As I fill the backlog, we have yet another big decision from the California Supreme Court. In Ayala v. Antelope Valley Newspapers, 59 Cal. 4th 522 (June 30, 2014), the Supreme Court examined how the question of certification should be answered in the context of misclassification of independent contractors.  Newspaper carriers, classified as independent contractors, filed suit to obtain remedies available to employees under California’s wage & hour laws.  Plaintiffs moved for class certification.  The trial court concluded the case could not proceed as a class action, holding that on the critical question whether plaintiffs and the class were employees, plaintiffs had not shown common questions predominate.  The trial court held that to determine employee status for the class would necessitate numerous unmanageable individual inquiries into the extent to which each carrier was afforded discretion in his or her work.  The Court of Appeal disagreed in part, holding that the trial court had misunderstood the nature of the inquiries called for, and remanded for reconsideration of the class certification motion as to five of the complaint’s claims.

The Supreme Court affirmed the Court of Appeal.  Beginning with the test for employee status as the key issue for evaluating the commonality issue, the Court said:

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, 139 Cal.Rptr.3d 315, 273 P.3d 513; Sav–On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 327, 17 Cal.Rptr.3d 906, 96 P.3d 194 [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”].)

The trial court and Court of Appeal correctly recognized as the central legal issue whether putative class members are employees for purposes of the provisions under which they sue. If they are employees, Antelope Valley owes them various duties that it may not have fulfilled; if they are not, no liability can attach. In turn, whether putative class members' employee status can be commonly resolved hinges on the governing test for employment.

Ayala v. Antelope Valley Newspapers, Inc., 59 Cal. 4th 522, 530 (2014).  The Court observed that the test relied upon in the Courts below was the Borello common law test. After considering the need to examine other employment tests, the Court concluded that the case could be resolved by focusing on the common law test exclusively.  The Court then restated the essentials of the common law test for employment:

Under the common law, “ ‘[t]he principal test of an employment relationship is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.’ ” (Borello, supra, 48 Cal.3d at p. 350, 256 Cal.Rptr. 543, 769 P.2d 399, quoting Tieberg v. Unemployment Ins. App. Bd. (1970) 2 Cal.3d 943, 946, 88 Cal.Rptr. 175, 471 P.2d 975; accord, Empire Star Mines Co. v. Cal. Emp. Com. (1946) 28 Cal.2d 33, 43, 168 P.2d 686.) What matters is whether the hirer “retains all necessary control” over its operations. (Borello, at p. 357, 256 Cal.Rptr. 543, 769 P.2d 399.) “ ‘[T]he fact that a certain amount of freedom of action is inherent in the nature of the work does not change the character of the employment where the employer has general supervision and control over it.’ ” (Burlingham v. Gray (1943) 22 Cal.2d 87, 100, 137 P.2d 9; see Toyota Motor Sales U.S.A., Inc. v. Superior Court (1990) 220 Cal.App.3d 864, 876, 269 Cal.Rptr. 647; Grant v. Woods (1977) 71 Cal.App.3d 647, 653, 139 Cal.Rptr. 533.) Perhaps the strongest evidence of the right to control is whether the hirer can discharge the worker without cause, because “[t]he power of the principal to terminate the services of the agent gives him the means of controlling the agent's activities.” (Malloy v. Fong (1951) 37 Cal.2d 356, 370, 232 P.2d 241; see Borello, at p. 350, 256 Cal.Rptr. 543, 769 P.2d 399; Kowalski v. Shell Oil Co. (1979) 23 Cal.3d 168, 177, 151 Cal.Rptr. 671, 588 P.2d 811; Isenberg v. California Emp. Stab. Com. (1947) 30 Cal.2d 34, 39, 180 P.2d 11; Burlingham, at pp. 99–100, 137 P.2d 9.)

Ayala, 59 Cal. 4th at 531.  The Court added an additional, significant observation to this formulation, observing, “The worker's corresponding right to leave is similarly relevant: “ ‘An employee may quit, but an independent contractor is legally obligated to complete his contract.’ ” (Perguica v. Ind. Acc. Com. (1947) 29 Cal.2d 857, 860, 179 P.2d 812.)”  Ayala, 59 Cal. 4th at 531 n. 2.  The Court then listed the secondary factors that a court may consider, including: (a) whether the one performing services is engaged in a distinct occupation or business; (b) 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; (c) the skill required in the particular occupation; (d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work; (e) the length of time for which the services are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is a part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee.

Next the Court turned to the question of whether certification should have been granted in this matter. Before doing so, however, the Court framed the core question, right to control, at issue in the case:

Significantly, what matters under the common law is not how much control a hirer exercises, but how much control the hirer retains the right to exercise. (Perguica v. Ind. Acc. Com., supra, 29 Cal.2d at pp. 859–860, 179 P.2d 812 [“The existence of such right of control, and not the extent of its exercise, gives rise to the employer-employee relationship.”]; Empire Star Mines Co. v. Cal. Emp. Com., supra, 28 Cal.2d at p. 43, 168 P.2d 686 [“If the employer has the authority to exercise complete control, whether or not that right is exercised with respect to all details, an employer-employee relationship exists.”]; Industrial Ind. Exch. v. Ind. Acc. Com. (1945) 26 Cal.2d 130, 135, 156 P.2d 926 [“The right to control and direct the activities of the alleged employee or the manner and method in which the work is performed, whether exercised or not, gives rise to the employment relationship.”]; S.A. Gerrard Co. v. Industrial Acc. Com. (1941) 17 Cal.2d 411, 414, 110 P.2d 377 [“the right to control, rather than the amount of control which was exercised, is the determinative factor”]; Hillen v. Industrial Acc. Com. (1926) 199 Cal. 577, 581–582, 250 P. 570 [“It is not a question of interference, or non-interference, not a question of whether there have been suggestions, or even orders, as to the conduct of the work; but a question of the right to act, as distinguished from the act itself or the failure to act.”].) Whether a right of control exists may be measured by asking “ ‘ “whether or not, if instructions were given, they would have to be obeyed” ’ ” on pain of at-will “ ‘ “discharge[ ] for disobedience.” ’ ” (Toyota Motor Sales U.S.A., Inc. v. Superior Court, supra, 220 Cal.App.3d at p. 875, 269 Cal.Rptr. 647.)

Ayala, 59 Cal. 4th at 533.  Applying this test to the case before it, the Court observed that:

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?

Ayala, 59 Cal. 4th at 533-34.  The Court concluded that the trial court lost sight of these questions in its analysis:

The trial court lost sight of this question. Its order reveals the denial of certification ultimately rested on two related determinations: (1) the record reflected considerable variation in the degree to which Antelope Valley exercised control over its carriers; and (2) the putative class as a whole was not subject to pervasive control as to the manner and means of delivering papers. Neither of these considerations resolves the relevant inquiry. Whether Antelope Valley varied in how it exercised control does not answer whether there were variations in its underlying right to exercise that control that could not be managed by the trial court. Likewise, the scope of Antelope Valley's right to control the work does not in itself determine whether that right is amenable to common proof.

Ayala, 59 Cal. 4th at 534.  The Court discussed briefly the evidence available to the Court, focusing heavily on the contract between the newspaper carriers and the defendant.  The Court found that even variations in the actual degree of control over different carriers was likely irrelevant if the right to control them all was effectively identical:

[T]he existence of variations in the extent to which a hirer exercises control does not necessarily show variation in the extent to which the hirer possesses a right of control, or that the trial court would find any such variation unmanageable. That a hirer may monitor one hiree closely and another less so, or enforce unevenly a contractual right to dictate the containers in which its product is delivered, does not necessarily demonstrate that the hirer could not, if it chose, monitor or control the work of all its hirees equally. (See Estrada v. FedEx Ground Package System, Inc. (2007) 154 Cal.App.4th 1, 13–14, 64 Cal.Rptr.3d 327 [recognizing that how a hirer exercised control over a particular hiree might show, not the hirer's differential control of that hiree, but the extent of its common right to control all its hirees].) 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?

Ayala, 59 Cal. 4th at 535-36.  The Court then explained the frequent error made in the certification analysis of claims based on independent contractor misclassification:

Certification of class claims based on the misclassification of common law employees as independent contractors generally does not depend upon deciding the actual scope of a hirer's right of control over its hirees. The relevant question is whether the scope of the right of control, whatever it might be, is susceptible to classwide proof. Bypassing that question, the trial court instead proceeded to the merits. In so doing, the court made the same mistake others have when deciding whether to certify claims predicated on common law employee status, “focus[ing] too much on the substantive issue of the defendant's right to control its newspaper deliverers, instead of whether that question could be decided using common proof.” (Dalton v. Lee Publications, supra, 270 F.R.D. at p. 564.) Moreover, by purporting to resolve on a classwide basis the scope of Antelope Valley's right to control its carriers, the trial court contradicted its own conclusion, that classwide assessment of Antelope Valley's right to control is infeasible.

Ayala, 59 Cal. 4th at 537.  The Court concluded by noting that many of the secondary factors must also be evaluated correctly to determine if common proof will adequately determine the secondary factor in question:

Preliminarily, we caution that courts assessing these secondary factors should take care to correctly identify the relevant considerations. Here, for example, the trial court noted variation in the “place of work.” The inquiry that sheds light on a hiree's common law employee status, however, is into who provides the place of work, the hirer or hiree (Borello, supra, 48 Cal.3d at p. 351, 256 Cal.Rptr. 543, 769 P.2d 399; Rest.3d Agency, § 7.07, com. f, p. 211; Rest.2d Agency, § 220, subd. (2)(e)), and thus the relevant inquiry is whether there is variation in who provides facilities. That carriers could pick up papers at any of several Antelope Valley warehouses or drop locations, as Antelope Valley argued, does not show variation in the underlying secondary factor.

Ayala, 59 Cal. 4th at 538.

The Court remanded with instructions to consider the certification question in light of the Court’s guidance.