Port Drivers Misclassified as Independent Contractors in Taylor v. Shippers Transport Express

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At the end of September, U.S. District Court Judge Beverly Reid O’Connell held that truck drivers who move cargo containers to and from California port facilities for STE, a trucking and logistics company, are “employees” who can pursue wage-and-hour claims under state law, and are not independent contractors. Taylor v. Shippers Transp. Express, Inc., No. 2:13-cv-02092 (C.D. Cal. Sept. 30, 2014) (slip op. available here).

The defendants initially contended that the plaintiffs’ claims under the Labor Code were preempted by the Federal Aviation Administration Authorization Act (“FAAAA”), but the Ninth Circuit recently rejected this argument in Dilts v. Penske Logistics, LLC, No. 12-55705 (9th Cir. Sept. 8, 2014) and the Taylor court denied the defendant’s motion for summary judgment accordingly. The court granted plaintiffs’ motion for partial summary judgment, finding that STE’s ability to terminate drivers on short notice and its control over their daily work strongly indicated that the drivers were employees rather than independent contractors. A certified class of 300 former and current drivers alleged that drivers who leased trucks from STE were misclassified as independent contractors, and were thus denied minimum wage, business expense reimbursements, and itemized wage statements. The principal test of an employment relationship developed by the California Supreme Court turns on “[w]hether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.” Slip op. at 23 (citing S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341, 350 (1989)). Citing Borello’s secondary indicia of employment, the court also found that “strong evidence in support of an employment relationship is the right to discharge at will, without cause,” a factor which was present here. Id.

For example, under the leases, STE “effectively retains the right to terminate any Driver’s agreement without cause provided it gives the Driver thirty days’ notice,” which showed STE had a right to control and is thus indicative of an employer-employee relationship. Slip op. at 18. Although STE maintained that it did not control drivers (i.e. they could work when they wanted and could choose which loads to accept), the court found that the evidence in the record undermined these claims, citing company policy statements that drivers were required to contact dispatchers daily, that drivers needed to be there “on time when required,” and that STE had the capacity to track driver’s speed via GPS and occasionally sent employees to monitor drivers and verify they were driving safely. Stating that it is the “right to control, and not the actual exercise of control, which drives this analysis,” the court said the drivers had satisfied their burden of establishing they were employees of STE. Slip op. at 22.

Castaneda v. The Ensign Group: Parent Co. May Be Liable for Unlawful Labor Policies at Subsidiaries

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A California Court of Appeal issued a published decision holding that a corporate parent could be found liable for its subsidiary’s nonpayment of overtime and minimum wages, where the parent not only wholly owned the subsidiary, but also exercised control over the subsidiary’s operations and employees. Castaneda v. Ensign Group, Inc., No. B249119 (2nd Dist. Div. 6 Sept. 15, 2014) (slip op. available here).

A putative class of certified nursing assistants filed suit against The Ensign Group, a parent company that owns a cluster or portfolio of rehabilitation and nursing care facilities like Cabrillo (where the plaintiff had worked). Ensign contended that because Cabrillo was an independent entity (albeit 100% owned by Ensign) that hired and paid the plaintiff and set his daily work schedule, Ensign could not be considered the plaintiff’s employee, as a matter of law. The trial court agreed, and granting Ensign’s motion for summary judgment and dismissing them from the wage-and-hour action.

The Court of Appeal reversed, ruling that there were triable issues of fact as to whether Ensign was the plaintiff’s employer. Citing the California Supreme Court’s decision in Martinez v. Combs, 49 Cal.4th 35 (2010), and the Court of Appeal decision’s in Guerrero v. Superior Court, 213 Cal.App.4th 912 (2013), the Court explained that an “entity that controls the business enterprise may be an employer even if it did not ‘directly hire, fire or supervise’ the employees.” Slip op. at 3 (citing Guerrero). Holding that “[t]he basis of liability is the owner’s failure to perform the duty of seeing to it that the prohibited condition does not exist,” the court found enough evidence that Ensign exercised structural and managerial control over Cabrillo, and thus could have ensured that its subsidiaries’ practices were in compliance with California labor laws. Slip op. at 4 (citing Martinez, italics added). Among other factors, evidence noted by the court included the fact that Ensign was involved in the recruitment and interviewing of Cabrillo employees, Ensign offered and performed essential, centralized services to its affiliates; there was a seamless flow of corporate officers between Ensign and its subsidiaries; Cabrillo employees were required to use Ensign forms and templates; and Ensign controlled the manner in which employees clocked in and out for shifts.

Although a written agreement stated that “the members of the facility staff are Cabrillo’s ‘own’ employees,” the court chose to ignore such labels when evidence of the entities’ actual conduct establishes a different relationship. Slip op. at 5 (internal citations omitted). The court also considered the facts that Ensign’s logo and signs were posted at the Cabrillo facility, employees at the facility believed they were Ensign employees, employees were assigned “@ensigngroup.net” email addresses, and Ensign controlled their employee benefits. The plaintiff had presented facts that the parent had the ability to correct the allegedly unlawful policy in effect at its wholly-owned subsidiary, and thus the Second Appellate District reversed.

J.C. Penney Denied Arb in Seating Action Following Iskanian

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In one of the first appellate decisions to apply the California Supreme Court’s landmark Iskanian decision, the California Court of Appeal affirmed the trial court’s decision to deny J.C. Penney’s motion to compel an ex-employee’s suitable seating action to arbitration. Jones v. J.C. Penney Corp., Inc., No. B246674 (2nd Dist. Div. 4 Sept. 5, 2014) (slip op. available here). 

The plaintiff in Jones was a sales associate/cashier at J.C. Penney from November 2007 to January 2008, and then again from November 2009 to December 2009.  Jones’ complaint alleged failure to provide suitable seating, in violation of Labor Code section 1198 and California Code of Regulations, title 8, section 11070, because J.C. Penny did not allow cashiers to sit in chairs while working.  Jones also sought civil penalties under PAGA for the seating violations.  As a condition of her employment, Jones signed an arbitration agreement that covered disputes “arising from, relating to, or asserted after the termination of . . . employment.”  Slip op. at 2 (quoting the arbitration agreement). The agreement contained a class and representative actions waiver.

In a unanimous, unpublished decision authored by Justice Lee Ann Edmon, the Second Appellate District denied the defendant’s petition to compel arbitration of the plaintiff’s seating claims under PAGA. Applying Iskanian, the court held that agreements such as J.C. Penney’s that waive an employee’s right to bring a representative PAGA action are unenforceable. The court also rejected J.C. Penney’s request to stay the appeal until after the U.S. Supreme Court decides on the Iskanian defendant’s petition for a writ of certiorari. J.C. Penney argued that Iskanian conflicts with U.S. Supreme Court precedent, but the court found that the defendant had already conceded in its brief that “[u]nless employers were to ask the LWDA [Labor and Workforce Development Agency] to sign arbitration agreements, and the LWDA was to sign them, there can be no circumstances under which an aggrieved employee could arbitrate any action for PAGA penalties.” Slip op. at 12 (internal citations omitted). “Without considering whether an arbitration agreement could ever be crafted that would permit arbitration of PAGA claims, we conclude that no such arbitration agreement was crafted here.” Id. at 12-13.

9th Cir.: Affirms Order Certifying Claims Adjusters Class in Jimenez v. Allstate

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Earlier this month, the Ninth Circuit Court of Appeal affirmed the California district court’s order certifying a class of approximately 800 claims adjusters who alleged that Allstate denied them overtime pay, ruling the class met the commonality requirement. Jimenez v. Allstate Insurance Co., No. 12-56112 (9th Cir. Sept. 3, 2014) (slip op. available here). Stating that the use of statistical sampling testimony to show classwide liability did not contradict the U.S. Supreme Court’s ruling in Wal-Mart Stores Inc. v. Dukes, 131 S. Ct. 2541 (2011), the court found that it and its sister circuit courts have regularly found that statistical sampling and representative testimony are acceptable ways to show liability. Moreover, the lower court had preserved the defendant’s ability to raise any individualized defenses it might have at the damages stage, and thus the certification order did not violate its due process rights.

Claims adjuster Jimenez filed this putative class action in 2010, on behalf of all Allstate claims adjusters in California working since Sept. 29, 2006. After Allstate reclassified its California claims adjusters from exempt positions to hourly status in 2005, the plaintiffs alleged that the defendant did not pay them overtime wages or for missing meal breaks. In April 2012, U.S. District Court Judge Kronstadt certified the overtime class, ruling that if Allstate had a common practice of disregarding its own written policies and discouraging employees from reporting overtime, then the employees meet the requirements for commonality. Meal and rest break claims were denied, however, because they were too individualized.

The Ninth Circuit agreed with the lower court’s order finding that the plaintiffs had raised at least three common questions: whether the class was forced to work unpaid overtime due to the defendant’s unofficial policy of deterring employees from reporting overtime (among other reasons), whether the defendants knew or should have known that the class members were working unpaid overtime, and whether the defendants “stood idly by.” Citing Dukes, the court opined that the lower court did not abuse its discretion in determining that these three common questions contained the ‘glue’ necessary to say that ‘examination of all the class members’ claims for relief will produce a common answer to the crucial question[s]’ raised in the plaintiffs’ complaint. Slip op. at 11 (internal citations omitted). The panel also rejected Allstate’s argument that statistical sampling violates due process during the liability phase of class action proceedings. “[S]tatistical sampling and representative testimony are acceptable ways to determine liability so long as the use of these techniques is not expanded into the realm of damages.” Id. at 12.