Access driver, SGT assigned him
specific routes for passenger pick-up and drop-off, and he was not permitted
to decline nor deviate from those assignments. He also alleged that he was
required to pay out of pocket for, among other things, radio service to
maintain contact with SGT’s dispatch, fuel, maintenance and repairs for his
vehicle and his uniform, and was required to paint his cab the specific colors
of and display the logo of at least one cab company.
Gonzales claims he typically worked 12-hour days, six days per week,
and was not provided nor compensated for meal or rest breaks. His schedule
was dictated almost entirely by his Access routes, and he lacked discretion to
alter those routes without risking a loss of business. Gonzales did not drive
LAX or school routes.
V. Declarations of Other Drivers
Gonzales presented 17 former coworkers’ declarations in support of the
motion. A general summary of that testimony reflects that:
Hiring Process and Training: When they were hired, drivers signed an
agreement stating they were independent contractors, not employees,
and were required to undergo background checks and present their
driving records to SGT.
10
Uniforms: Most drivers were required to wear a uniform (or at least
clothing and shoes of specified colors).
Suspension: Drivers could be “suspended” if they got into a traffic
accident. If a driver refused to take a passenger or declined to accept
more routes, he or she would not be “suspended,” but faced the risk of
losing favor with dispatchers—and the concomitant risk of a decrease
in future business.
Meal and Rest Breaks: SGT had no policy regarding meal or rest
breaks, and drivers received neither.
Discipline: Several declarants were regularly summoned to SGT’s
administrative office due to customer complaints, and told they could
be fired if future incidents occurred. Some drivers testified they were
or could be fired for refusing Access routes. One driver said SGT fired
him after he refused to violate his own and Access’ safety guidelines.
VI. SGT’s Opposition to the Motion
Primarily through the testimony of Stacey Murphy, its Manager of
Operations, SGT presented evidence that its “independent drivers” are free to
work when and where they please, and to acquire business where and as they
choose. Drivers may receive referrals through SGT’s dispatch service, or
generate their own business through personal relationships, flag downs, by
waiting at taxi stands or through regular house accounts. Eligible drivers
may acquire business through Access, LAX service and/or school runs. SGT
does not tell drivers when to work, and does not impose any “rules, policies or
procedures” on its independent drivers.
Murphy testified that drivers must pay a weekly “lease” fee to cover
insurance and maintenance, plus a processing fee of up to 10 percent per fare
for credit payments. Some drivers skirt the latter contractual requirement
and avoid paying SGT’s 10 percent processing fee by using an alternate
method to process credit payment (such as their own “Square” accounts).
Drivers keep fares and tips for cash-paying customers, and do not report
those amounts to or share them with SGT.
11
According to Murphy, some drivers lease vehicles from SGT,
individuals or other entities, others own their cabs, and others share vehicles
and negotiate cost-sharing agreements with other drivers. All of SGT’s lease
agreements specify that SGT or a driver may terminate the agreement for a
specified or no reason, subject to certain notice restrictions.
SGT presented declarations from more than 55 current drivers to
demonstrate that some drivers:
(1) use SGT’s dispatch service for all or some routes, while others use
the dispatch service only for Access routes;
(2) choose to drive Access routes; others do not;
(3) choose to drive LAX passengers;
(4) develop personal relationships with passengers who contact them
directly;
(5) choose to drive school runs for LA Taxi; and
(6) pick up passengers who hail cabs; others do not.
Most of SGT’s declarants said they understood they were independent
contractors, and did not wish to be treated as employees.
VII. The Trial Court’s Ruling
The trial court denied the motion. Addressing the complaint as a
whole, the court found that Gonzales demonstrated the existence of an
ascertainable and sufficiently numerous class, and that he and his counsel
were adequate class representatives. However, the trial court found that
Gonzales failed to make the requisite showing that the issue of
misclassification as an independent contractor (either as to the proposed class
or three proposed subclasses of drivers) was susceptible to common proof.
12
A. Lack of Commonality Among Class Members—Single Class
As to whether to certify a single class, the trial court found that the
class claims were not subject to common proof primarily because, during the
class period, SGT’s drivers worked under several different lease agreements,
among which the terms on various topics differed (e.g., inspection
requirements, leased versus driver-owned vehicles, routes driven, lease
termination, and necessity of the driver wearing a uniform). The court also
found variations in “rules and regulations” imposed on drivers and the level
and type of training required, and found insufficient common evidence that
SGT used its dispatch service to control drivers or dictate their work hours.
Moreover, the court concluded that the drivers’ rates and manner of
compensation were not entirely within SGT’s control.
Finally, implicit in the trial court’s ruling was its disapproval of
Gonzales’ proposed trial plan. The court noted that Gonzales failed to specify
how he planned to use expert testimony. Also, issues of credibility among
some of Gonzales’ declarants, would likely require “mini trials” about those
drivers’ singular experiences.
B. Lack of Commonality Among Class Members—Sub-Classes
The trial court also found insufficient common evidence regarding
misclassification if drivers were divided into the three proposed subclasses.
9
As for Subclass (A) the court found that Gonzales failed to establish by
substantial evidence that all Access drivers were misclassified as
9
“All non-employee Drivers, or Lessees, of [SGT] from February 14, 2010
to the present who drove a taxicab or van, paid [SGT] a weekly lease, and
transported passengers in connection with Access.”
13
independent contractors or subject to a right of control by SGT. Further, SGT
presented evidence to show that drivers were free to choose whether to drive
Access routes at all, and to accept or decline such routes at will.
10
The court found Subclass (B) not certifiable because, among other things,
Gonzales, the sole named plaintiff, never drove a school route for SGT. The
11
court found Subclass (C) overbroad
C. Lack of Typicality
The court also found that Gonzales failed to establish typicality among
the class members’ claims, i.e., that he and others sought recovery for the
same or substantially similar injuries arising from a common course of
conduct. First, the court determined that Gonzales’s position with SGT
varied from 2005 to 2012, as he had both leased and purchased taxicabs from
SGT. Second, although Gonzales provided traditional taxicab services
(without a set schedule or hours) at first, he was later assigned to Access
routes with designated schedules which typically required him to work up to
14 hours per day, six days per week, without meal or rest breaks and was
required to wear a uniform. Third, Gonzales did not perform school or LAX
routes. Finally, the court found that Gonzales failed to establish typicality
because he was unable to show that SGT exercised the same degree of control
10
“All non-employee Drivers, or Lessees, of [SGT] from February 14, 2010
to the present who drove a taxicab or van, paid [SGT] a weekly vehicle lease,
and transported school children in connection with a school route.”
11
“All other non-employee Drivers, or Lessees, of [SGT] from February
14, 2010 to the present who drove a taxicab or van and paid [SGT] a weekly
vehicle lease.”
14
over its drivers. While Gonzales and some of his declarants claimed they
were required to adhere to specific work schedules and route assignments,
other drivers said they were free to choose their own work hours and routes.
DISCUSSION
Gonzales contends that the trial court erred in concluding that his
proposed class or subclasses lacked sufficient commonality, and that his
claims are not typical of the putative class members. Based on Dynamex,
supra, 4 Cal.5th 903, decided by our Supreme Court during the pendency of
this appeal, we conclude that we must remand the case to the trial court for
reconsideration.
I. Standard of Review and Requirements for Class Certification
The requirements for class certification are well established. “‘The
party advocating class treatment must demonstrate the existence of an
ascertainable and sufficiently numerous class, a well-defined community of
interest, and substantial benefits from certification that render proceeding as
a class superior to the alternatives. [Citations.] “. . . the ‘community of
interest requirement embodies three factors: (1) predominant common
questions of law or fact; (2) class representatives with claims or defenses
typical of the class; and (3) class representatives who can adequately
represent the class.’”’” (Ayala v. Antelope Valley Newspapers, Inc. (2014) 59
Cal. 4th 522, 529 (Ayala), quoting Brinker, supra, 53 Cal.4th at p. 1021.)
California law “‘encourages the use of the class action device.’ [Citation.]”
(Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal. 4th 319, 340 (Sav-
On).) The “predominant common questions” factor does not require that all
class members have identical claims. Rather, the focus is on whether issues
15
shared by the class members are sufficiently uniform to permit class-wide
assessment, and whether individual variations in proof on those issues are
manageable. (Ayala, at p. 530.)
“The certification question is ‘essentially a procedural one that does not
ask whether an action is legally or factually meritorious.’” (Sav-On, supra, 34
Cal.4th at p. 326.) “A class certification motion is not a license for a free-
floating inquiry into the validity of the complaint’s allegations; rather,
resolution of disputes over the merits of a case generally must be postponed
until after class certification has been decided [citation], with the court
assuming for purposes of the certification motion that any claims have
merit.” (Brinker, supra, 53 Cal.4th at p. 1023.) Still, whether common or
individual questions predominate often depends on resolution of issues
closely tied to the merits. (Id. at p. 1024.) Phrased another way, “a trial
court must examine the plaintiff’s theory of recovery, assess the nature of the
legal and factual disputes likely to be presented, and decide whether
individual or common issues predominate. To the extent the propriety of
certification depends upon disputed threshold legal or factual questions, a
court may, and indeed must, resolve them.” (Id. at p. 1025.)
“Courts regularly certify class actions to resolve wage and hour claims.”
(Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal. App. 4th 1193, 1208,
disapproved on another ground by Noel v. Thrifty Payless, Inc. (2019) 7
Cal.5th 955, 986, fn. 15; see Brinker, supra, 53 Cal.4th at p. 1033.) Indeed,
the California Supreme Court has held that a theory of liability that a hiring
entity “has a uniform policy, and that that policy, measured against wage
order requirements, allegedly violates the law—is by its nature a common
question eminently suited for class treatment.” (Brinker, at p. 1033.) We
review a trial court order denying a motion for class certification for abuse of
16
discretion, and generally will not disturb that decision “‘“unless (1) it is
unsupported by substantial evidence, (2) it rests on improper criteria, or (3) it
rests on erroneous legal assumptions.”’ [Citation.]” (Ayala, supra, 59 Cal.4th
at p. 530; see Duran v. U.S. Bank National Assn. (2014) 59 Cal. 4th 1, 49
(Duran); Brinker, at p. 1022.)
In class actions, California courts may look to federal rules on
procedural matters. (Richmond v. Dart Industries, Inc. (1981) 29 Cal. 3d 462,
469, fn. 7 [looking to Fed. Rules Civ. Proc., rule 23 (Rule 23)]; Williams v.
Superior Court (2013) 221 Cal. App. 4th 1353, 1364.) Under that framework,
at the class certification stage, the focus is not whether a sufficient number of
common questions have been raised. Rather, the thrust of the inquiry is the
capacity of a class-wide proceeding to generate common answers apt to drive
resolution of the litigation. (Rule 23(a)(2); Wal-Mart Stores, Inc. v. Dukes
(2011) 564 U.S. 338, 350 (Dukes); Duran, supra, 59 Cal.4th at p. 28 [same].)
We review the trial court’s actual reasons for denying certification; if
they are erroneous we must reverse, even if other reasons on which the court
did not rely may have supported the same ruling. (Linder, supra, 23 Cal.4th
at pp. 435-436.) As the California Supreme Court recently explained, the
“question of what legal standard or test applies in determining whether a
worker is an employee or, instead, an independent contractor for purposes of
the obligations imposed by a wage order is . . . a question of law.” (Dynamex,
supra, 4 Cal.5th at p. 942, fn. 16; cf., Martinez, supra, 49 Cal.4th at pp. 57-
60.) “[I]f the trial court applied the wrong legal standard and that error
affected the propriety of its class certification ruling, the order denying
decertification would constitute an abuse of discretion.” (Dynamex, at p. 942,
fn. 16; Sav-On, supra, 34 Cal.4th at p. 339, fn. 10.)
17
In California, in the context of class actions seeking a determination of
whether a category of workers has been misclassified as independent
contractors, courts have examined whether sufficient evidence exists of a
uniform right of control to resolve the issue of misclassification on a class-
wide basis. (See, e.g., Ayala, supra, 59 Cal.4th at pp. 530-540.) “As part of
the community of interest requirement, the party seeking certification must
show that issues of law or fact common to the class predominate. [Citation.]”
(Duran, supra, 59 Cal.4th at p. 28.) Before certifying a class, the trial court
need not resolve all legal disputes concerning the elements of plaintiff’s
claims to determine whether common questions predominate. (Brinker,
supra, 53 Cal.4th at p. 1038.) “The ‘ultimate question’ . . . is whether ‘the
issues which may be jointly tried, when compared with those requiring
separate adjudication, are so numerous or substantial that the maintenance
of a class action would be advantageous to the judicial process and to the
litigants.’” (Id. at p. 1021.) In conducting this analysis, a “court must
examine the allegations of the complaint and supporting declarations
[citation] and consider whether the legal and factual issues they present are
such that their resolution in a single class proceeding would be both desirable
and feasible. ‘As a general rule if the defendant’s liability can be determined
by facts common to all members of the class, a class will be certified even if
the members must individually prove their damages.’” (Id. at p. 1021-1022,
fn. omitted.)
II. Dynamex
In Dynamex, supra, 4 Cal.5th at pages 927-943, our Supreme Court
conducted an exhaustive review of the evolution of the test for distinguishing
employees from independent contractors, and how that distinction is applied
18
in the context of California wage orders. We summarize the principles as
necessary to our disposition of this appeal.
A. The Borello Test and Ayala’s Refinement of that Test
Under California law, an individual who provides services for another
is presumed to be an employee. (§ 3357 [“Any person rendering service for
another, other than as an independent contractor, or unless expressly
excluded herein, is presumed to be an employee”]; Robinson v. George (1940)
16 Cal. 2d 238, 243.) From this threshold, the burden is on an employer to
“prove, if it can, that the presumed employee was an independent contractor.”
(Narayan v. EGL, Inc. (9th Cir. 2010) 616 F.3d 895, 900.) For decades,
California courts have applied the test articulated in Borello, supra, 48
Cal. 3d 341, to determine whether a worker is an employee or an independent
contractor. (Id. at pp. 351, 353-354, 357-359; Ayala, supra, 59 Cal.4th at p.
522.)
Under Borello, “‘“[t]he principal test of an employment relationship
[was] whether the person to whom service is rendered ha[d] the right to
control the manner and means of accomplishing the result desired.”’” (Ayala,
supra, 59 Cal.4th at p. 531, quoting Borello, supra, 48 Cal.3d at p. 350, italics
added.) Ayala reaffirmed and clarified application of the Borello test for
Labor Code violations by evaluating several “secondary indicia” which inform
the task of classifying workers as employees. (Ayala, at p. 532.) They are:
“(a) whether the one performing services is engaged in a distinct occupation
or business; (b) 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; (c) the skill required in the particular
occupation; (d) whether the principal or the worker supplies the
19
instrumentalities, tools, and the place of work for the person doing the work;
(e) the length of time for which the services are to be performed; (f) the
method of payment, whether by the time or by the job; (g) whether or not the
work is a part of the regular business of the principal; and (h) whether or not
the parties believe they are creating the relationship of employer-employee.”
(Ibid.; Borello, at p. 351.) These “‘individual factors cannot be applied
mechanically as separate tests; they are intertwined, and their weight
depends often on particular combinations.’ [Citation.]” (Borello, at p. 351;
but see Ayala, at p. 539 [“the skill which is required in the occupation is often
of almost conclusive weight”].) Moreover, the label parties attach to their
relationship “is not dispositive and will be ignored if their actual conduct
establishes a different relationship.” (Estrada v. FedEx Ground Package
System, Inc. (2007) 154 Cal. App. 4th 1, 10–11; Borello, at p. 349 [an
affirmative agreement to classify a worker in one way may be considered, but
“is not dispositive, and subterfuges are not countenanced”].)
In Ayala, plaintiffs proceeded on the sole basis that they were
employees, and the Court resolved the case applying the Borello test for
employment. (Ayala, supra, 59 Cal.4th at p. 531.) The Court confined itself
to determining whether plaintiffs’ theory that they were employees under the
common law definition was susceptible of proof on a class-wide basis, and left
“for another day the question of what application, if any, the wage order tests
for employee status might have to wage and hour claims.” (Id. at p. 531;
Dynamex, supra, 4 Cal.5th at p. 941.)
B. Martinez—Wage Order Claims
In Martinez, supra, 49 Cal. 4th 35, the Supreme Court resolved the
standard to be applied in determining whether workers should be classified
20
as employees or independent contractors for purposes of California wage
order claims. (Martinez, at pp. 52–57; Dynamex, supra, 4 Cal.5th at p. 936.)
In Martinez, seasonal farm laborers sued the grower (which
indisputably employed them), and the merchants to whom the grower
regularly sold its produce, for failure to pay minimum or overtime wages.
The workers argued that, in an action to recover unpaid wages under section
1194, the alternative definitions of “employ” and “employer,” as used in the
applicable wage order (there Wage Order No. 14), established the standard
for determining whether both the grower and the merchants should be
considered employers, jointly liable for workers’ unpaid wages. (Martinez,
supra, 49 Cal.4th at pp. 42-50.) The Court discussed at length the impact of
the IWC regulatory scheme on whether a joint employment relationship arose
between the farm workers and merchants. (See Martinez at pp. 52–57.)
Although the Court concluded that no joint employer relationship was
formed, it clarified that IWC wage orders are accorded the same weight as
statutes and the applicable wage order defines the employment relationship
for wage and hour claims within its scope. (Id. at pp. 52, 61.)
After examining the statutory and historical context of section 1194,
the Martinez Court concluded that the wage order encompassed three
alternative definitions of the term “employ.” (Martinez, supra, 49 Cal.4th at
p. 64.) To employ “means: (a) to exercise control over the wages, hours or
working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby
creating a common law employment relationship.” (Id. at pp. 64, 57–58; see
Cal. Code Regs., tit. 8, § 11090, subd. 2(D); see also Dynamex, supra, 4
Cal.5th at p. 937 [the same definition of “employ” applies to Wage Order Nos.
9 and 14].)
21
C. “Another Day” Arrives—the Dynamex ABC Test for Wage Orders
The Ayala Court expressly left “for another day the question of what
application, if any, the wage order tests for employee status might have to
wage and hour claims.” (Ayala, supra, 59 Cal.4th at p. 531; Dynamex, supra,
4 Cal.5th at p. 941.) That day arose in Dynamex, which resolved the
principal question at issue here, “namely whether in a wage and hour class
action alleging that the plaintiffs have been misclassified as independent
contractors when they should have been classified as employees, a class may
be certified based on the wage order definitions of ‘employ’ and ‘employer’ as
construed in Martinez, . . . or, instead, whether the test for distinguishing
between employees and independent contractors discussed in Borello . . . is
12
the only standard that applies in this setting.” (Dynamex, at pp. 941-942.)
In Dynamex, delivery drivers alleging they had been misclassified as
independent contractors, brought a wage and hour lawsuit seeking overtime
pay, reimbursement of business expenses, and other claims. (Dynamex, at p.
12
In Dynamex, the Court observed that Borello is frequently
characterized “as embodying the common law test . . . for distinguishing
employees and independent contractors [citation].” (Dynamex, supra, 4
Cal.5th at p. 934, italics added.) But the Court explained it was more precise
to describe Borello “as calling for resolution of the employee or independent
contractor question by focusing on the intended scope and purposes of the
particular statutory provision or provisions at issue[,]” because in Borello the
court “repeatedly emphasize[d] statutory purpose as the touchstone for
deciding whether a category of workers should be considered employees for
purposes of social welfare legislation.” (Id. at pp. 934-935, italics added.) “In
other words, Borello calls for application of a statutory purpose standard that
considers the control of details and other potentially relevant factors . . . in
order to determine [whether classification as employee or independent
contractor] best effectuates the underlying legislative intent and objective of
the statutory scheme at issue.” (Id. at p. 934.)
22
942.) With respect to the drivers’ wage order claims, the Supreme Court held
that, “the suffer or permit to work standard properly applies to the question
whether a worker should be considered an employee or, instead, an
independent contractor.” (Id. at p. 943.) Dynamex next considered the
appropriate test to resolve this question under the “suffer or permit to work”
definition of “employ.” The Court rejected the Borello/Ayala multifactor test
for this purpose, and instead adopted the “simpler, more structured” three-
part “ABC” test used in Massachusetts and other jurisdictions. (Id. at pp.
955–958, & fns. 23-26.)
In contrast to Borello’s multifactor test, the ABC test permits “‘courts to
look beyond labels and evaluate whether workers are truly engaged in a
separate business or whether the business is being used by the employer to
evade wage, tax, and other obligations.’” (Dynamex, supra, 4 Cal.5th at p.
958, fn. 26.) Under the ABC test, a worker is presumptively an employee,
and the hiring entity bears the burden to show otherwise. (Curry v. Equilon
Enterprises, LLC (2018) 23 Cal.App.5th 289, 313.) The ABC test is
conjunctive, and the hiring entity’s failure to establish any of the following
three factors precludes a finding that the worker is an independent
contractor: “(A) that the worker is free from the control and direction of the
hiring entity in connection with the performance of the work, both under the
contract for the performance of the work and in fact; and (B) that the worker
performs work that is outside the usual course of the hiring entity’s business;
and (C) that the worker is customarily engaged in an independently
established trade, occupation, or business of the same nature as the work
performed.” (Dynamex, at p. 957, adopting language of Massachusetts Wage
Act, Mass. Gen. Laws, ch. 149, § 148B.)
23
Part A of the ABC test refines Borello’s “right to control” test, as
broadly defined in Martinez. (See Dynamex, supra, 4 Cal.5th at p. 958 [“as
. . . Martinez makes clear . . . the suffer or permit to work definition was
intended to be broader and more inclusive than the common law test”].)
Under part A, a court determines whether class certification is appropriate
by examining whether there is common proof of a hirer’s right to control that
would permit resolution of the misclassification issue on a class-wide basis.
(Ayala, supra, 59 Cal.4th at pp. 530–540; Ali v. U.S.A. Cab Ltd. (2009) 176
Cal. App. 4th 1333, 1344–1352.) The primary focus is not on the scope of
actual control exercised by a business over “the precise manner or details of
the work” performed, but on the broader question of the degree to which the
hirer legally has retained, either as a matter of contractual right or in actual
practice, the right of “necessary control” over the work, and the extent to
which that scope of control—whatever it is—is subject to common proof.
(Dynamex, at pp. 950-951, fn. 20, 958; Ayala, at p. 533.)
Part B of the ABC test requires a business to demonstrate “that the
worker performs work that is outside the usual course of the hiring entity’s
business.” (Dynamex, supra, 4 Cal.5th at pp. 917, 959.) This part of the test
seeks “to bring within the ‘employee’ category all individuals who can
reasonably be viewed as working ‘in [the hiring entity’s] business’ [citation],
that is, all individuals who are reasonably viewed as providing services to the
business in a role comparable to that of an employee, rather than in a role
comparable to that of a traditional independent contractor. [Citation.]” (Id.
at p. 959, italics added; see Garcia v. Border Transportation Group, LLC
(2018) 28 Cal.App.5th 558, 569 (Garcia).) The focus is not on the label
attached to a worker’s position, but on how that individual’s job may
reasonably be viewed. “Workers whose roles are most clearly comparable to
24
those of employees include individuals whose services are provided within the
usual course of the business of the entity for which the work is performed and
thus who would ordinarily be viewed by others as working in the hiring
entity’s business and not as working, instead, in the worker’s own
independent business.” (Dynamex, at p. 959.)
An employer fails to make the necessary showing under prong B if a
court finds that the work performed is “‘not “merely incidental to” [the
company’s] business, but rather, is an “integral part of” that business.’
[Citation.]” (Dynamex, supra, 4 Cal.5th at p. 961, fn. 29.) To illustrate this
point, the Court observed that a retailer who hires an outside plumber or
electrician to fix a malfunctioning pipe or to install lighting “would not
reasonably be seen as having suffered or permitted the plumber or electrician
to provide services to it as an employee.” (Id. at p. 959.) By contrast, a
clothing manufacturer who hires work-at-home seamstresses to sew clothing
the company intends to sell, using fabric and patterns supplied by the
company, or a bakery that regularly hires decorators to decorate its custom
designed cakes, would be considered an employer. (Ibid.) In the latter two
examples, “the workers are part of the hiring entity’s usual business
operation and the [hirer] can reasonably be viewed as having suffered or
permitted the workers to provide services as employees” and “the workers’
role within the . . . usual business operations is more like . . . an employee
than . . . an independent contractor.” (Id. at p. 960.) Similarly, Dynamex
pointed to a case in which a court found that a business failed to satisfy prong
B where it was unable to demonstrate that workers’ harvesting work was
outside the usual course of business for a company engaged in the business of
contracting for the purchase, harvesting, sale and delivery of cut timber to
customers. (Id. at p. 961, fn. 29, citing Maine Supreme Court decision,
25
McPherson Timberlands, Inc. v. Unemployment Ins. Com. (1998) 714 A.2d
818, 821.)
Finally, to establish a worker is an independent contractor, part C of
the ABC test requires the hiring entity to show that the worker is
“customarily engaged in an independently established trade, occupation, or
business of the same nature as the work performed for the hiring entity.”
(Dynamex, supra, 4 Cal.5th at p. 961.) Here the inquiry is whether the
worker “independently has made the decision to go into business for himself
or herself.” (Id. at p. 962.) This factor is established with evidence that the
worker has “take[n] the usual steps to establish and promote his or her
independent business—for example, through incorporation, licensure,
advertisements, routine offerings to provide the services of the independent
business to the public or to a number of potential customers, and the like.”
(Ibid.) Critically, part C requires the hirer to show a worker actually be
engaged in an independent business, not merely that he or she could be. (Id.
at p. 962 & fn. 30; Garcia, supra, 28 Cal.App.5th at pp. 573–574.)
Again, the ABC test is conjunctive, so a hiring entity’s failure to satisfy
any of the three prongs directs a finding that a “worker should be treated as
an employee for purposes of the wage order.” (Dynamex, supra, 4 Cal.5th at
p. 963.) Accordingly, “a court is free to consider the separate parts of the
ABC standard in whatever order it chooses.” (Ibid.) If, at any point in the
analysis, the court finds a business has failed to make a sufficient showing as
to A, B or C, it need not analyze the remaining prongs.
26
III. Retroactive Application of Dynamex
A. Wage Order Claims
On appeal, SGT states that it “does not concede that Dynamex applies
retroactively to this matter,” yet makes no substantive argument on the
point. Having failed substantively to address the issue, SGT has forfeited
any claim that Dynamex is not retroactive. (Wall Street Network, Ltd. v. New
York Times Co. (2008) 164 Cal. App. 4th 1171, 1177.)
In any event, there is no reason to conclude that Dynamex departs from
the usual rule of retroactive application. Judicial decisions in civil litigation
almost uniformly are given retroactive effect and applied to pending
litigation. (See e.g., Grafton Partners v. Superior Court (2005) 36 Cal. 4th
944, 967; Newman v. Emerson Radio Corp. (1989) 48 Cal. 3d 973, 978;
Grobeson v. City of Los Angeles (2010) 190 Cal. App. 4th 778, 796; Rose v.
Hudson (2007) 153 Cal. App. 4th 641, 646.) A rare exception is employed in
extraordinary circumstances dictated by considerations of fairness and public
policy, such as when a decision articulates a new standard or rule of law.
(See Rose v. Hudson, supra, 153 Cal.App.4th at p. 653, Hoschler v.
Sacramento City Unified School Dist. (2007) 149 Cal. App. 4th 258, 271.) The
instant litigation presents no extraordinary circumstance. Dynamex did not
establish a new standard. Rather, its expressly articulated purpose was to
streamline the existing complex, multifactor wage order analysis: “In our
view, this interpretation of the suffer or permit to work standard is faithful to
its history and to the fundamental purpose of the wage orders and will
provide greater clarity and consistency, and less opportunity for
manipulation, than a test or standard that invariably requires the
27
consideration and weighing of a significant number of disparate factors on a
13
case-by-case basis.” (Dynamex, supra, 4 Cal.5th at p. 964.)
B. Labor Code Claims
Dynamex did not reach the question of whether the ABC test applies to
non–wage order related Labor Code claims. (Dynamex, supra, 4 Cal.4th at p.
916, fn. 5 [“The drivers contend that the wage order definitions should apply
to all the relief sought under [Labor Code] section 2802 . . . that issue is not
before us and we express no view on that question”].) Considering that
question here, we conclude that the ABC test applies to Labor Code claims
which are either rooted in one or more wage orders, or predicated on conduct
alleged to have violated a wage order. As to Labor Code claims that are not
either rooted in one or more wage orders, or predicated on conduct alleged to
have violated a wage order, the Borello test remains appropriate.
13
To date, one published decision has addressed retroactive application of
Dynamex. In Garcia, supra, 28 Cal.App.5th at page 572, the court observed
that, at least as to wage order claims, “Dynamex changed the appropriate
standard for determining whether [an individual is] an employee entitled to
wage order protection, or an independent contractor who [is] not.” The
comment is dicta. Dynamex was decided after appellate briefing was
complete in Garcia. Although the court gave the parties an opportunity to
brief the issue of retroactivity, they chose not to do so, and the court did not
expressly resolve whether the rule articulated in Dynamex applied
retroactively, but assumed implicitly that it would not. (Id. at p. 565, and fn.
11 [applying Dynamex retroactively as to that case only because the
defendant, which bore the burden to do so, never raised the issue].) Further,
we disagree with any suggestion that, for purposes of retroactivity, Dynamex
established a new standard. We take the Supreme Court at its word:
Dynamex merely clarified and streamlined the analysis of the wage order
“suffer or permit to work” test. (Dynamex, supra, 4 Cal.5th at p. 964.)
28
Here, Gonzales specifically alleged violations of both the Labor Code
and Wage Order No. 9 only in the seventh cause of action (for failure to
reimburse business expenses in violation of section 2802). However, he
generally alleges that SGT’s misconduct violates both wage order protections
and the Labor Code. The complaint opens with the general allegation that
Gonzales and others “who drove for [SGT] . . . during the . . . (‘Class Period’),
. . . were denied the benefits and protections required under the California
Labor Code and other statutes and regulations applicable to California
employees because they were misclassified as independent contractors.”
(Italics added.) After listing specific wrongful acts and a host of SGT’s
alleged Labor Code violations, Gonzales alleges that this same misconduct
violated “applicable Wage Orders issued by California’s Industrial Welfare
Commission, including [Wage Order No. 9] during the Class Period.” (Italics
added.)
Second, Wage Order No. 9 covers most of the Labor Code violations
alleged. For example, the failure to pay minimum wages under section 1194,
which (according to section 1197), is established in the wage orders and
governed by Wage Order No. 9(4). Failure to provide meal or rest periods in
violation of sections 512 and 516 is governed by Wage Order Nos. 9(11) and
(12). The failure to supply accurate wage statements and records of hours
worked in violation of section 226 is encompassed by Wage Order No. 9(7),
and failure to reimburse expenses and improper deductions in violation of
section 2802 is encompassed by Wage Order Nos. 9(8) and (9). Further,
section 1198 makes unlawful “employment of any employee . . . under
conditions of labor prohibited by the [wage] order.”
Notwithstanding the close, if not inseparable, ties between these
alleged Labor Code violations and wage order provisions, SGT insists the
29
order denying class certification must stand because Gonzales has not shown
14
that common issues predominate under the ABC test. Such an approach
would pose a significant practical problem, as it would require a trial court to
apply one test to a wage and hour claim grounded solely in the Labor Code
and a different test for essentially the same claim premised on a wage order.
Employers/hirers and employees/independent contractors cannot determine
their rights if they do not know what test applies. Moreover, the suggestion
that different tests govern statutory wage and hour claims is contrary to
Dynamex’s stated purpose of providing clarity and consistency in analyzing
this thorny issue. (See Dynamex, supra, 4 Cal.5th at p. 964.)
In a lawsuit such as this, a plaintiff seeks primarily to enforce
provisions of the Labor Code which, by its own terms, incorporate the wage
orders: “[A]n employee who sues to recover unpaid minimum wages under
section 1194 [of the Labor Code] actually sues to enforce the applicable wage
order. Only by deferring to wage orders’ definitional provisions do we truly
14
SGT also insists the order denying class certification must stand, at
least in part, because some claims are not predicated on violations of a wage
order. Specifically, SGT contends that alleged violations of sections 1194 and
510 (for failure to pay overtime), sections 201–203 (waiting time penalties),
and section 2802 (failure to reimburse business expenses), must be analyzed
under Borello, as should any alleged violation of section 17200 premised on
those claims.
We recognize that some statutory claims may not be encompassed by,
or are expressly excluded from, wage order protection. For example, the
overtime protections of Wage Order No. 9 do not apply to taxicab drivers.
(See Wage Order No. 9(3)(M).) However, Access or school route drivers may
not be considered “taxicab drivers” (an undefined term), but may
nevertheless be subject to another exception. (See e.g., Wage Order No.
9(3)(L).) We leave it to the trial court on remand to resolve this—and similar
issues—on a more complete record.
30
apply section 1194 according to its terms by enforcing the ‘legal minimum
wage.”’ (Martinez, supra, 49 Cal. 35 at p. 62.) Indeed, this is what happened
in Dynamex where plaintiffs alleged Labor Code violations based on
Dynamex’s failure to comply with specific wage order requirements.
(Dynamex, supra, 4 Cal.5th at pp. 941–943.) Given that pleading and the fact
that wage orders establish basic requirements for such things as wages,
hours and working conditions, the Supreme Court’s holding that the ABC test
should be applied to determine employee status under the wage orders can
only mean that the same test applies to Labor Code claims seeking to enforce
or advance the wage order requirements and their basic workplace
protections.
Because most of the statutory claims alleged here are rooted in wage
order protections and requirements, the ABC test must be applied to those
claims to resolve the employee vs. independent contractor issues. SGT’s
contention that the Supreme Court specifically approved different tests for
determining employee status in the context of wage and hour litigation
misses the mark. Although Dynamex acknowledged the possibility of a “two-
test approach” to “disparate claims under different labor statutes brought by
the same individual” (Dynamex, supra, at p. 948), the court did not suggest
that a different test should apply to Labor Code claims which are either
rooted in one or more wage orders, or predicated on conduct alleged to have
violated a wage order. In referencing different wage and hour standards
under the federal FLSA, the Court discussed “wage and hour laws” (i.e. wage
and hour provisions of the Labor Code) and “wage orders” as having a
singular purpose: “[T]he federal context demonstrates that California is not
alone is adopting a distinct standard that provides broader coverage of
31
workers with regard to the very fundamental protections afforded by wage
and hour laws and wage orders.” (Ibid., italics added.)
Indeed, not long before it issued its unanimous decision in Dynamex,
the Supreme Court indicated its intent to apply the ABC test to a claim
brought under the Labor Code aimed at addressing conduct redundant of
that alleged in a wage order claim. In Mendoza v. Nordstrom, Inc. (2017) 2
Cal.5th 1074 (Mendoza), the court responded to the Ninth Circuit’s request
for guidance as to whether prohibitions in sections 551 and 552 against
working seven days in a row should be calculated on a rolling basis, or by the
workweek. (Id. at p. 1078.) In conducting its analysis, the Court observed
that, under the applicable wage order, for purposes of calculating overtime,
seven days of work was calculated on the basis of a workweek. (Id. at p.
1083.) The Court adopted that same understanding, harmonizing the
meaning of a seven-day workweek for purposes of sections 551 and 552,
because “[t]he provisions of the Labor Code are not to be construed in
isolation, but in harmony with a second set of rules governing employment . . .
[and the Court’s] role in interpreting . . . wage orders and reconciling them
with the Labor Code is settled.” (Id. at pp. 1081–1082, italics added; see
Brinker, supra, 53 Cal.4th at p. 1026 [wage and hour claims, including claims
regarding the availability and timing of meal breaks, are “governed by two
complementary and occasionally overlapping sources of authority: the
provisions of the Labor Code, enacted by the Legislature, and a series of 18
15
wage orders, adopted by the IWC”].) “[S]tatutory purpose [is] the
15
“To the extent a wage order and a statute overlap, we will seek to
harmonize them, as we would with any two statutes.” (Brinker, supra, 53
Cal.4th at p. 1027.) However, because the Legislature is the source of the
IWC’s authority, where there is a conflict, a provision of the Labor Code shall
32
touchstone for deciding whether a particular category of workers should be
considered employees rather than independent contractors for purposes of
social welfare legislation.” (Dynamex, supra, 4 Cal.5th at p. 935.) In a wage
and hour action where the purposes served by the Labor Code and wage order
provisions are coextensive, there is no principled reason to treat the claims
differently. Such a policy would create different standards for violation of the
same or very similar conduct.
We conclude that the ABC test articulated in Dynamex applies to
equivalent or overlapping non-wage order allegations arising under the Labor
Code. Just as the Supreme Court in Mendoza sought to harmonize the
calculation of seven-day workweeks between the Labor Code and wage order,
the court here must harmonize and apply the same test to Gonzales’s
contentions that he and other class members were misclassified as
independent contractors in violation of numerous Labor Code provisions.
IV. Remand for the Trial Court to Apply the ABC Test, as Appropriate
A. Community of Interest
SGT does not dispute the trial court’s conclusion that Gonzales
adequately established the elements of numerosity, ascertainability and
adequacy of representation. Those issues are not before us.
On remand, the trial court will first have to determine which Labor
Code claims alleged here enforce wage order requirements, and which do not.
As to any Labor Code claims that do not enforce wage order requirements,
the court must reevaluate the claim under the Borello test. As for Labor
Code claims that do enforce wage order requirements, the court must analyze
prevail over a wage order. (See id. at p. 1026; Gerard v. Orange Coast
Memorial Medical Center (2018) 6 Cal.5th 443, 448.)
33
the claims under the ABC test. We offer the following comments on the ABC
test for guidance.
As for community of interest in distinguishing “employees” from
“independent contractors,” the trial court on remand must examine whether
common evidence will or may establish all three prongs of the ABC test:
“(A) that the worker is free from the control and direction of the hiring entity
in connection with the performance of the work, both under the contract for
the performance of the work and in fact; and (B) that the worker performs
work that is outside the usual course of the hiring entity’s business; and
(C) that the worker is customarily engaged in an independently established
trade, occupation, or business of the same nature as the work performed.”
(Dynamex, supra, 4 Cal.5th at p. 957.)
Specifically, as to the “A” prong of the ABC test, the question is
whether drivers are free from its direction and control “both under [their
contracts] for the performance of [their] work and in fact.” (Dynamex, supra,
4 Cal.5th at p. 917.) Although the trial court was correct that Gonzales and
other drivers executed varying versions of the lease agreements, on remand
the trial court’s focus under prong A must be not simply on the leases and
their terms, but on the nature and extent of SGT’s actual direction and
control of the drivers. The issue is not whether Gonzales and other members
of the putative class were misclassified as independent contractors. Rather,
the salient inquiry is whether there is “a sufficient commonality of interest”
within the proposed class (or subclasses) to permit the issue of whether SGT’s
drivers are employees or independent contractors “for purposes of the wage
order to be litigated on a class basis.” (Dynamex, at pp. 966–967.)
As to prong “B” of the ABC test, the trial court’s focus must be on
whether it may be shown by common evidence that the services performed by
34
putative class members, regardless of whether they provided traditional
passenger services, or drove Access or school routes, are within the usual
course of SGT’s business. (See Dynamex, supra, 4 Cal.5th at pp. 916-917.)
We note that in Dynamex, the Court found the company unable to satisfy its
burden under prong B as to a class composed of delivery drivers, because its
entire business was to provide delivery services, and the company obtained
the customers, set the delivery rates charged, told drivers where to pick up
and deliver packages, and required its drivers to use its tracking and
recordkeeping systems. (Id. at pp. 965–966.)
Finally, as to part C of the test, the question for the trial court is
whether there is sufficient common evidence that SGT’s drivers are actually
and “customarily engaged in an independently established trade, occupation,
or business,” not merely whether they could be. (Dynamex, supra, 4 Cal.5th
at p. 966.)
We remand this action to the trial court to conduct further proceedings
as necessary to consider these issues, recognizing that the parties’ arguments
on the question of whether class certification was in order were not framed
with the ABC test in mind, and they may have proceeded on a different
evidentiary record. As to any remaining claims that the trial court finds are
governed by Borello, the court shall reevaluate whether its previous ruling
may stand.
B. Typicality
The trial court must also reevaluate the issue of typicality. Typicality
does not require that the representative plaintiff’s claims and those of the
class members be identical or perfectly aligned. (Wersba v. Apple Computer,
Inc. (2001) 91 Cal. App. 4th 224, 228, disapproved on another ground by
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Hernandez v. Restoration Hardward, Inc. (2018) 4 Cal.5th 260, 269–270.) It
is enough that both the named plaintiff’s claims and class members’ claims
arise from similar conduct and implicate the same legal theories so that the
plaintiff has a motive to litigate on behalf of all class members. (See Classen
v. Weller (1983) 145 Cal. App. 3d 27, 45.) “‘“‘The test of typicality “is whether
other members have the same or similar injury, whether the action is based
on conduct which is not unique to the named plaintiffs, and whether other
class members have been injured by the same course of conduct.”’”’
[Citation.]” (Martinez v. Joe’s Crab Shack Holdings (2014) 231 Cal. App. 4th
362, 375.)
The trial court found that Gonzales failed to satisfy the typicality
requirement because he could not show he was subjected to “the same right of
control by SGT” as other drivers, primarily because he claimed he was
required to adhere to a work schedule, while other drivers said they were free
to choose their own routes and hours. The analysis under the ABC test may
alter this conclusion.
First, under the ABC test, the court examines not merely the scope of a
hirer’s contractual or formal right to control, but the hirer’s retention of the
right and actual exercise of its control. (Dynamex, supra, 4 Cal.5th at p. 955.)
The trial court focused on differences between Gonzales’s and other drivers’
lease agreements. However, Gonzales presented evidence that, irrespective
of some variation among the terms of their written agreements, SGT’s drivers
were not treated in markedly different respects. Further, to the extent SGT’s
control of drivers differed, such differences may be a function of the category
of services performed by a driver at a given time. For example, while drivers
who perform Access or school work may be subject to fixed schedules, routes
and payment rates, and required to wear uniforms, drivers who perform
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traditional taxicab services retain more flexibility as to their schedules and
routes. To the extent such evidentiary variations are pivotal, they might be
resolved, if appropriate, by redefining the subclasses.
Also, SGT maintains that Gonzales’ claims are atypical because,
“unlike other class members, [he] never leased a taxi during the class period.”
But the class allegations are not premised on having “leased” a vehicle.
Rather, Gonzales seeks more generally to certify a class of plaintiffs who
“were engaged by [SGT] to drive passengers for hire,” and who “drove” for
SGT during the class period, i.e., all “drivers employed by, or formerly
employed by [SGT] . . . [during the class period], who were or are classified as
independent contractors.” The common allegations of harm suffered by
Gonzales and other drivers is that all were misclassified as independent
contractors. As such, they were required at their own expense to install
equipment and provide tools to access SGT’s dispatch system, and to obtain
insurance and perform maintenance, all expenses Gonzales contends should
properly be borne by their employer and were denied the benefits of wage
order protections.
On remand, SGT must show that the variations in class members’
factual situations are sufficiently wide to defeat class certification. For
instance, regardless of a driver’s status as lessee or owner/operator, drivers
were charged weekly “lease” fees to perform services under the SGT
umbrella. If and to the extent it is important that a driver owned rather than
leased a vehicle—which may cause a variation in weekly “lease” rates,
insurance, equipment installation fees, or some other business expense—such
a difference would likely be a function of the damages to which an individual
driver was entitled. That a calculation of individual damages will, at some
point, be required does not foreclose the possibility of taking common
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evidence on the issue of misclassification questions. (Collins v. Rocha (1972)
7 Cal. 3d 232, 238.) The overarching inquiry is whether class members were
misclassified during the class period. If so, as discussed in the overlapping
analysis of commonality above, the class members are entitled to a
determination as to whether SGT misclassified them as independent
contractors. The fact that individual members of the class have different
damages does not preclude class certification. (Sav–On, supra, 34 Cal.4th at
pp. 329–330.)
The trial court also alluded to the fact that Gonzales could not
demonstrate typicality for the entire class because he never drove LAX or
school runs. However, as we have noted, typicality does not require that a
class representative have suffered injuries identical to those of other class
members. (Martinez v. Joe’s Crab Shack Holdings, supra, 231 Cal.App.4th at
p. 375.) Accordingly, the trial court must reevaluate whether the
requirements for typicality are satisfied, and whether, given time limitations,
the complaint may be amended to add an additional representative plaintiff.
C. Determination Regarding Superiority of Proceeding as Class Action
Finally, we recognize that, given its other conclusions, the trial court
had no need to address whether class treatment would be “superior to other
available methods for fairly and efficiently adjudicating the controversy.”
(Rule 23(b)(3); Duran, supra, 59 Cal.4th at p. 29.) This rule applies to class
actions brought under Code of Civil Procedure section 382, as well as federal
actions under Rule 23. (Schneider v. Vennard (1986) 183 Cal. App. 3d 1340,
1345.) Thus, on remand, if the court finds the other requirements for class
certification satisfied, Gonzales must also demonstrate that a class
proceeding is superior to other litigation methods for the fair and efficient
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adjudication of the controversies here. (See Sav-on, supra, 34 Cal.4th at pp.
327, 332.)
“Although predominance of common issues is often a major factor in a
certification analysis, it is not the only consideration. In certifying a class
action, the court must also conclude that litigation of individual issues,
including those arising from affirmative defenses, can be managed fairly and
efficiently. [Citation.] ‘[W]hether in a given case affirmative defenses should
lead a court to approve or reject certification will hinge on the manageability
of any individual issues. [Citation.]’ [Citation.] In wage and hour cases
where a party seeks class certification based on allegations that the employer
consistently imposed a uniform policy or de facto practice on class members,
the party must still demonstrate that the illegal effects of this conduct can be
proven efficiently and manageably within a class setting. [Citations.]”
(Duran, supra, 59 Cal.4th at pp. 28–29.)
Previously, the trial court had no cause to determine whether Gonzales
had shown that a class proceeding was superior to other adjudication
methods. But, the court did observe that, (1) SGT had presented “varied
defenses, including that some drivers are subject to an arbitration agreement
while others are not,” (2) “credibility [issues existed among some of Gonzales’]
declarants” which may result in a number of “mini trials,” and (3) Gonzales
did “not meaningfully specif[y] how he intends to use expert testimony.” On
remand, the trial court shall consider all relevant factors to determine
whether class treatment (including coordination and analysis of discovery
data and a further detailed explication of plaintiffs’ trial plan) would be
superior to alternative methods for the fair and efficient adjudication of this
controversy. Courts “seeking to preserve efficiency and other benefits of class
actions routinely fashion methods to manage individual questions[,]” and are
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encouraged to be “procedurally innovative” to certify and manage class
actions. (Sav-On, supra, 34 Cal.4th at p. 339; Linder, supra, 23 Cal.4th at p.
440 [in class actions, “trial courts must be accorded the flexibility ‘to adopt
innovative procedures’”].) Such innovation also permits defendants to
“present their opposition, and to raise certain affirmative defenses.” (Day v.
NLO (S.D. Ohio 1994) 851 F. Supp. 869, 876.)
DISPOSITION
The order denying the motion for class certification is reversed. The
case is remanded to the trial court with the following directions. In
accordance with this opinion’s holdings, the trial court shall: (1) evaluate
which Labor Code claims enforce wage order requirements, and which do not;
(2) as to the Labor Code claims that enforce wage order requirements, apply
the ABC test as described in Dynamex to determine whether the
requirements of commonality and typicality for purposes of certification of a
class action are satisfied; (3) as to the Labor Code claims that do not enforce
wage order requirements, apply the Borello test to determine whether the
requirements of commonality and typicality for purposes of certification of a
class action are satisfied; (4) as to the derivative section 17200 claim, apply
the ABC or Borello test as appropriate for the underlying alleged unfair
business practice; and (5) in the event the court determines class certification
is appropriate, complete the analysis by determining whether proceeding as a
class action would be superior to alternative methods of adjudication.
//
//
//
//
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Gonzales shall recover his costs on appeal.
CERTIFIED FOR PUBLICATION
WILLHITE, Acting P. J.
We concur:
COLLINS, J.
CURREY, J.
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