California Courts of Appeal
CERTIFIED TIRE AND SERVICE CENTERS WAGE AND HOUR CASES
DEFENDANT CERTIFIED TIRE PAID TECHNICIANS ON A VARIABLE HOURLY RATE SYSTEM
Defendant Certified Tire operates forty stores in California and employs automotive technicians to diagnose and repair customer vehicles. Its technicians were compensated via the Technician Compensation Program (TCP). The technicians were paid an hourly wage for all work, but the rate varied between pay periods. The rate was guaranteed to be at least the minimum guaranteed hourly rate assigned at hire, which was never less than minimum wage. The hourly rate formula rewarded technicians for work billed to customers as a separate labor charge and adjusted their hourly rates upward accordingly. Overtime rates were paid at 1.5 times the hourly rate that applied in the given pay period. Multiple class action lawsuits were filed and then consolidated. The trial court certified the class and conducted a bench trial. The trial court issued a Statement of Decision in favor of Certified Tire, finding no violation of wage and hour laws. The class appealed.
CERTIFIED TIRE PROPERLY PAID EMPLOYEES AT OR ABOVE MINIMUM WAGE FOR ALL HOURS WORKED
Although the TCP had some similarity to a piece-rate or commission-based system, it was not an activity-based compensation system. The TCP was an hourly rate system. The technicians were always paid on an hourly basis, always paid for all hours worked, and always paid ate a rate above minimum wage. Plaintiffs did not establish any violation of Wage Order 4.
COA 4th Dist., Div. 1. Filed 9/18/18, publication ordered 10/4/18. 28 Cal.App. 5th 1. Opinion by Justice Irion.
GARCIA v. BORDER TRANSPORTATION GROUP, LLC
PLAINTIFF GARCIA RENTED HIS TAXI FROM DEFENDANT BORDER TRANSPORTATION GROUP
Plaintiff Garcia was a taxi cab driver. He rented his taxi from Defendant Border Transportation Group (“BTG”), and also purchased optional dispatch services from them.
Operating in Calexico, Plaintiff Garcia obtained a taxi permit from the city, which allowed him to work only for Defendant BTG. If he wanted to work for a different company, he would have to obtain a different permit from the city.
PLAINTIFF GARCIA SUED FOR VARIOUS ALLEGED WAGE-AND-HOUR VIOLATIONS
Upon stopping his work with Defendant BTG (the facts regarding how that came about were disputed), Plaintiff Garcia became a named plaintiff in a putative class action against Defendant BTG. Garcia and the putative class alleged wrongful termination in violation of public policy as well as various wage and hour claims, including unpaid wages, failure to pay minimum wage, failure to pay overtime, failure to provide wage statements, failure to provide meal and rest breaks, waiting time penalties, and unfair competition.
THE TRIAL COURT GRANTED SUMMARY JUDGMENT
In deciding Defendant BTG’s motion for summary judgment, the trial court used the Borello test for determining if the workers were independent contractors or employees. Under Borello, the company bears the burden of demonstrating that the worker is an independent contractor, and the most important factor is the company’s ability to exercise control, whether actually used or not. That is not the only factor, however. Borello goes on to detail a multi-factor test to determine the existence of an employment relationship:
(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.
Applying Borello, the trial court granted summary judgment, finding that the factors weighed in favor of Defendant BTG’s assertion of an independent contractor relationship.
DYNAMEX APPLIED TO THE WAGE ORDER CLAIMS
There was little dispute that the Supreme Court’s decision in Dynamex applied to the claims arising under the wage orders. In Dynamex, the court approved the ABC test for determining whether a worker was an independent contractor or an employee. In that test (detailed in the April 2018 edition of the CELA Bulletin), as in Borello, workers are presumed to be employees, and the burden is on the defendant company to prove any asserted independent contractor relationship. Moreover, under Dynamex, a worker will be found to be an independent contractor only if all of the following criteria are met:
(a) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
THE CLASS OF WORKERS WERE EMPLOYEES FOR THE WAGE ORDER CLAIMS UNDER DYNAMEX
Applying Dynamex’s ABC test, the Garcia court determined that summary judgment should have been denied as to those claims arising under the wage order. The court pointed out the significance of the phrase used in part (C): “independently established.” Citing cases both from California and out of state, the Garcia court explained that this meant that the worker, to qualify as an independent contractor, had to have established a separate business of that worker’s own volition, and had to ply that trade in a manner traditionally thought of as an ongoing enterprise. The fact that the putative class members could have worked elsewhere was not relevant; the question was whether they did, and actively got business elsewhere. Not so here, where Garcia and the putative class could not even have worked for a different company without obtaining a separate license.
THE PLAINTIFFS WAIVED THEIR NON-WAGE ORDER CLAIMS
The court did not have occasion to apply the Borello test to the non-wage order claims, because it determined that the plaintiffs waived their appeal as to those causes of action by not fully developing their argument.
CONCLUSION
The first published case to interpret Dynamex has limited it to claims arising under the IWC Wage Orders. Dynamex didn’t reject the ABC test for claims outside the wage orders; it expressly did not consider the issue. The result in Garcia does not seem congruent with the strong statement Dynamex makes about the importance of timely payment of wages in California public policy, even those wages and remedies not contemplated by the wage orders. Don’t be surprised when a different appellate court comes to a different conclusion, and the Supreme Court takes the issue up again.
Fourth Dist., Div. 1, Filed 10/23/18. Opinion by Judge Dato.
MARTINEZ v. EATLITE ONE, INC.
PLAINTIFF MARTINEZ PREVAILED AT TRIAL BUT RECEIVED A JURY AWARD LESS THAN EATLITE’S SECTION 998 OFFER
Plaintiff Samantha Martinez sued Defendant Eatlite One for employment discrimination and other claims. A jury found in her favor on all claims and awarded $11,490 in damages. Martinez did not exceed Eatlite’s section 998 offer of $12,001, which was silent as to costs and attorney fees. The trial court added Martinez’s costs and fees to the verdict and determined that she had beaten the 998 offer. It then granted Martinez’s motion to strike Eatlite’s costs, denied Eatlite’s motion to strike or tax Martinez’s costs, and granted Martinez’s motion for attorney fees for $60,000. Eatlite appealed.
THE TRIAL COURT FAILED TO ADD ATTORNEY FEES AND COSTS TO THE VALUE OF EATLITE’S 998 OFFER
The trial court was required to determine the value of the 998 offer by adding $12,001 plus Martinez’s costs and fees at the time of the offer. The trial court should then compare that sum to the jury’s award plus Martinez’s pre-offer costs and fees. Since the costs and fees are the same in both, the jury’s award was less than the 998 offer. Because Martinez did not obtain a judgment more favorable than the 998, the Court of Appeal reversed the cost and fee awards and urged the Legislature to clarify how costs and fees should be addressed in 998 offers.
NOTE: The Opinion does not address the SB 1300 amendment to Government Code section 12965(b), which clarified existing law to state that a prevailing defendant in a FEHA case shall not be awarded costs and fees unless the action was frivolous.
COA 4th Dist., Div. 3. Filed 10/3/18. 27 Cal.App.5th 1181. Opinion by Justice Ikola.
UBER TECHNOLOGIES, INC. v. GOOGLE LLC
Anthony Levandowski and Lior Ron worked for Google LLC. Levandowski and Ron left Google to start a self-driving vehicle company, which Google considered a competitor to its self-driving vehicle project. After Uber Technologies, Inc. acquired Levandowski’s and Ron’s company, Google brought claims in arbitration against its former employees for breach of their employment contracts and other claims. Google sought discovery from Uber, who was not a party to the arbitration, via subpoena. Part of Uber’s acquisition terms included indemnity of Levandowski and Ron for intellectual property claims that Google might make against them. The indemnity provision required a due diligence process involving investigation by an outside expert as to the scope of the indemnified claims. Stroz, an independent third party, was retained for this purpose by Uber’s attorneys. Stroz issued a final written report to the attorneys labeled as “Privileged” and “Attorney Work Product.” Google sought Stroz’s report and all of his investigative materials. The arbitration panel ordered Uber to produce the Stroz documents, so Uber initiated a special proceeding in Superior Court to vacate the arbitration discovery order. The trial court sided with Uber, and Google appealed.
A PARTY TO AN ARBITRATION MAY APPEAL AN ADVERSE DISCOVERY COURT ORDER OBTAINED BY A THIRD PARTY TO THE ARBITRATION
In a case of first impression, the Court of Appeal held that a party to an arbitration has the right to appeal an adverse Superior Court order vacating an arbitrator’s discovery order in favor of a third party to the arbitration. The court’s discovery order was final for purposes of CCP section 1294 because it disposed of the entire controversy between Uber and Google in the special proceeding. The Court of Appeal used de novo review because Superior Court orders vacating final arbitration awards are reviewed de novo, and there was no apparent reason to use a different standard.
THE STROZ DOCUMENTS ARE DISCOVERABLE BECAUSE UBER COULD NOT ESTABLISH ATTORNEY-CLIENT PRIVILEGE OR WORK PRODUCT
In assessing whether a communication is privileged, the initial focus is on the dominant purpose of the relationship between the attorney and client, rather than on the purpose of the communication. If the communications were made during the course of an attorney-client relationship, the communications are privileged. However, the privilege is strictly construed where the relationship is not clearly established. Here, Uber never established that the Stroz documents were attorney-client communications, and it could not. The Stroz documents resulted from a pre-acquisition due diligence process, and Stroz was retained by two parties to the due diligence process, but not Levandowski or Ron. During this process, the interests of Uber were adverse to those of Levandowski, Ron, and their company. When Stroz interviewed Levandowski and Ron for his report, he did not do so as their agent or on behalf of their attorneys. Therefore, the Stroz documents were not privileged. The Stroz documents were also not work product because they did not reflect an attorney’s impressions, conclusions, opinions, legal research, or theories. Rather, the Stroz documents reflect the result of a factual investigation, and Stroz’s retention letter stated that he was not authorized to practice law and that his services were “non-legal.” Therefore the Stroz documents were discoverable in arbitration.
COA. 1st Dist., Div. 3. Filed 9/28/18. Modified on denial of rehearing 10/25/18. 27 Cal.App.5th 954. Opinion by Justice Siggins.