Superior Court Los Angeles County Super Ct. No. BC332016, Ct.
App. 2/7 B249546 Michael L. Stern Judge.
Littler Mendelson, Robert G. Hulteng, Damon M. Ott, Philip A.
Simpkins; Sheppard Mullin Richter & Hampton, Paul S.
Cowie; DLA Piper and Ellen M. Bronchetti for Petitioner.
Orrick, Herrington & Sutcliffe, Andrew R. Livingston,
Michael Weil, Lauri Damrell and Kathryn G. Mantoan for
California Employment Law Council and Employers Group as
Amici Curiae on behalf of Petitioner.
Horvitz & Levy, John A. Taylor, Jeremy B. Rosen, Felix
Shafir and David W. Moreshead for Chamber of Commerce of the
United States of America and California Chamber of Commerce
as Amici Curiae on behalf of Petitioner.
No
appearance for Respondent.
Pope,
Berger & Williams, Pope, Berger, Williams Reynolds, A.
Mark Pope; Glancy Binkow & Goldberg, Glancy Prongay &
Murray, Kevin F. Ruf; Boudreau Williams, Williams Iagmin and
Jon R. Williams for Real Parties in Interest.
Della
Barnett, R. Erandi Zamora; Anthony Mischel; Cynthia L. Rice,
William G. Hoerger and Jean H. Choi for California Rural
Legal Assistance Foundation, National Employment Law Project,
Los Angeles Alliance for a New Economy, La Raza Centro Legal,
Legal Aid Society-Employment Law Center, Asian Americans
Advancing Justice-LA, Asian Americans Advancing Justice-ALC,
The Impact Fund, Alexander Community Law Center, UCLA Center
for Labor Research, Women's Employment Rights Clinic and
Worksafe as Amici Curiae on behalf of Real Parties in
Interest.
Duckworth Peters Lebowitz Olivier and Monique Olivier for
California Employment Lawyers Association as Amicus Curiae on
behalf of Real Parties in Interest.
CANTIL-SAKAUYE, C. J.
Under
both California and federal law, the question whether an
individual worker should properly be classified as an
employee or, instead, as an independent contractor has
considerable significance for workers, businesses, and the
public generally.[1] On the one hand, if a worker should
properly be classified as an employee, the hiring business
bears the responsibility of paying federal Social Security
and payroll taxes, unemployment insurance taxes and state
employment taxes, providing worker's compensation
insurance, and, most relevant for the present case, complying
with numerous state and federal statutes and regulations
governing the wages, hours, and working conditions of
employees. The worker then obtains the protection of the
applicable labor laws and regulations. On the other hand, if
a worker should properly be classified as an independent
contractor, the business does not bear any of those costs or
responsibilities, the worker obtains none of the numerous
labor law benefits, and the public may be required under
applicable laws to assume additional financial burdens with
respect to such workers and their families.
Although
in some circumstances classification as an independent
contractor may be advantageous to workers as well as to
businesses, the risk that workers who should be treated as
employees may be improperly misclassified as independent
contractors is significant in light of the potentially
substantial economic incentives that a business may have in
mischaracterizing some workers as independent contractors.
Such incentives include the unfair competitive advantage the
business may obtain over competitors that properly classify
similar workers as employees and that thereby assume the
fiscal and other responsibilities and burdens that an
employer owes to its employees. In recent years, the relevant
regulatory agencies of both the federal and state governments
have declared that the misclassification of workers as
independent contractors rather than employees is a very
serious problem, depriving federal and state governments of
billions of dollars in tax revenue and millions of workers of
the labor law protections to which they are
entitled.[2]
The
issue in this case relates to the resolution of the employee
or independent contractor question in one specific context.
Here we must decide what standard applies, under California
law, in determining whether workers should be classified as
employees or as independent contractors for purposes of
California wage orders, which impose obligations
relating to the minimum wages, maximum hours, and a limited
number of very basic working conditions (such as minimally
required meal and rest breaks) of California
employees.[3]
In the
underlying lawsuit in this matter, two individual delivery
drivers, suing on their own behalf and on behalf of a class
of allegedly similarly situated drivers, filed a complaint
against Dynamex Operations West, Inc. (Dynamex), a nationwide
package and document delivery company, alleging that Dynamex
had misclassified its delivery drivers as independent
contractors rather than employees. The drivers claimed that
Dynamex's alleged misclassification of its drivers as
independent contractors 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, as well as various sections of the Labor Code, and,
as a result, that Dynamex had engaged in unfair and unlawful
business practices under Business and Professions Code
section 17200.
Prior
to 2004, Dynamex classified as employees drivers who
allegedly performed similar pickup and delivery work as the
current drivers perform. In 2004, however, Dynamex adopted a
new policy and contractual arrangement under which all
drivers are considered independent contractors rather than
employees. Dynamex maintains that, in light of the current
contractual arrangement, the drivers are properly classified
as independent contractors.
After
an earlier round of litigation in which the trial court's
initial order denying class certification was reversed by the
Court of Appeal (Lee v. Dynamex, Inc. (2008) 166
Cal.App.4th 1325), the trial court ultimately certified a
class action embodying a class 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. In finding that the
relevant common legal and factual issues relating to the
proper classification of the drivers as employees or as
independent contractors predominated over potential
individual issues, the trial court's certification order
relied upon the three alternative definitions of
“employ” and “employer” set forth in
the applicable wage order as discussed in this court's
then-recently decided opinion in Martinez v. Combs
(2010) 49 Cal.4th 35, 64 (Martinez). As described
more fully below, Martinez held that “[t]o
employ... under the [wage order], has three alternative
definitions. It means: (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 at p. 64.) The trial court rejected Dynamex's
contention that in the wage order context, as in most other
contexts, the multifactor standard set forth in this
court's seminal decision in S. G. Borello & Sons,
Inc. v. Department of Industrial Relations (1989) 48
Cal.3d 341 (Borello) is the only appropriate
standard under California law for distinguishing employees
and independent contractors.
In
response to the trial court's denial of Dynamex's
subsequent motion to decertify the class, Dynamex filed the
current writ proceeding in the Court of Appeal, maintaining
that two of the alternative wage order definitions of
“employ” relied upon by the trial court do not
apply to the employee or independent contractor issue.
Dynamex contended, instead, that those wage order definitions
are relevant only to the distinct joint employer question
that was directly presented in this court's decision 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.
The
Court of Appeal rejected Dynamex's contention, concluding
that neither the provisions of the wage order itself nor this
court's decision in Martinez supported the
argument that the wage order's definitions of
“employ” and “employer” are limited
to the joint employer context and are not applicable in
determining whether a worker is a covered employee, rather
than an excluded independent contractor, for purposes of the
obligations imposed by the wage order. The Court of Appeal
concluded 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. The Court of Appeal upheld the
trial court's class certification order with respect to
all of plaintiffs' claims that are based on alleged
violations of the wage order.
At the
same time, the Court of Appeal concluded that insofar as the
causes of action in the complaint seek reimbursement for
business expenses such as fuel and tolls that are not
governed by the wage order and are obtainable only under
section 2802 of the Labor Code, [4] the Borello
standard is the applicable standard for determining whether a
worker is properly considered an employee or an independent
contractor. With respect to plaintiffs' non-wage-order
claim under section 2802, the Court of Appeal remanded the
matter to the trial court to reconsider its class
certification of that claim pursuant to a proper application
of the Borello standard as further explicated in
this court's decision in Ayala v. Antelope Valley
Newspapers, Inc. (2014) 59 Cal.4th 522 (Ayala).
Dynamex
filed a petition for review in this court, challenging only
the Court of Appeal's conclusion that the wage order
definitions of “employ” and
“employer” discussed in Martinez are
applicable to the question whether a worker is properly
considered an employee or an independent contractor for
purposes of the obligations imposed by an applicable wage
order. We granted review to consider that
issue.[5]
For the
reasons discussed below, we agree with the Court of Appeal
that the trial court did not err in concluding that the
“suffer or permit to work” definition of
“employ” contained in the wage order may be
relied upon in evaluating whether a worker is an employee or,
instead, an independent contractor for purposes of the
obligations imposed by the wage order. As explained, in light
of its history and purpose, we conclude that the wage
order's suffer or permit to work definition must be
interpreted broadly to treat as “employees, ” and
thereby provide the wage order's protection to,
all workers who would ordinarily be viewed as
working in the hiring business. At the same time, we
conclude that the suffer or permit to work definition is a
term of art that cannot be interpreted literally in a manner
that would encompass within the employee category the type of
individual workers, like independent plumbers or
electricians, who have traditionally been viewed as
genuine independent contractors who are working only
in their own independent business.
For the
reasons explained hereafter, we conclude that in determining
whether, under the suffer or permit to work definition, a
worker is properly considered the type of independent
contractor to whom the wage order does not apply, it is
appropriate to look to a standard, commonly referred to as
the “ABC” test, that is utilized in other
jurisdictions in a variety of contexts to distinguish
employees from independent contractors. Under this test, a
worker is properly considered an independent contractor to
whom a wage order does not apply only if the hiring entity
establishes: (A) that the worker is free from the control and
direction of the hirer in connection with the performance of
the work, both under the contract for the performance of such
work and in fact; (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 for the hiring entity.
Although,
as we shall see, it appears from the class certification
order that the trial court may have interpreted the wage
order's suffer or permit to work standard too literally,
we conclude that on the facts disclosed by the record, the
trial court's certification order is nonetheless correct
as a matter of law under a proper understanding of the suffer
or permit to work standard and should be upheld.
Accordingly,
we conclude that the judgment of the Court of Appeal should
be affirmed.
I.
Facts and Proceedings Below
We
summarize the facts as set forth in the prior Court of Appeal
opinions in this matter, supplemented by additional facts set
forth in the record.
Dynamex
is a nationwide same-day courier and delivery service that
operates a number of business centers in California. Dynamex
offers on-demand, same-day pickup and delivery services to
the public generally and also has a number of large business
customers - including Office Depot and Home Depot - for whom
it delivers purchased goods and picks up returns on a regular
basis. Prior to 2004, Dynamex classified its California
drivers as employees and compensated them pursuant to this
state's wage and hour laws. In 2004, Dynamex converted
all of its drivers to independent contractors after
management concluded that such a conversion would generate
economic savings for the company. Under the current policy,
all drivers are treated as independent contractors and are
required to provide their own vehicles and pay for all of
their transportation expenses, including fuel, tolls, vehicle
maintenance, and vehicle liability insurance, as well as all
taxes and workers' compensation insurance.
Dynamex
obtains its own customers and sets the rates to be charged to
those customers for its delivery services. It also negotiates
the amount to be paid to drivers on an individual basis. For
drivers who are assigned to a dedicated fleet or scheduled
route by Dynamex, drivers are paid either a flat fee or an
amount based on a percentage of the delivery fee Dynamex
receives from the customer. For those who deliver on-demand,
drivers are generally paid either a percentage of the
delivery fee paid by the customer on a per delivery basis or
a flat fee basis per item delivered.
Drivers
are generally free to set their own schedule but must notify
Dynamex of the days they intend to work for Dynamex. Drivers
performing on-demand work are required to obtain and pay for
a Nextel cellular telephone through which the drivers
maintain contact with Dynamex. On-demand drivers are assigned
deliveries by Dynamex dispatchers at Dynamex's sole
discretion; drivers have no guarantee of the number or type
of deliveries they will be offered. Although drivers are not
required to make all of the deliveries they are assigned,
they must promptly notify Dynamex if they intend to reject an
offered delivery so that Dynamex can quickly contact another
driver; drivers are liable for any loss Dynamex incurs if
they fail to do so. Drivers make pickups and deliveries using
their own vehicles, but are generally expected to wear
Dynamex shirts and badges when making deliveries for Dynamex,
and, pursuant to Dynamex's agreement with some customers,
drivers are sometimes required to attach Dynamex and/or the
customer's decals to their vehicles when making
deliveries for the customer. Drivers purchase Dynamex shirts
and other Dynamex items with their own funds.[6]
In the
absence of any special arrangement between Dynamex and a
customer, drivers are generally free to choose the sequence
in which they will make deliveries and the routes they will
take, but are required to complete all assigned deliveries on
the day of assignment. If a customer requests, however,
drivers must comply with a customer's requirements
regarding delivery times and sequence of stops.
Drivers
hired by Dynamex are permitted to hire other persons to make
deliveries assigned by Dynamex. Further, when they are not
making pickups or deliveries for Dynamex, drivers are
permitted to make deliveries for another delivery company,
including the driver's own personal delivery business.
Drivers are prohibited, however, from diverting any delivery
order received through or on behalf of Dynamex to a
competitive delivery service.
Drivers
are ordinarily hired for an indefinite period of time but
Dynamex retains the authority to terminate its agreement with
any driver without cause, on three days' notice. And, as
noted, Dynamex reserves the right, throughout the contract
period, to control the number and nature of deliveries that
it offers to its on-demand drivers.
In
January 2005, Charles Lee - the sole named plaintiff in the
original complaint in the underlying action - entered into a
written independent contractor agreement with Dynamex to
provide delivery services for Dynamex. According to Dynamex,
Lee performed on-demand delivery services for Dynamex for a
total of 15 days and never performed delivery service for any
company other than Dynamex. On April 15, 2005, three months
after leaving his work at Dynamex, Lee filed this lawsuit on
his own behalf and on behalf of similarly situated Dynamex
drivers.
In
essence, the underlying action rests on the claim that, since
December 2004, Dynamex drivers have performed essentially the
same tasks in the same manner as when its drivers were
classified as employees, but Dynamex has improperly failed to
comply with the requirements imposed by the Labor Code and
wage orders for employees with respect to such drivers. The
complaint alleges five causes of action arising from
Dynamex's alleged misclassification of employees as
independent contractors: two counts of unfair and unlawful
business practices in violation of Business and Professions
Code section 17200, and three counts of Labor Code violations
based on Dynamex's failure to pay overtime compensation,
to properly provide itemized wage statements, and to
compensate the drivers for business expenses.
The
trial court's initial order denying class certification
was reversed by the Court of Appeal based on the trial
court's failure to compel Dynamex to provide contact
information for potential putative class members that would
enable plaintiffs to establish the necessary elements for
class certification. (See Lee v. Dynamex,
supra, 166 Cal.App.4th 1325, 1336-1338.) After the
trial court permitted plaintiffs to file a first amended
complaint adding Pedro Chevez (a former Dynamex dedicated
fleet driver) as a second named plaintiff and the parties
stipulated to the filing of a second amended complaint (the
current operative complaint), the parties agreed to send
questionnaires to all putative class members seeking
information that would be relevant to potential class
membership.
Based
on the responses on the questionnaires that were returned by
current or former Dynamex drivers, plaintiffs moved for
certification of a revised class of Dynamex drivers. As
ultimately modified by the trial court, the proposed class
includes those individuals (1) who were classified as
independent contractors and performed pickup or delivery
service for Dynamex between April 15, 2001 and the date of
the certification order, (2) who used their personally owned
or leased vehicles weighing less than 26, 000 pounds, and (3)
who had returned questionnaires which the court deemed timely
and complete. The proposed class explicitly excluded,
however, drivers for any pay period in which the driver had
provided services to Dynamex either as an employee or
subcontractor of another person or entity or through the
driver's own employees or subcontractors (except for
substitute drivers who provided services during vacation,
illness, or other time off). Also excluded were drivers who
provided services concurrently for Dynamex and for another
delivery company that did not have a relationship with
Dynamex or for the driver's own personal delivery
customers. Thus, as narrowed by these exclusions, the class
consisted only of individual Dynamex drivers who had returned
complete and timely questionnaires and who personally
performed delivery services for Dynamex but did not employ
other drivers or perform delivery services for another
delivery company or for the driver's own delivery
business. The trial court's certification order states
that 278 drivers returned questionnaires and that from the
questionnaire responses it appears that at least 184 drivers
fall within the proposed class.
On May
11, 2011, the trial court, in a 26-page order, granted
plaintiffs' motion for class certification. The validity
of that order is at issue in the present proceeding.
After
determining that the proposed class satisfied the
prerequisites of ascertainability, numerosity, typicality,
and adequacy of class representatives and counsel required
for class certification, the trial court turned to the
question of commonality - that is, whether common issues
predominate over individual issues. Because of its
significance to our subsequent legal analysis, we discuss
this aspect of the trial court's certification order in
some detail.
The
trial court began its discussion of the commonality
requirement by observing that “ ‘[t]he ultimate
question in every [purported class action] is whether, given
an ascertainable class, the issues which may be jointly
tried, when compared with those requiring separate
adjudication, are so numerous or substantial that the
maintenance of a class action would be advantageous to the
judicial process and to the litigants.' ” The court
noted that in examining whether common issues of law or fact
predominate, a court must consider the legal theory on which
plaintiffs' claim is based and the relevant facts that
bear on that legal theory. The court explained that in this
case all of plaintiffs' causes of action rest on the
contention that Dynamex misclassified the drivers as
independent contractors when they should have been classified
as employees. Thus, the facts that are relevant to that legal
claim necessarily relate to the appropriate legal standard or
test that is applicable in determining whether a worker
should be considered an employee or an independent
contractor.
The
court then explained that the parties disagreed as to the
proper legal standard that is applicable in determining
whether a worker is an employee or an independent contractor
for purposes of plaintiffs' claims. Plaintiffs relied on
this court's then-recent decision in Martinez,
supra, 49 Cal.4th 35, maintaining that the standards
or tests for employment set forth in Martinez are
applicable in the present context, and that the standard for
determining the employee or independent contractor question
set forth in this court's decision in Borello,
supra, 48 Cal.3d 341 is not the sole applicable
standard. Dynamex, by contrast, took the position that the
alternative definitions of “employ” and
“employer” discussed in Martinez are
applicable only in determining whether an entity that has a
relationship with the primary employer of an admitted
employee should be considered a joint employer of
the employee, and not in deciding whether a worker
is properly classified as an employee or an independent
contractor. Dynamex asserted that even with respect to claims
arising out of the obligations imposed by a wage order, the
question of a worker's status as an employee or
independent contractor must be decided solely by reference to
the Borello standard.
In its
certification order, the trial court agreed with
plaintiffs' position, relying on the fact that the
Martinez decision “did not indicate that its
analysis was in any way limited to situations involving
questions of joint employment.” The court found that
the Martinez decision represents “a
redefinition of the employment relationship under a claim of
unpaid wages as follows: ‘To employ, then, under the
IWC's [Industrial Welfare Commission's] definition,
has three alternative definitions. It means (a) to exercise
control over the wages, hours or working conditions, (b) to
suffer or permit to work, or (c) to engage, thereby creating
a common law employment relationship.' ” (Quoting
Martinez, supra, 49 Cal.4th at p. 64.) The
trial court concluded that “[t]hese definitions must be
considered when analyzing whether the class members are
employees or independent contractors” and thereafter
proceeded to discuss separately each of the three definitions
or standards set forth in Martinez in determining
whether common issues predominate for purposes of class
certification.
With
regard to the “exercise control over wages, hours or
working conditions” test, the trial court stated that
“ ‘control over wages' means that a person or
entity has the power or authority to negotiate and set an
employee's rate of pay” and that “[w]hether
or not Dynamex had the authority to negotiate each
driver's rate of pay can be answered by looking at its
policies with regard to hiring drivers.... [I]ndividual
inquiry is not required to determine whether Dynamex
exercises control over drivers' wages.”
With
regard to the suffer or permit to work test, the trial court
stated in full: “An employee is suffered or permitted
to work if the work was performed with the knowledge of the
employer. [Citation.] This includes work that was performed
that the employer knew or should have known about.
[Citation.] Again, this is a matter that can be addressed by
looking at Defendant's policy for entering into agreement
with drivers. Defendant is only liable to those drivers with
whom it entered into an agreement (i.e., knew were providing
delivery services to Dynamex customers). This can be
determined through records, and does not require individual
analysis.”
With
regard to the common law employment relationship test
referred to in Martinez, the trial court stated that
this test refers to the multifactor standard set forth in
Borello, supra, 48 Cal.3d 341. The
trial court described the Borello test as involving
the principal factor of “ ‘whether the person to
whom services is rendered has the right to control the manner
and means of accomplishing the result desired' ” as
well as the following nine additional factors: “(1)
right to discharge at will, without cause; (2) whether the
one performing the services is engaged in a distinct
occupation or business; (3) the kind of occupation, with
reference to whether in the locality the work is usually done
under the direction of the principal or by a specialist
without supervision; (4) the skill required in the particular
occupation; (5) whether the principal or the worker supplies
the instrumentalities, tools, and the place of work for the
person doing the work; (6) the length of time for which the
services are to be performed; (7) method of payment, whether
by the time or by the job; (8) whether or not the work is
part of the regular business of the principal; and (9)
whether or not the parties believe they are creating the
relationship of employer-employee.” As the trial court
observed, Borello explained that “ ‘the
individual factors cannot be applied mechanically as separate
tests; they are intertwined and their weight depends often on
particular combinations.' ” (Borello,
supra, 48 Cal.3d at p. 351.)
The
trial court then discussed the various Borello
factors, beginning with whether the hiring business has the
right to control work details. In analyzing this factor, the
court stated: “A determination of control of the work
details must look to ‘all meaningful aspects of the
business relationship.' [Citation.] For a delivery
service, those aspects include obtaining customer/customer
service, prices charged for delivery, routes, delivery
schedules and billing. Plaintiffs contend that these factors
are all controlled by Dynamex because it obtains the
customers, maintains a centralized call system, maintains a
package tracking system, sets the prices for its services and
customers are billed by Dynamex. This is not necessarily
borne out by the evidence. Defendants' [supervising
officer], Mr. Pople, [7] testified that the drivers solicit new
customers. [Citation.] There is also evidence that customer
service is handled by some of the drivers, depending on the
customer's relationship to that driver. [Citation.]
Finally, defendant does not necessarily control the
drivers' delivery schedules, as a number of drivers state
that their only obligation is to complete the deliveries by
the end of the business day. [Citation.] The degree to which
Dynamex controls the details of the work varies according to
different circumstances, including the particular driver or
customer that is involved. Determining whether Dynamex
controls the details of the business, therefore, does not
appear susceptible to common proof.”
With
regard to the right to discharge factor, the trial court
stated: “[T]he right to discharge at will, without
cause, is an important consideration. Defendant's
[supervising officer] testified that Dynamex maintains the
right to discharge the drivers at will. [Citation.] This does
not appear to vary from driver to driver. So it is a
classwide factor, which is particularly relevant to
demonstrating the existence of an employer-employee
relationship.”
With
regard to the “distinct occupation or business”
factor, the trial court stated: “A distinct business
relates to whether the drivers have the opportunity for
profit and loss. [Citation.] Plaintiffs contend that the
drivers have no opportunity for profit or loss because they
are charged according to standardized rate tables. This may
be a misrepresentation of defendants' evidence.
Defendant['s supervising officer] testified that it tries
to standardize the rates paid to on-demand drivers, however,
drivers enter into different compensation arrangements.
[Citations.] The opportunity for profit or loss depends on
the nature of the agreement negotiated between Dynamex and
the particular driver. Each arrangement would have to be
reviewed to determine the extent of the driver's
opportunity for profit and loss.”
With
regard to the “who supplies instrumentalities”
factor, the court stated: “Defendant admitted that the
drivers had to provide the instrumentalities of their work
and that this was a classwide policy. This factor is subject
to common inquiry.”
With
regard to the duration of service factor, the court stated:
“Defendants concede that the drivers are at-will.
[This] [f]actor is also subject to common inquiry.”
With
regard to the method of payment factor, the court stated:
“Defendants identify different payment scenarios: (a)
percentage of the fee Dynamex charges its customer for each
delivery performed; (b) flat rate per day, regardless of the
number of packages delivered; (c) set amount per package,
regardless of the size or type of package; (d) flat fee to be
available to provide delivery service regardless of whether
the Driver's services are used; or (e) a combination of
these payment types. [Citation.] These factors vary from
driver to driver and raise individualized questions.”
Finally,
with regard to the “parties' belief regarding the
nature of relationship” factor, the court noted that
“this factor is given less weight by courts” and
stated “[a]ll the drivers signed agreements stating
that they were independent contractors. The drivers'
belief could reasonably be demonstrated through this
classwide agreement.”
The
court then summarized its conclusion with regard to the
Borello standard: “Thus, most of the secondary
factors are subject to common proof and do not require
individualized inquiry of the class members. But the main
factor in determining whether an employment agreement exists
- control of the details - does require individualized
inquiries due to the fact that there is no indication of a
classwide policy that only defendants obtain new customers,
only the defendants provide customer service and create the
delivery schedules.”
With
respect to the entire question of commonality, however, the
trial court concluded: “Common questions predominate
the inquiry into whether an employment relationship exists
between Dynamex and the drivers. The first two alternative
definitions of ‘employer' can both be demonstrated
through common proof, even if the common law test requires
individualized inquiries.”
Having
found that common issues predominate, the trial court went on
to conclude that “[a] class action is a superior means
of conducting this litigation.” The court stated in
this regard: “Given that there is evidence from
Plaintiffs that common questions predominate the inquiry into
[the] employment relationship[, ] managing this as a class
action with respect to those claims will be feasible. There
appears to be no litigation by individual class members,
indicating that they have little interest in personally
controlling their claims. Finally, consolidating all the
claims before a single court would be desirable since it
would allow for consistent rulings with respect to all the
class members' claims.”
On the
basis of its foregoing determinations, the trial court
granted plaintiffs' motion for class certification.
In
December 2012, Dynamex renewed its motion to decertify the
class action that the trial court had certified in May 2011.
Dynamex relied upon intervening Court of Appeal decisions
assertedly demonstrating that the trial court had erred in
relying upon the wage order's alternative definitions of
employment, as set forth in Martinez. The trial
court denied the renewed motion to decertify the class.
In June
2013, Dynamex filed a petition for writ of mandate in the
Court of Appeal, challenging the trial court's denial of
its motion to decertify the class. In response, plaintiffs,
while disagreeing with Dynamex's claim that the trial
court had erred, urged the Court of Appeal to issue an order
to show cause and resolve the issues presented in the writ
proceeding. The Court of Appeal issued an order to show cause
in order to determine whether the trial court erred in
certifying the underlying class action under the wage order
definitions of “employ” and
“employer” discussed in Martinez.
After
briefing and argument, the Court of Appeal denied the
petition in part and granted the petition in part. The
appellate court concluded that the trial court properly
relied on the alternative definitions of the employment
relationship set forth in the wage order when assessing those
claims in the complaint that fall within the scope of the
applicable wage order, and it denied the writ petition with
respect to those claims. With respect to those claims that
fall outside the scope of the applicable wage order, however,
the Court of Appeal concluded that the Borello
standard applied in determining whether a worker is an
employee or an independent contractor, and it granted the
writ to permit the trial court to reevaluate its class
certification order in light of this court's intervening
decision in Ayala, supra, 59 Cal.4th 522,
which clarified the proper application of the
Borello standard.
As
already noted, Dynamex's petition for review challenged
only the Court of Appeal's conclusion that the trial
court properly determined that the wage order's
definitions of “employ” and
“employer” may be relied upon in determining
whether a worker is an employee or an independent contractor
for purposes of the obligations imposed by the wage order. We
granted the petition for review to consider that question.
II.
Relevant Wage Order Provisions
We
begin with a brief review of the relevant provisions of the
wage order that applies to the transportation industry. (See
Cal. Code Regs., tit. 8, § 11090.)
In
describing its scope, the transportation wage order initially
provides in subdivision 1: “This order shall apply to
all persons employed in the transportation industry, whether
paid on a time, piece rate, commission, or other basis,
” except for persons employed in administrative,
executive, or professional capacities, who are exempt from
most of the wage order's provisions. (Cal. Code Regs.,
tit. 8, § 11090, subd. 1.)[8]
Subdivision
2 of the order, which sets forth the definitions of terms as
used in the order, contains the following relevant
definitions:
“(D)
‘Employ' means to engage, suffer, or permit to
work.
“(E)
‘Employee' means any person employed by an
employer.
“(F)
‘Employer' means any person as defined in Section
18 of the Labor Code, 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.” (Cal. Code Regs., tit. 8, § 11090, subd.
2(D)-(F).)[9]
Thereafter,
the additional substantive provisions of the wage order that
establish protections for workers or impose obligations on
hiring entities relating to minimum wages, maximum hours, and
specified basic working conditions (such as meal and rest
breaks) are, by their terms, made applicable to
“employees” or “employers.” (See,
e.g., Cal. Code Regs., tit. 8, § 11090, subds. 3 [Hours
and Days of Work], 4 [Minimum Wages], 7 [Records], 11 [Meal
Periods], 12 [Rest Periods].)
Subdivision
2 of the wage order does not contain a definition of the term
“independent contractor, ” and the wage order
contains no other provision that otherwise specifically
addresses the potential distinction between workers who are
employees covered by the terms of the wage order and workers
who ...