This Week at The Ninth: Class Certification and Misclassification | Morrison & Foerster LLP – Left Coast Appeals

This week, the Court takes a close look at the standards for certifying a class action under Rule 23 and classifying someone as an employee or independent contractor under California law.


Court Finds Injury and Damage Variations Prevented Class Certification for Plaintiffs’ Overtime and Reimbursement Claims, While Clarifying Standards for Determining Whether a Person Is an Employee or Independent Contractor in California .

The panel: W. Fletcher, Bennett and Bade JJ., with Judge Bennett writing the opinion.

Climax : “[B]because the class members did not necessarily suffer damages attributable to their alleged misclassification, and because they did not present a method of calculating damages that is not excessively difficult, they did not unsatisfied Comcastsimple command that the case be “capable of awarding class-wide damages”.

Background: Defendant FAS contracted with vendors to perform services preserving residential properties prior to foreclosure. It has classified all of its suppliers as independent contractors. Plaintiff Fred Bowerman, one of those vendors, sued, alleging that the FAS improperly classified him as an independent contractor rather than an employee, and therefore violated California law by failing to pay properly. overtime or not reimbursing business expenses.

The district court granted Bowerman’s motion to certify a class containing 156 FAS vendors. He later granted partial summary judgment to the class members, finding that they had been misclassified in law. The court then held an 8-day jury trial to determine damages for 11 of the group’s members, after which FAS filed a motion to dismiss the group. The District Court denied the motion, then entered judgment regarding these 11 class members under Rule 54(b). After the FAS appeal, the district court awarded plaintiffs’ attorney interim compensation in excess of $5 million.

Results: The ninth circuit reversed. First, the Court ruled that the group could not be properly certified because the common issues did not predominate. The Court assumed that whether FAS misclassified the sellers could be proven by common evidence. But, he explained, “FAS responsibility to a Class Member for failing to pay them overtime or reimburse their business expenses would involve highly individualized investigations into whether that particular Class Member has ever worked overtime or already incurred all “necessary” business expenses. The Court thus rejected the plaintiffs’ reliance on the principle that individual questions regarding damages do not defeat certification, explaining that these questions related to the responsibility of FAS towards each member of the class. In any event, the Court continued, even if the establishment of the misclassification of the members of the group by FAS was sufficient to establish liability, the group still could not be certified because the plaintiffs could not demonstrate that “the entire group had suffered damages attributable to the same prejudicial conduct underlying the plaintiffs’ legal theory. Moreover, as the 8-day damages lawsuit for 11 class members confirmed, the plaintiffs had also failed to demonstrate “that damages can be determined without undue difficulty.”

Next, the Court turned to the legal standard governing plaintiff misclassification claims. As the Court explained, the California Supreme Court in Dynamex had adopted a new test for claims “to derive[d] directly from the obligations imposed” by a California wage order. On the other hand, the “pre-existingBorello” test continued to govern non-wage claims. In this case, while plaintiffs’ overtime claims were based on a California wage order (and therefore governed by Dynamex), their expense claims were instead based on California law (and therefore governed by Borello). The Court rejected FAS’ argument that all overtime claims should be governed by Borello because they were ultimately joint employment claims, but left it to the district court to determine whether this might be true with respect to some class members who were employed by a FAS salesman .

Applying these standards, the Court then reversed the District Court’s granting of summary judgment. As the Court held, under the Borello test, justiciable factual disputes existed as to whether FAS controlled the means by which its suppliers performed their work (as opposed to just the results they were supposed to achieve). Although FAS provided detailed instructions on what the sellers were expected to accomplish, it was up to a jury to conclude whether it thereby exercised the required control. But, the Court continued, a different result would follow under the Dynamex test, as it was undisputed that FAS suppliers had not “performed[] work that is not part of the normal course of business of the hiring entity. FAS may, however, be able to invoke the recently enacted business-to-business exception to the Dynamex test against its suppliers. Finally, the Court found with respect to the claims of all class members that, even assuming that a given class member was misclassified, there was a genuine dispute of material fact as to whether he had “already incurred out-of-pocket expenses or ever worked overtime”, thus rendering summary judgment “inappropriate for the same reason that class certification was”.

Finally, the Court also set aside the interim order on attorneys’ fees. Although this order is not final and therefore not normally subject to appeal, the Court found that it could exercise pending appellate jurisdiction over the sentence as it involved issues inextricably linked to summary judgment review. and class certification orders. And because those orders had been overturned, the Court also overturned the costs order.

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