The California Supreme Court decided Duran v. U.S. Bank Nat. Assn., 59 Cal.4th 1, just a few weeks ago. We discussed that here. That was a major decision on class actions. The Court there explained how courts are to consider whether to certify a class action. The Court suggested that trial courts must consider not only whether there are "common questions" but whether a class action is "manageable" in that the individual issues won't drown the trial court. From the opinion in Duran:
In the misclassification context, as in other types of cases, trial courts deciding whether to certify a class must consider not just whether common questions exist, but also whether it will be feasible to try the case as a class action. Depending on the nature of the claimed exemption and the facts of a particular case, a misclassification claim has the potential to raise numerous individual questions that may be difficult, or even impossible, to litigate on a classwide basis. Class certification is appropriate only if these individual questions can be managed with an appropriate trial plan.Now, the Court has issued another class-action-related opinion in Ayala v. Antelope Valley Newspapers, Inc., opinion here. Here, the court considered another "misclassification case," one involving the issue of independent contractors. The Court's focus again was whether common issues "predominate" and how trial courts make that determination.
Curiously, other than a quick cite to the opinion for an unremarkable proposition of law, there is no discussion of Duran in this latest case. Perhaps that is because this case is a roadmap to certification of independent contractor v. employee class actions.
In Ayala, the plaintiff's case involves the test for employee v. independent contractor status. The Court made clear that to determine whether common issues predominate, one must look at the nature of the legal claims. Said the Court:
We begin by identifying the principal legal issues and examining the substantive law that will govern. In doing so, we do not seek to resolve those issues. Rather, the question at this stage is whether the operative legal principles, as applied to the facts of the case, render the claims susceptible to resolution on a common basis. (Brinker, supra, 53 Cal.4th at pp. 1023–1025; Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 327 [the focus ―is on what type of questions—common or individual—are likely to arise in the action, rather than on the merits of the case‖].)
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A court evaluating predominance ―must determine whether the elements necessary to establish liability [here, employee status] are susceptible to common proof or, if not, whether there are ways to manage effectively proof of any elements that may require individualized evidence.‖ (Brinker, supra, 53 Cal.4th at p. 1024.)So, it's more than just the plaintiff's "theory" that drives whether issues are common. That "theory" has to be valid within the context of the substantive law.
Here, the theory was that Antelope Valley's "right to control" its newspaper carriers rendered them employees, rather than independent contractors. That indeed is the central issue in employee v. independent contractor cases. So, the Court evaluated whether that right to control was susceptible to resolution via common proof.
at the certification stage, the relevant inquiry is not what degree of control Antelope Valley retained over the manner and means of its papers‘ delivery. It is, instead, a question one step further removed: Is Antelope Valley‘s right of control over its carriers, whether great or small, sufficiently uniform to permit classwide assessment? That is, is there a common way to show Antelope Valley possessed essentially the same legal right of control with respect to each of its carriers? Alternatively, did its rights vary substantially, such that it might subject some carriers to extensive control as to how they delivered, subject to firing at will, while as to others it had few rights and could not have directed their manner of delivery even had it wanted, with no common proof able to capture these differences?The Court then assessed whether the trial court properly decided that Antelope Valley's "right to control" the carriers was susceptible to common proof. The Court decided the trial court applied the wrong analysis, because it focused on the degree to which Antelope Valley actually exercised control. The trial court believed that because it did not uniformly exercise control, the case would splinter into mini-trials of whether each carrier was a contractor or employee.
The Supreme Court instead focused on Antelope's contract with the carriers, which was uniform in that it applied to all of the carriers. The contract specified the "right to control," thereby providing a sufficient "common issue":
At the certification stage, the importance of a form contract is not in what it says, but that the degree of control it spells out is uniform across the class. Here, for example, the two form contracts address, similarly for all carriers, the extent of Antelope Valley‘s control over what is to be delivered, when, and how, as well as Antelope Valley‘s right to terminate the contract without cause on 30 days‘ notice.
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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 arisesbecause 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. (Malloy, at p. 370 [―It is not essential that the right of control be exercised or that there be actual supervision of the work of the agent.The Court summarized:
For class certification under the common law test, the key question is whether there is evidence a hirer possessed different rights to control with regard to its various hirees, such that individual mini-trials would be required. Did Antelope Valley, notwithstanding the form contract it entered with all carriers, actually have different rights with respect to each that would necessitate mini-trials?
Then the Court explained how to address whether there is variation in the right to control, such that there is no "common" question. For example, the Court explained that, despite the written contract, there could be evidence of the parties' course of dealing that showed individual rights to control depending on the carrier involved. The Court explained that when there is a dispute in the evidence over the central issue, a trial court must consider it if certification "depends on" resolution of that dispute:
The extent of Antelope Valley‘s legal right of control is a point of considerable dispute; indeed, it is likely the crux of the case‘s merits. To address such an issue on a motion for class certification is not necessarily erroneous. We recently reaffirmed that a court deciding a certification motion can resolve legal or factual disputes: ―To the extent the propriety of certification depends upon disputed threshold legal or factual questions, a court may, and indeed must, resolve them.‖ (Brinker, supra, 53 Cal.4th at p. 1025; see Dailey v. Sears, Roebuck & Co. (2013) 214 Cal.App.4th 974, 990–991.) But we cautioned that such an inquiry generally should occur only when ―necessary.‖ (Brinker, at p. 1025.) The key to deciding whether a merits resolution is permitted, then, is whether certification ―depends upon‖ the disputed issue. (Ibid.)
Finally, the Court addressed the "secondary factors" that apply in independent contractor cases. These include who specifies the location of the work, whether the contractor uses his or her own tools, how the relationship is terminated, the form of compensation, etc. The Court wrote that trial courts must weigh individual v. common issues, but give special weight to whether the "more important" factors are susceptible to common proof.
Accordingly, the impact of individual variations on certification will depend on the significance of the factor they affect. Some may be of no consequence if they involve minor parts of the overall calculus and common proof is available of key factors such as control, the skill involved, and the right to terminate at will; conversely, other variations, if they undermine the ability to prove on a common basis the most significant factor or factors in a case, may render trial unmanageable even where other factors are common. The proper course, if there are individual variations in parts of the common law test, is to consider whether they are likely to prove material.
All 7 justices agreed the trial court erred. But the majority opinion, by Justice Werdegar, is joined by (Liu, Kennard, Corrigan, and CJ. Cantil-Sakauye). Justice Baxter wrote a concurring opinion, joined by Justice Corrigan, in which he argued that most of the majority's opinion was unnecessary to the decision. It is a bit strange that Justice Corrigan joined Justice Baxter's concurrence, but also joined the majority opinion. And Justice Chin concurred in the result only, authoring a long opinion explaining his view of the record and the flaws in the majority's analysis.
So, bottom line:
- The California Supreme Court's recent decisions in Duran and Ayala have clarified class certification practice. However, on the whole, class certification will be easier to obtain.
- Class action defense must change strategies to defeat certification. The proffered "differences' among the putative class members have to concern the common issues advanced by the plaintiff.
- Larger employers facing class actions in a variety of contexts may wish to consider arbitration agreements containing class action waivers.
- Companies relying on large groups of independent contractors to perform aspects of their work should review their independent contractor agreements and consider (1) whether the classification is defensible and (2) whether the "right to control" is common enough to allow for class certification, or whether the agreement can build in variations in the right to control.
