Independent Contractors Denied Class Action Status Under the Dynamex ABC Test

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In a rare victory for employers, a California Court of Appeal in Wilson v. The La Jolla Group, 2021 WL 940283 (3/12/2021) affirmed the trial court’s denial of class certification of independent contractors’ wage and hour claims who alleged they were misclassified.  The Court of Appeal, however, reversed the trial court’s denial of class certification as to whether a class could be certified to determine whether the business misclassified the Plaintiffs and violated California’s wage statement requirements, and directed the trial court to review the evidence further.  The Wilson Court affirmed long-standing class action principles that certification requires a predominance of common questions of law and fact where liability must be demonstrated by an employer’s uniform policy or consistent practice that violates wage and hour laws.  The Court held that Plaintiffs failed to demonstrate predominance due to a wide variety of factual differences among the contractors.

Plaintiffs worked as signature gatherers on behalf of political campaigns or political action committees for The La Jolla Group (LJG).  LJG paid for each signature submitted (i.e., on a piece-rate basis).  Plaintiffs could work as much or as little as they desired, and had complete control over where and how they sought to obtain signatures.  LJG did not require contractors to work a certain number of hours or obtain a certain number of signatures.  LJG maintained no timekeeping records of its signature gatherers.  Importantly, the relationship between LJG and signature gatherers was not exclusive and signature gatherers could simultaneously work for multiple brokers like LJG.  Plaintiffs claimed that they were misclassified as independent contractors and asserted claims for failure to pay minimum wage, failure to pay overtime, meal and rest period violations, waiting time penalties, failure to reimburse business expenses, and failure to issue accurate itemized wage statements.

Plaintiffs moved to certify the class-based solely on the theory that they were misclassified under the “B” prong of the ABC test first articulated by the California Supreme Court in Dynamex Operations West, Inc. v. Super. Ct., 4 Cal.5th 905 (2018) – that is, Plaintiffs should have been classified as employees because the work they performed was in the usual course of LJG’s business as a political consulting firm.  In opposing certification, LJG argued that even if Plaintiffs and putative class members were misclassified as independent contractors, each putative class member’s circumstances were so variable that Plaintiffs could not prove liability as to any wage and hour violation on a classwide basis.  The Court of Appeal agreed that these variations affected questions of liability on wage and hour claims, and not damages, rendering certification inappropriate as to all but, potentially, Plaintiff’s wage statement claim.  For example, whether any particular signature gatherer suffered a minimum wage or overtime violation, or meal/rest break violation, depended on the number of hours they chose to work, and any potentially applicable local minimum wage ordinance.  Moreover, because signature gatherers could be working for multiple brokers and multiple political campaigns at the same time, the class action device was not superior to individual actions because adjudicating which work time was attributed to work for LJG would vary in each case.  In contrast, the Court of Appeal remanded to the trial court for reconsideration of Plaintiff’s wage statement claim, because the trial court did not properly consider whether Plaintiff’s misclassification theory affected the putative class similarly, and the trial court had not explained why this theory did not meet class certification requirements.

Given the dramatic shift in the legal landscape in California on independent contractor misclassification claims post-Dynamex and AB 5, the Wilson decision provides welcome relief to employers with a business model that relies on contractors and where the contractors provide similar services for multiple entities across a variety of California jurisdictions.  However, it remains to be seen whether, and how, the courts will come out on the wage statement issue.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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