Posts belonging to Category Caselaw Developments



Sali v. Corona Regional: “Compensable Time” and Considering Inadmissible Evidence at Class Cert.

On May 3, 2018, the Ninth Circuit Court of Appeals issued its ruling in Sali, et al. v. Corona Regional Medical Center, et al., 889 F.3d 623, 629 (9th Cir. 2018) (slip op. available here), a wage-and-hour class action, reversing the district court’s denial of class certification on several grounds. The Ninth Circuit found that the plaintiffs’ evidence of typicality, while not admissible at trial, should be considered for the purposes of class certification. Significantly, in reversing the denial of class certification, the panel found that the district court erred in interpreting compensable time as limited to time spent actually working. The ruling reaffirms that compensable time is both the time when an employee is under the control of the employer, regardless of whether or not the employee is engaged in work activities, as well as the time when an employee is “suffered or permitted to work, whether or not required to do so.” Slip op. at 24 (quoting Morillion v. Royal Packing Co., 22 Cal.4th 575 (2000)).

In Corona, the plaintiffs alleged that the employer failed to fully compensate a putative class of registered nurses (RNs) due to an electronic timekeeping system that did not account for their starting early and failed to pay their statutory time-and-a-half for overtime. Under Corona’s timekeeping system, a clock-in at seven minutes before or after the hour would round to the hour. But a clock-in at eight minutes or more before the hour would round back to the prior quarter hour, while those made eight minutes or more after the hour are rounded forward to the next quarter hour. The district court initially denied certification as to the plaintiffs’ rounding claim, finding that “time records are not a reliable indicator of the time RNs actually spent working because RNs frequently clock in for work and perform non-compensable activities, such as waiting in the break room, getting coffee, or chatting with their co-workers, until the start of their scheduled shift.” Slip op. at 23. The district court also rejected, on evidentiary grounds, that the plaintiffs had demonstrated typicality. Slip op. at 10. The plaintiffs appealed the district court’s denial of class certification.

The Ninth Circuit reversed the lower court’s denial of certification on several grounds, finding that the district court misapplied California’s definition of “work” because it did not decide whether Corona controlled workers after they had clocked in. Under California law, employees must be compensated for all time under the employer’s control, whether the employee is actually required to work or not. Morillion, 22 Cal.4th at 578 (quoting Cal. Code Regs., tit. 8, § 11140, subd. 2(G)). The panel found that the district court erred in suggesting that “‘non-compensable activities, such as waiting in the break room, getting coffee, or chatting with their co-workers’ are categorically not time ‘actually worked . . . ’,” meaning that this was not “time spent engaging in work activities.” Slip op. at 24. This misapplies California law. The Ninth Circuit further elaborated that that the question of whether the rounding policy was unfair required a focus on the company’s policies and practices, and whether they “restricted RNs in a manner that amounted to employer control during the period between their clock-in and clock-out times and the rounded shift-start and shift-end times,” an issue that the district court failed to consider. Id. at 26.

The Sali panel also found it to be an abuse of discretion for a district court to limit its analysis of whether class plaintiffs satisfied a Rule 23 requirement “to a determination of whether Plaintiffs’ evidence on that point was admissible.” Slip op. at 14 (quoting Ellis v. Costco Wholesale Corp., 657 F.3d 970, 982 (9th Cir. 2011)). Specifically, Sali found that the lower court committed reversible error by striking the class counsel’s paralegal’s declaration regarding Corona’s time-rounding to demonstrate the plaintiffs’ injuries, because courts cannot be limited to only evidence which is admissible at trial when deciding whether to certify a class: “Limiting class-certification stage proof to admissible evidence risks terminating actions before a putative class may gather crucial admissible evidence . . . [a]nd transforming a preliminary stage into an evidentiary shooting match inhibits an early determination of the best manner to conduct the action.” Slip op. at 13-14. Thus, inadmissibility alone is not a proper basis to reject evidence submitted in support of class certification.

Corona will be helpful for potential employee-plaintiffs because they are not restricted to presenting admissible evidence in support of their class certification motions. Further, the Ninth Circuit affirmed Morillion’s broad definition of compensable time as time when an employee is actually working or under the control of his or her employer.

Authored by:
Jordan Carlson, Associate
CAPSTONE LAW APC

Employee or Independent Contractor? Simple as A-B-C

On April 30, 2018, the California Supreme Court issued its long-awaited ruling in Dynamex Operations West, Inc. v. The Superior Court of Los Angeles County, No. S22732, 2018 WL 1999120 (April 30, 2018) (slip op. available here). Dynamex announced a new test under California law to determine whether workers are properly classified as independent contractors rather than employees and, in so doing, adopted the “ABC test,” a standard that should make class certification of misclassification claims more likely. The ruling will also presumably result in findings that many “independent contractors” are currently misclassified and, therefore, are entitled to the rights and benefits of California’s wage orders. These important benefits include the right to minimum wage, overtime, meal and rest breaks, and, depending on the wage order in question, reimbursement for certain business expenses.

In Dynamex, the plaintiffs alleged that Dynamex, a nationwide package and document delivery company, had improperly misclassified its delivery drivers as independent contractors rather than employees. The drivers claimed that the misclassification led to Dynamex’s violation of the provisions of Industrial Welfare Commission Wage Order No. 9, the applicable state wage order governing the transportation industry, and various sections of the Labor Code. Id. at 3. Then, the plaintiffs moved for class certification. The trial court granted certification of a class consisting of “Dynamex drivers who, during a pay period, did not themselves employ other drivers and did not do delivery work for other delivery businesses or for the drivers’ own personal customers.” Id. at 4. In certifying the class, the trial court determined that the applicable standard for determining whether the drivers were employees was the test announced in Martinez v. Combs, 49 Cal.4th 35 (2010), which held that “[t]o employ . . . under the [wage order], has three alternative definitions[:] (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.” 49 Cal.4th 35, 64.

Thus, the trial court rejected Dynamex’s argument that the multi-factor test from S. G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal.3d 341 (1989), governs the independent contractor analysis rather than the Martinez test. Dynamex at 4. Dynamex had claimed that the Martinez wage order definitions are relevant only to the joint employer question that was directly presented in Martinez—namely, whether, when a worker is an admitted employee of a primary employer, another business or entity that has some relationship with the primary employer should properly be considered a joint employer of the worker and therefore also responsible, along with the primary employer, for the obligations imposed by the wage order. Id. at 5. Dynamex then appealed the trial court’s order of certification. The Court of Appeal affirmed, concluding that the wage order definitions discussed in Martinez are applicable to the “employee or independent contractor” question with respect to obligations arising out of the wage order, and not just to joint employer determinations. The Court of Appeal upheld the trial court’s class certification order with respect to all of plaintiffs’ claims based on alleged violations of the wage order. Id.

Dynamex filed a petition for review, and the California Supreme Court granted review. In rendering a unanimous decision, the court extensively analyzed the relevant wage orders and judicial decisions and announced a new test for determining whether a worker is to be classified as an employee or independent contractor. The court interpreted the “suffer or permit to work” standard in California’s wage orders as: (1) placing the burden on the hiring entity to establish that the worker is an independent contractor who was not intended to be included within the wage order’s coverage; and (2) requiring the hiring entity, in order to meet this burden, to establish each of the three factors embodied in the ABC test—namely (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. Id. at 57, n20. Further, the court held that the hiring entity’s failure to satisfy any one of the three parts itself establishes that the worker should be treated as an employee for purposes of the wage order. Id. at 76. The court also provided guidance as to case management, commenting that a trial court is free to consider the separate parts of the ABC standard in whatever order it chooses and that, in terms of increased clarity and consistency, courts will often be best served by first considering one or both of the latter two parts of the standard (i.e., B and C) in resolving the employee or independent contractor question. Id.

Dynamex streamlines the employee/contactor analysis because only one prong may need be analyzed, simplifying the theory of liability and making certification far more probable. For example, in many cases, the plaintiff can focus on part B of the ABC test to argue that there is sufficient commonality of interest regarding the question whether the work provided by the workers is outside the usual course of the hiring entity’s business to permit the plaintiff’s claim of misclassification to be resolved on a class basis. If so, the class will be certified and the merits of the case hinge on an analysis of this single question. In fact, that is exactly how the California Supreme Court applied its new legal standard to the facts in Dynamex and accordingly affirmed the trial court’s certification order. Id. at 78-82. The state Supreme Court also analyzed part C of the ABC test and found a sufficient commonality of interest as to whether the drivers in the certified class are customarily engaged in an independently established trade, occupation, or business to permit resolution of that issue on a class basis. Id. at 81.

The significance of Dynamex on independent contractor misclassification claims in California cannot be overstated. Dynamex should also increase the likelihood that plaintiffs will prevail on the merits given that the work performed by the “contractors” is frequently part of, or even critical to, the hiring entities’ business. For example, it is now difficult to imagine that delivery drivers would not be employees for any company with a business model that centers on, or includes, the delivery of products. Whereas workers such as plumbers, electricians, and other trade workers would properly be classified as independent contractors, given that they are customarily engaged in business distinct from the hiring entity. Many companies, especially those part of the gig economy, rely on the use of independent contractors as key to their business model, since it would be much more expensive to provide benefits and rights to which an employee would be entitled. It is now clear that many of those companies will need to make dramatic changes to their workforce to comply with California law.

Authored By:
Robert Drexler, Senior Counsel
CAPSTONE LAW APC

Brown v. Wal-Mart: Good News for Plaintiffs Seeking Standing and Class Cert in Seating Cases

In April, Wal-Mart attempted and failed to defeat class certification and challenge standing for employee plaintiffs seeking redress for seating violations before the Northern District of California. On April 27, 2018, the district court released a scathing order denying Wal-Mart’s motion to decertify the class in Brown, et al. v. Wal-Mart Store, Inc., Case No. 09-cv-03339-EJD, stating that addressing Wal-Mart’s motion is “an exercise in futility” (slip op available here). The order dealt with the interpretation of two aspects of section 14 of California Wage Order 7-2001—one involving class certification requirements and the other involving standing.

Wal-Mart fought long and hard to decertify the class in Brown ever since it was first certified. In August 2012, the district court certified a class of “[a]ll persons who, during the applicable statute of limitations, were employed by Wal-Mart in the State of California in the position of Cashier.” Slip op. at 1. Wal-Mart appealed the certification to the Ninth Circuit. Two other appeals were pending before the Ninth Circuit at the time that dealt with similar issues, one of which was Kilby v. CVS, No. S215614 (Cal. April 4, 2016) (Kilby was previously covered on the ILJ here, and the Brown appeal was previously covered on the ILJ here). The Ninth Circuit had certified questions regarding interpretation of the Wage Order to the California Supreme Court in those two cases. Once the California Supreme Court issued its decision in Kilby, the Ninth Circuit decided to affirm certification in Brown in June 2016. Slip op. at 2. Proceedings in the district court resumed, but Wal-Mart again raised the issue less than two years later, filing a motion to decertify the class in January 2018. After briefing concluded, the district court rejected Wal-Mart’s arguments entirely.

Wal-Mart’s decertification argument failed largely because it relied on rehashed arguments (see slip op. at 4). Wal-Mart presented arguments regarding cashier duties that the district court had already explicitly rejected: Wal-Mart’s 30(b)(6) witness testified all cashiers perform the same essential tasks and the district court found her credible. Wal-Mart claimed newly-raised evidence as well, but failed to sufficiently describe how it was meaningfully different. Wal-Mart’s decertification argument also stumbled because it relied on arguments and evidence that “ignor[ed] or misapprehend[ed]” the Kilby decision. See slip op. at 5. The California Supreme Court stated in Kilby that “courts must examine subsets of an employee’s total tasks and duties by location . . . and consider whether it is feasible for an employee to perform each set of location-specific tasks while seated” Kilby, at 564. This means that the amount of time plaintiffs spend doing each duty is irrelevant in seating cases—the correct inquiry is whether the duties at each work location can reasonably be performed seated. See Cal. Code Regs., tit.8, § 11040, subd. 14(a) (Wage Order No. 4-2001). Disregarding this precedent, Wal-Mart argued that one of the named plaintiff’s claims were not typical of the class because she “was on register nearly 100% of her working time” and “did not spend time on tasks away from her checkstand, unlike other [c]ashiers.” Slip op. at 6 (internal citations omitted). In short, the district court wrote that as to decertification, Wal-Mart “does not have a leg to stand on.” Slip op. at 3.

Issuing a final blow, the district court denied Wal-Mart’s argument that the plaintiffs in Brown lacked standing using a bit of wordplay: “In a final ironic twist, Wal-Mart digresses from its tirade against sitting and takes a swipe at standing.” Slip op. at 6. Wal-Mart again ignored precedent set by Kilby by arguing that Brown plaintiffs could not satisfy the injury-in-fact requirement of Article III standing because the Wage Order was a procedural requirement rather than a substantive provision. In Kilby, however, the California Supreme Court explained that the Wage Order “provide[s] a minimum level of protection for workers.” Kilby, at 563. “In other words,” the district court wrote, “the Wage Order does not prescribe a procedure that businesses must follow but instead protects an employee’s concrete interest in her own well-being, and therefore “clearly sits in the [substantive provision] group.” Slip op. at 6.

This order is a victory for plaintiffs in seating claims, as it substantially strengthens arguments in favor of standing and class certification. This validation of Kilby may be one of many to come as the weight of precedent builds in favor of seating plaintiffs.

Authored by:
Ariel Harman-Holmes, Associate
CAPSTONE LAW APC

McGill v. Citibank Breathes New Life into Roberts v. AT&T Mobility

A consumer class action against AT&T Mobility for cell phone data “throttling” was revived on March 14, 2018, by the Northern District of California, courtesy of a motion to reconsider and subsequent denial of a motion to compel arbitration (as to all but one of the plaintiffs) in Roberts v. AT&T Mobility, No. 15-cv-03418-EMC (slip op. available here). The case was on remand from the Ninth Circuit after it affirmed the district court’s order compelling arbitration. Roberts v. AT&T Mobility LLC, 877 F.3d 833 (9th Cir. Dec. 11, 2017), petition for cert. filed (U.S. March 9, 2018) (No. 17-1287). While Roberts was on appeal, the California Supreme Court handed down its decision in McGill v. Citibank, 2 Cal.5th 945 (2017), holding that an arbitration agreement that waives the right to seek the statutory remedy of public injunctive relief in any forum is contrary to California public policy and therefore unenforceable. On reconsideration, the district court relied on McGill to deny AT&T’s motion to compel arbitration because it contained a pre-dispute waiver of public injunctive relief.

The Roberts arbitration saga began in April 2016 when the district court compelled arbitration, rejecting the plaintiffs’ First Amendment challenge to the Federal Arbitration Act (FAA). On appeal, the plaintiffs argued that an order forcing arbitration would violate the Constitution’s Petition Clause because the plaintiffs had not “knowingly and voluntarily give[n] up their right to have a court adjudicate their claims.” Roberts v. AT&T Mobility LLC, 877 F.3d 833, 836 (9th Cir. 2017). However, the First Amendment right to petition is a guarantee only against abridgment by the government, and a plaintiff must get over the threshold showing of a state action to make a valid Petition Clause claim. Id. at p. 837. The Ninth Circuit shot down the plaintiffs’ constitutional argument primarily because AT&T’s conduct was not fairly attributable to the state. Id. at 839.

One month after Roberts was remanded to the district court, the plaintiffs filed for reconsideration of the district court’s order compelling arbitration based on McGill. In granting reconsideration, Judge Edward Chen noted that two other judges in the Northern District already had relied on McGill to deny motions to compel arbitration in similar circumstances. See McArdel v. AT&T Mobility LLC, 2017 WL 4354998 (N.D. Cal. Oct. 2, 2017), appeal docketed, No. 17-17246 (Nov. 2, 2017); Blair v. Rent-A-Center, Inc., No. C-17-2335 WHA (Oct. 25, 2017), appeal docketed, No. 17-17221 (Oct. 30, 2017).

Procedurally, the district court rejected AT&T’s argument that the plaintiffs had delayed in bringing the motion to reconsider, finding that the plaintiffs had exercised “reasonable diligence.” Slip op. at 3. On the merits, the district court examined the California Supreme Court’s rationale in McGill. Id. at 6. The court noted that McGill had not held that public injunctive relief claims are inarbitrable, but rather that the at-issue agreement in that case was “unenforceable because it prohibited her from pursuing public injunctive relief in any forum—arbitration or otherwise.” Id. This distinction is important as it avoids potential preemption by the FAA. See, e.g., Ferguson v. Corinthian College, 733 F.3d 928, 929 (9th. Cir. 2013) (noting that the Broughton-Cruz rule exempting claims for “public injunctive relief” from arbitration is preempted by the FAA). The district court also noted that the anti-waiver defense adopted in McGill applied to contract formation in general, not just arbitration contracts. Slip op. at 7. As such, it met the U.S. Supreme Court’s mandate that courts place arbitration agreements on equal footing with other contracts. AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011).

Finally, the district court rejected AT&T’s preemption argument, that claims for public injunctive relief interfere with the fundamental attributes of arbitration because they are “indistinguishable” from class-wide injunctive relief, which can be forcibly waived via an arbitration agreement consistent with the FAA. Slip op. at 9. The court analogized claims for public injunctive relief under the consumer protection statutes to representative actions under the California Private Attorneys General Act (PAGA), which the California Supreme Court has likewise held to be unwaivable. Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal.4th 348, 381 (2014), accord Sakkab v. Luxottica Retail N. Am., Inc., 803 F.3d 425, 427 (9th Cir. 2015).

It can reasonably be expected that Roberts will return to the Ninth Circuit. However, given the logical parallels between claims for public injunctive relief and PAGA, there is a good chance of another opinion like Sakkab upholding the California Supreme Court’s analysis, including with respect to FAA preemption. In any event, Roberts stands as a good reminder to the plaintiffs’ bar to be aware of the evolving law involving arbitration; a favorable decision in a recently-decided case may revive a class action from an order compelling arbitration.

Authored By:
John Stobart, Senior Counsel
CAPSTONE LAW APC