Posts belonging to Category Caselaw Developments

The trial judge in the Santa Clara Superior court, Judge Peter H. Kirwan, certified a class of employees who alleged that Ma Laboratories Inc. failed to pay for all “hours worked” pursuant to 8 Cal. Code Regs., § 11070(2)(G). The wage-and-hour lawsuit claimed that the defendant was shaving time off employees’ actual hours worked; the judge found that time-shaving is a “one-way” practice and that workers are under their employers’ control as soon as they are on the clock, even if they are not performing any actual work. Tian v. Ma Laboratories Inc., No. 1-11-cv-195373 (Cal. Super. Ct. Oct. 9, 2014) (slip op. available here).

The court certified the time-shaving class and several subclasses, finding that even workers who are sitting around before their shifts smoking cigarettes and waiting for instructions are considered on the clock and working and thus must be paid. The class consisted of approximately 550 employees who worked at Ma Labs’ headquarters in San Jose or in its facility in Los Angeles. Stating, “even those who are waiting for instructions in the morning are clocked in and subject to Ma Labs’ control/suffered or permitted to work, whether or not required to do so,” the court held that, per the plaintiffs’ theory, “this still constitutes ‘hours worked’ for purposes of compensation, and the necessary findings can be made from the timekeeping alone.” Slip op. at 7.

Ma Labs allegedly had a strict start and end time for each employee, so that if and when workers clocked in before that set time starts or clocked out after it ends, the extra time needed to be approved and manually revised by a system administrator. The plaintiffs also alleged that this time-shaving practice allowed Ma Labs to not always pay for the extra time when workers arrived early or stayed late, but consistently docked their pay if they came in late or clocked out early. Approval for pre-shift time was “rarely if ever” granted, and post-shift time was not typically approved unless it was less than ten minutes. Slip op. at 6. The defendant argued that the plaintiffs were unable demonstrate that each particular employee was not incorrectly reporting his or her time or individual reasons for each individual’s denial of overtime or time card adjustment. Ma Labs also contended that workers would sometimes swipe their cards to clock in, then eat breakfast or perform personal tasks, rather than begin work right away. However, the court declined to address the merits of the plaintiffs’ time-shaving theory and stated that “[defendant’s] evidence that some employees occasionally engaged in personal activities after clocking in does not defeat certification because the record does not suggest that such instances would predominate over common ones.” Slip op. at 7 (emphasis added).

The court granted certification as to the time-shaving subclass, the auto-deduct lunch policy subclass consisting of employees from March 1, 2007 to February 15, 2010, the second meal period policy subclass, the rest period policy subclass from March 1, 2007 to February 15, 2010, the derivative wage statement class, and derivative waiting time penalty subclass. However, it denied the certification motion as to a drivers subclass within the auto-deduct lunch policy theory and a broader rest period policy subclass after February 15, 2010.

The California Court of Appeal ruled that independent contractor delivery drivers who were formerly classified as employees could rely on the California Industrial Welfare Commission’s (IWC) definition of “employee” for claims that fall within the scope of its wage orders. Lee v. Dynamex Operations West, Inc., No. B249546 (2nd Dist. Div. 7 Oct. 15, 2014) (slip op. available here).

The Dynamex plaintiff had filed the lawsuit in April 2005 on behalf of a class of approximately 1,800 drivers, after Dynamex converted the status of its drivers from employee to independent contractor in 2004. The suit alleged that drivers were still performing the same tasks as they had when classified as employees, with no substantive changes to how their work was performed or the degree of control Dynamex exercised, and, therefore, that the reclassification was in violation of California labor law. Slip op. at 2. After the trial court initially denied class certification, a ruling later reversed by the appellate court, the respondent superior court then certified the proposed class in 2011. Following that certification decision, Dynamex unsuccessfully moved to decertify the class twice and then filed a petition a writ of mandate to the court of appeal, arguing that the lower court “had improperly adopted the definition of ‘employee’ found in [IWC] wage orders to ascertain the status of class members . . . and had failed to use the common law test for distinguishing between employees and independent contractors.” Slip op. at 2 (internal citations omitted).

Wage Order No. 9, applicable to the transportation industry, defines “employ” to mean “to engage, suffer, or permit to work,” while an “employer” is defined as any person “who directly or indirectly . . . employs or exercises control over the ages, hours, or working conditions of any person,” the same language reviewed by the California Supreme Court in Martinez v. Combs, 49 Cal.4th 35 (2010). While acknowledging that it was not inappropriate to rely on the common law standard to determine whether an employment relationship exists, the Martinez court embraced the IWC’s employee-centric definition, stating that they could not ignore the IWC’s broad regulatory definition because it would endanger the IWC’s ability to achieve its statutory purposes. The panel held that the plaintiff should rely on the IWC’s definition of “employee” for claims that fall within the ambit of the wage orders, including claims under unfair competition, failure to pay overtime compensation (1194), failure to provide accurate wage statements (226), and some claims for failure to reimburse for business expenses (2802), while claims that are not violations of the wage orders should apply the common law definition of “employee” under S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341 (1989). The panel ordered the trial court to reevaluate, in light of Ayala v. Antelope Valley Newspapers, Inc., 59 Cal. 4th 522 (2014), whether class certification was still appropriate for any claims that fell outside of Wage Order No. 9.

Dyanmex is the first case in California to directly state that the much broader Wage Order definitions of “employment” discussed in Martinez (rather than the common law definition under Borello) apply to wage-and-hour claims, so long as the claims fall within the reach of Wage Order No. 9.

In Ybarra, the California Court of Appeal reconsidered its previous pre-Iskanian decision to compel arbitration of an apartment complex manager’s Private Attorney General Act (“PAGA”) claims against her employer, Apartment Investment and Management Company (“Aimco”). Ybarra v. Apartment Investment and Management Co., No. B245901 (2nd Dist. Div. 2 Oct. 7, 2014) (slip op. available here). Ultimately, the court of appeal reversed its prior holding and held that the state high court’s ruling in Iskanian meant the plaintiff’s PAGA claims could stay in court.

The plaintiff alleged three claims against her former employer, Aimco: (1) a class claim under Labor Code section 1194 for unpaid overtime and minimum wages; (2) a PAGA claim for various violations of the Labor Code, including, but not limited to, unpaid overtime (sections 510 and 1198), late final pay (201 and 202), and improper wage statements (226(a)); and (3) a claim under Bus. & Prof. Code 17200 for the same alleged violations of the Labor Code. The parties had signed an arbitration agreement that provided that the parties agreed to arbitrate all disputes between them and prohibited either party from bringing class or representative actions. Aimco unsuccessfully tried to remove the case to federal court, while the plaintiff voluntarily dismissed all claims except the PAGA claim. Then, Aimco filed a motion to compel arbitration, but the trial court denied it, finding that Ybarra had demonstrated some procedural unconscionability due to the arbitration agreement’s having been presented as a condition of employment, and had shown substantive unconscionability because the PAGA waiver was unenforceable.

Aimco appealed the trial court’s ruling and the court of appeal reversed. Following the court of appeal’s decision, the plaintiffs filed a petition for review to the California Supreme Court. The high court granted the petition and held the case pending its decision in Iskanian. Following the Iskanian decision, the high court sent the case back to the court of appeal to decide in light of Iskanian.

Citing the holding in Iskanian, the panel stated that it was bound to find that the PAGA waiver in the parties’ arbitration agreement is “unenforceable as a matter of law.” Slip op. at 4. Because she was not bringing the PAGA claims on an individual basis, the court applied the Iskanian exception for PAGA claims, noting, “The dispute here involves the legal question of whether the parties’ arbitration agreement—specifically, its prohibition of representative claims—is enforceable. Iskanian has now answered this question, and the answer is no.” Slip op. at 4 (emphasis added).

At the end of September, U.S. District Court Judge Beverly Reid O’Connell held that truck drivers who move cargo containers to and from California port facilities for STE, a trucking and logistics company, are “employees” who can pursue wage-and-hour claims under state law, and are not independent contractors. Taylor v. Shippers Transp. Express, Inc., No. 2:13-cv-02092 (C.D. Cal. Sept. 30, 2014) (slip op. available here).

The defendants initially contended that the plaintiffs’ claims under the Labor Code were preempted by the Federal Aviation Administration Authorization Act (“FAAAA”), but the Ninth Circuit recently rejected this argument in Dilts v. Penske Logistics, LLC, No. 12-55705 (9th Cir. Sept. 8, 2014) and the Taylor court denied the defendant’s motion for summary judgment accordingly. The court granted plaintiffs’ motion for partial summary judgment, finding that STE’s ability to terminate drivers on short notice and its control over their daily work strongly indicated that the drivers were employees rather than independent contractors. A certified class of 300 former and current drivers alleged that drivers who leased trucks from STE were misclassified as independent contractors, and were thus denied minimum wage, business expense reimbursements, and itemized wage statements. The principal test of an employment relationship developed by the California Supreme Court turns on “[w]hether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.” Slip op. at 23 (citing S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341, 350 (1989)). Citing Borello’s secondary indicia of employment, the court also found that “strong evidence in support of an employment relationship is the right to discharge at will, without cause,” a factor which was present here. Id.

For example, under the leases, STE “effectively retains the right to terminate any Driver’s agreement without cause provided it gives the Driver thirty days’ notice,” which showed STE had a right to control and is thus indicative of an employer-employee relationship. Slip op. at 18. Although STE maintained that it did not control drivers (i.e. they could work when they wanted and could choose which loads to accept), the court found that the evidence in the record undermined these claims, citing company policy statements that drivers were required to contact dispatchers daily, that drivers needed to be there “on time when required,” and that STE had the capacity to track driver’s speed via GPS and occasionally sent employees to monitor drivers and verify they were driving safely. Stating that it is the “right to control, and not the actual exercise of control, which drives this analysis,” the court said the drivers had satisfied their burden of establishing they were employees of STE. Slip op. at 22.