CA Supreme Court Issues Decision in Antelope Valley Newspapers Independent Contractor Misclassification Case

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Last week, the California Supreme Court affirmed the Second District Court of Appeal’s reversal of a trial court’s decision denying certification in a case involving newspaper carriers who were misclassified as “independent contractors.” Ayala v. Antelope Valley Newspapers, Inc., No. S206874 (June 30, 2014) (slip opinion available here). The Court held that the delivery workers can be certified as a class if they are subject to a common policy, which could make it more difficult for companies to defeat motions for class certification by plaintiffs. The complaint alleged that Antelope Valley treats its carriers as independent contractors when, as a matter of law, they are actually employees, and were thus denied wage-and-hour protections to which they are entitled. The plaintiffs sought class certification, arguing that the “central question in establishing liability was whether carriers are employees, and that this question could be resolved through common proof, [such as via] the contents of the standard contract entered into between Antelope Valley and its carriers.” Slip op. at 3. Antelope Valley opposed; it disagreed that the question of employee status could be resolved on a common basis because of individual variations in how the workers carried out their deliveries.

The trial court had rejected certification, concluding that common issues did not predominate because resolution of the plaintiffs’ status as “employees,” as well as the wage-and-hour claims, would require “heavily individualized inquiries,” and thus the class action vehicle could not be superior to individual lawsuits brought by each worker. Slip op. at 3. The Second District then reversed in part, holding that even though there was evidence of variation in how the carriers performed their work and how the company’s policies affected them, the company had uniform policies affecting all carriers. Before the California Supreme Court, the carriers argued that the contents of the form agreements the defendant required them to sign were proof that the paper controlled how they carried out their work. The Court explained that the lower courts properly recognized the central legal issue: “whether putative class members are employees for purposes of the provisions under which they sue,” stating, “[i]f they are employees, Antelope Valley owes them various duties that it may not have fulfilled; if they are not, no liability can attach.” Id. at 5.

The Court affirmed, stating that the principal test for whether a worker is an employee or an independent contractor under the common law is the extent to which the hiring party retains the right of control over how the work is performed. Slip op. at 2 (citing S. G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal.3d 341, 350 (1989)). Further, “whether the hirer’s right to control can be shown on a classwide basis will depend on the extent to which individual variations in the hirer’s rights vis-à-vis each putative class member exist, and whether such variations, if any, are manageable.” Id. Because the trial court rejected certification based not on variations in the company’s right to exercise control, but rather on dissimilarities in how that right was exercised, the Court found the trial court decision could not stand. Id. Under the common law, what matters is whether the hirer retains “all necessary control” over its operations; the strongest evidence of such right to control is if an “employer” has the right discharge the worker without cause, regardless of whether or not it actually exercised that right. Id. at 6-7 (citing Borello, at 357). In addition to the right of control, the Court narrowed which “secondary” Borello factors are most significant and clarified the meaning of these additional factors.

Finally, the Court stated that after common and individual factors are identified, it must weigh the costs and benefits to determine whether the advantages of a class action to resolve a common, predominating question exceed the disadvantages created by individualized inquiries. Slip op. at 17. “Individual issues do not render class certification inappropriate so long as such issues may effectively be managed.” Id. at 17-18 (citing Sav-On Drug Stores, Inc. v. Superior Court, 34 Cal.4th 319, 334 (2004), and Duran v. U.S. Bank National Association, 59 Cal.4th 1, 29 (2014). Ayala, as a decision issued post-Duran, clarifies how the manageability of a class claims can impact class certification.