Daily Blast June 30, 2014

The California Supreme Court issued an opinion in Ayala v. Antelope Valley Newspapers, Inc. (June 30, 2014, S206874) __ Cal.4th __, analyzing whether common issues predominate in a proposed class action relating to claims that turn on whether members of the putative class are independent contractors or employees. The Supreme Court held that “[whether] a common law employer-employee relationship exists turns foremost on the degree of a hirer’s right to control how the end result is achieved. [Citation.] In turn, 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. Because the trial court principally rejected certification based not on differences in [the employer’s] right to exercise control, but on variations in how that right was exercised, its decision cannot stand.” (Slip opn., pp. 1-2.)

Plaintiff sued its employer, a newspaper publication, on behalf of a putative class of newspaper carriers. Plaintiff alleged that the newspaper treated its carriers as independent contractors when, as a matter of law, they are employees. (Slip opn., p. 2.) The complaint alleged unpaid overtime, unlawful deductions, failure to provide breaks, and failure to reimburse for business expenses, among other statutory and wage order violations. (Id. at pp. 2-3.) Plaintiff sought class certification alleging that “the central question in establishing liability was whether carriers are employees, and that this question could be resolved through common proof.” (Id. at p. 3.) The trial court denied class certification. (Ibid.) The Court of Appeal affirmed in part and reversed in part. The Court of Appeal “agreed with the trial court that [plaintiff] had not shown how overtime, meal break, and rest break claims could be managed on a classwide basis.” (Ibid.) For the remaining claims, the Court of Appeal “disagreed that proof of employee status would necessarily entail a host of individual inquiries.” (Ibid.) The California Supreme Court granted review. (Id. at p. 4.)

The Supreme Court applied the common law test to determine whether plaintiffs were employees or independent contractors. “Under the common law, ‘[the] principal test of an employment relationship is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.’” (Slip opn., p. 6, additional quotations and citations omitted, quoting S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, 350.) “[What] matters under the common law is not how much control a hirer exercises, but how much control the hirer retains the right to exercise.” (Slip opn., p. 8, italics in original.) “Evidence of variations in how work is done may indicate a hirer has not exercised control over those aspects of a task, but they cannot alone differentiate between cases where the omission arises because the hirer concludes control is unnecessary and those where the omission is due to the hirer’s lack of the retained right. That a hirer chooses not to wield power does not prove it lacks power.” (Id. at p. 12.)

Here, the court stated that the proper inquiry is whether the employer’s “right of control over its carriers, whether great or small, [is] sufficiently uniform to permit classwide assessment?” (Id. at pp. 9-10.) In other words, “is there a common way to show [the employer] possessed essentially the same legal right of control with respect to each carrier?” (Id. at p. 10.) The trial court considered only variations in the actual exercise of control and therefore “erroneously treated them as the legal equivalent of variations in the right to control.” (Id. at p. 13.) Therefore, the Supreme Court remanded “for the trial court to reconsider class certification under the correct legal standards.” (Id. at p. 16.)

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