Posts belonging to Category Certification Rulings

On September 1, 2015, in a 68-page decision, District Court Judge Edward M. Chen of the Northern District of California certified a class of an estimated 160,000 “UberBlack, UberX, and UberSUV drivers who have driven for Uber in . . . California at any time since August 16, 2009,” and who either had not signed an arbitration provision or who had opted out of such a provision. See O’Connor, et al. v. Uber Technologies, Inc., 3:13-cv-03826 (N.D. Cal. Sept. 1, 2015) (slip opinion available here). The court held the class may pursue its claims that Uber misclassified them as independent contractors instead of employees and violated California’s Unfair Competition Law by failing to pass on to its drivers the entire amount of any tip or gratuity, in violation Cal. Labor Code section 351. Excluded from the certified class are Uber drivers who work for third-party intermediaries, those paid under a corporate name, and those who did not opt out of the arbitration provision in Uber’s most recent driver contracts.

In ruling that the working relationship between the drivers and Uber is “sufficiently similar” that their employment status can be adjudicated on a class basis, the district court applied California’s common-law test of employment, enunciated in the seminal case S.G. Borello & Sons, Inc. v. Department of Indus. Relations, 48 Cal. 3d 341 (1989). In applying the Borello test at the summary judgment stage, the court previously determined that because Uber drivers “render service to Uber,” they are presumptive employees as a matter of law. See O’Connor, 2015 WL 1069092, at *4-6, *9 (N.D. Cal. 2015). Therefore, at trial, the burden would fall on Uber to “disprove an employment relationship” by rebutting the plaintiffs’ prima facie showing of employment. Id. at *10.

To rebut the presumption of employment, Uber needed to demonstrate that the multi-factor Borello test weighs in its favor. The principal inquiry under Borello “is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.” Alexander v. FedEx Ground Package Sys., 765 F.3d 981, 988 (9th Cir. 2014) (quoting Borello, 48 Cal. 3d at 350). Critically for purposes of class certification, the pertinent question under California’s right-to-control test is “not how much control a hirer [actually] exercises, but how much control the hirer retains the right to exercise.” Ayala v. Antelope Valley Newspapers, Inc., 59 Cal. 4th 522, 533 (2014) (emphases in original). Although retaining control over any one work detail is not dispositive, the “right to discharge at will, without cause,” is “strong evidence in support of an employment relationship.” Borello, 48 Cal.3d at 350; see also Ayala, 59 Cal. 4th at 531. There are also at least eight (8) other “secondary indicia” that may be relevant to the employee/independent contractor determination. Borello, 48 Cal.3d at 351 (discussed in this prior ILJ post). After an exhaustive analysis of the Borello factors, the O’Connor court concluded that, despite variations in contract and length of service, and though drivers could set their own schedules and routes, Uber retained the right to terminate them at will and without cause, to monitor and track their performance, and to set their pay unilaterally, and that all the “secondary indicia” raised common questions that would yield common answers. Slip op. at 32-54. Moreover, given the specific class definition, the court found the predominance requirement satisfied “because there are not significant material legal differences between the claims and defenses of the class members and those of the named Plaintiffs.” Id. at 19.

Arguing that there is “no typical Uber driver,” Uber argued that the plaintiffs failed to satisfy Rule 23(a)(3)’s typicality requirement by focusing on differences between drivers under the Borello test, but the court rejected that argument, finding Uber’s “no typical driver” argument to be “a commonality or predominance argument masquerading as a typicality argument.” Slip op. at 19. Moreover, the court found an “inherent tension” in Uber’s argument. Id. On the one hand, it argued that the drivers’ employment classification could not be adjudicated on a classwide basis because its right of control over drivers and the day-to-day reality of their relationship is not sufficiently uniform to satisfy the class action requirements of Federal Rule of Civil Procedure 23; on the other hand, Uber argued that it had properly (and uniformly) classified every single driver as an independent contractor. The court found Uber’s “no typical driver” argument to be focused on “legally irrelevant differences” between the named plaintiffs and class members, such as whether they received in-person or online training. Slip op. at 19. However, Uber most vigorously argued that the plaintiffs were neither typical nor adequate because of an irreconcilable conflict between the remedy they seek (establishment of an employment relationship) and the interests of “countless drivers” who “do not want to be employees and view Uber as having liberated them from traditional employment.” Slip op. at 24. In support, Uber pointed to 400 declarations, 150 of which actually stated a preference for independent contractor status. The court found the views of these 400 drivers to be “statistically insignificant” (i.e. 0.25% of the class), particularly because there was no evidence that they were randomly selected, or constituted a representative sample of the driver population, or that their responses were “free from the taint of biased questions” from the defendant’s attorneys. Id. Ultimately, the court concluded that because the plaintiffs’ legal claims all arise from essentially the same conduct by Uber underlying the claims of class members and allege that they suffered the same legal injury—i.e., their misclassification as independent contractors—the plaintiffs’ claims were typical of the class. However, the court also denied without prejudice the plaintiffs’ request to certify their expense reimbursement claims which alleged that Uber uniformly failed to reimburse its drivers for their necessary expenses in violation of Labor Code section 2802.

On September 15, 2015, Uber filed a Petition for interlocutory review of the district court’s certification decision under Rule 23(f) with the Ninth Circuit, available here. Uber casts the need for immediate review in dire economic terms, arguing that if the decision is permitted to stand, it will “effectively kill[] the sharing economy business model” on which Uber and other online software platforms operate. Hyperbole aside, if the plaintiffs prevail on the merits of their employment status claim, Uber’s business model will likely be no more, and Uber’s costs would exponentially increase beyond the scope of the damages sought by the plaintiffs in this lawsuit. Accordingly, this case will remain closely watched by both the legal and business communities.

Authored By:
Melissa Grant, Senior Counsel
CAPSTONE LAW APC

On August 5, 2015, after nearly five years of litigation and following a remand from the California Court of Appeal, a class of exotic dancers was finally certified in Salazar v. VIP Showgirls, aka Victory Entertainment, No. BC445154 (Los Angeles Super. Ct., filed Sept. 10, 2010).  In 2010, Salazar, an exotic dancer, sued VIP Showgirls aka Victory Entertainment, Inc. (“VIP”), an adult entertainment club, alleging wage-and-hour violations arising from the club’s misclassification of dancers who performed at the club.  VIP required its dancers to sign a standard agreement identifying them as independent contractors, and the agreement provided that either party could terminate the relationship at will.

Salazar moved to certify a class of “[a]ll persons who are employed or have been employed and who have worked one or more shifts as a ‘dancer’ for [VIP] in the State of California.” In its initial determination of whether the class certification requirements had been met, the trial court applied the common law test for whether an employee relationship existed between Salazar and VIP.  See S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341 (1989).  Defendant-employers frequently succeed in arguing that that the multi-factor Borello test, often called the “economic realities” test,[1] creates individual issues of fact which predominate over common questions, hindering class certification.  The Salazar trial court thus denied certification because it found that the dancers’ relationships with VIP under the Borello test would require individual inquiries at trial.  Salazar then appealed, and, in 2014, the Court of Appeal reversed the order denying certification in an unpublished decision and remanded to the superior court.  Salazar v. Victory Entertainment, Inc., No. B249888 (2nd Dist. Div. 7 Dec. 15, 2014) (slip op. available here). 

In reversing the trial court, the Court of Appeal cited its opinion in Dynamex Operations West, Inc. v. Superior Court, 230 Cal. App. 4th 718 (2014), which had been decided after the Salazar trial court denied certification.  In Dynamex, the Court of Appeal held the Industrial Welfare Commission (“IWC”) definition of an employment relationship applied to claims falling within the scope of an IWC wage order.  Dynamex at 734; see also Martinez v. Combs, 49 Cal. 4th 35, 64 (2010).  For claims falling outside the scope of a relevant wage order, the common law test for an employment relationship applies.  Dynamex at 734; see Ayala v. Antelope Valley Newspapers, Inc., 59 Cal. 4th 522, 531-532 (2014).  The Salazar Court of Appeal concluded that both Wage Orders 5 and 10 appeared to apply to the exotic dancers and both define the word “employ” as “to engage, suffer, or permit to work” and define an “employer” as any person “who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person.”  Interpreting this same language, the California Supreme Court in Martinez previously concluded that “[t]o employ, then, under the IWC’s definition, 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.”  Martinez, supra, 49 Cal. 4th at 64.  The Martinez test of employment is far simpler than the Borello test and is easier to prove with common evidence.  The Salazar appellate court concluded that because the trial court had applied only the common law test, reversal was required in order to determine whether the dancers’ claims fell within the IWC Wage Orders and were thereby governed by the IWC employment test.  The Salazar appellate court instructed the trial court to determine on remand whether the IWC definitions applied, and if so, whether common issues predominated.

Applying the standards for determining employment articulated by the appellate court, the Salazar trial court held that the dancers’ claims fell within the Wage Orders and that common issues predominated, and on that basis reversed its March 2013 decision and certified the class.  This case highlights the significance of the simplified employment test announced in Martinez, which eases the burden of obtaining class certification.  This ruling is also a victory for a group of long-suffering workers who often endure difficult workplace conditions and deserve the rights and protections afforded employees under the California Labor Code. 

Authored By:
Robert Drexler, Senior Counsel
CAPSTONE LAW APC

Editors’ note: the Order in Salazar is not yet publicly available and will be posted as soon as is practicable.

On July 24, 2015, United States District Judge Lawrence O’Neil issued an order granting certification to a class of FedEx line-haul drivers alleging rest break and wage violations under California law.  See Taylor v. FedEx Freight, Inc., No. 13-01137 (E.D. Cal. July 24, 2015) (slip opinion available here).  In doing so, Judge O’Neil adopted in full Magistrate Judge Barbara McAuliffe’s 27-page Findings and Recommendations (available here), rejecting each of FedEx’s arguments to the contrary.  

Plaintiff Roy Taylor, a former line-haul driver for FedEx, brought suit in 2013 alleging that FedEx underpaid him and fellow drivers by utilizing a policy that failed to separately compensate them for non-driving activities, such as vehicle inspections, rest breaks, trip-related paperwork, and wait time.  FedEx countered that non-driving work was already built into its mileage pay program.  The plaintiff then moved for class certification under Rule 23. 

Conceding numerosity and typicality, FedEx’s main arguments against class certification related to the U.S. Supreme Court’s heightened standards for commonality in Wal-Mart Stores Inc. v. Dukes, 131 S. Ct. 2541 (2011), and the requirements for a manageable trial plan in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013).  Ultimately, the District Court held that the question of whether FedEx’s compensation policy was lawful was well-suited for classwide determination.

With respect to commonality and predominance, FedEx argued that Dukes precludes certification because the dissimilarities among the class members prevent a common answer to the liability question of whether FedEx’s compensation policy failed to account for all non-driving work.  Distinguishing Dukes, the court held that FedEx’s mileage policy was uniformly applied without discretion, and thus resolution of the liability question did not hinge on differences among the drivers.

With respect to manageability, FedEx contended that damages for the rest break claims could not be determined by reviewing employee time cards, because, although breaks were recorded, (1) the records did not distinguish between meal periods and rest breaks, and (2) the time cards were rounded in fifteen-minute increments.  The court rejected this argument, however, finding that because the plaintiff’s theory of liability centers on FedEx’s non-payment for recorded rest breaks, liability would attach whenever the records demonstrated that a rest break was taken, regardless of the length.  With respect to the wage claims, the plaintiff persuasively argued that statistical sampling and surveys, along with FedEx’s admissions and employee testimony, would effectively manage any differences in damages.

It is also noteworthy that the plaintiff successfully moved to certify a class period which continues “through the date of trial.”  While FedEx argued that this definition subjects the company to one-way intervention and raises due process issues (because individuals hired after the mailing of the class notice would fall into the class definition, but would not have an opportunity to opt in or out), the court adopted the plaintiff’s proposed solution of providing a second class notice to such individuals just prior to trial. 

Authored by: 
Matthew Theriault, Partner
CAPSTONE LAW APC

On May 26, 2015, Judge Lucy H. Koh of the Northern District of California certified both nationwide and California state classes of individual non-Yahoo mail users in a putative class action against Yahoo for its non-consensual collection, or mining, of data from non-user emails to Yahoo Mail subscribers. See In Re Yahoo Mail Litig., No. 13-4980 (N.D. Cal. May 26, 2015) (Order Granting in Part and Denying in Part Motion for Class Certification, available here).

In In re Yahoo Mail Litig., the class claims were limited to injunctive and declaratory relief, and the plaintiffs strategically did not seek statutory damages. Judge Koh certified a nationwide class under the Stored Communications Act (“SCA”) and a California-only class under the California Invasion of Privacy Act (“CIPA”). The certification of the two classes involved the intersection of three current, hot-button issues: (1) electronic online data mining; (2) Article III standing; and (3) ascertainability. In particular, Judge Koh’s straightforward, commonsense analysis of Article III standing is instructive for its clarity and reasoning.

Whether a plaintiff has Article III standing to pursue injunctive relief after gaining knowledge of a defendant’s wrongdoing was a pivotal question in this case. Yahoo argued that the plaintiffs’ continued email interaction with Yahoo subscribers after they learned of Yahoo’s data collection practices forecloses their standing to pursue injunctive relief, since these continued interactions constituted consent to Yahoo’s policies. As a result, the class members would be unable to show a likelihood of being injured in the future. See Order at 10. However, the court simply rejected this argument. Id.

According to Yahoo, the plaintiffs would be required to cease emailing Yahoo users in order to preserve their claims and to avoid consenting to Yahoo’s data mining, yet they would need to continue communicating with Yahoo users’ accounts in order to demonstrate a threat of future injury. Judge Koh found that, because a showing of a likelihood of future injury is required to pursue injunctive relief, Yahoo’s rationale “would put Plaintiffs in a catch-22 that would essentially preclude injunctive relief altogether.” Id. at 14.

While other courts have landed on the less-desirable end of the issue, Judge Koh’s ruling signals that Yahoo’s interpretation of Article III standing should be rejected for being overly narrow in the consumer protection context, which is welcome news for California consumers. See id. at 12.

Authored by: 
Tarek Zohdy, Associate
CAPSTONE LAW APC