Determining Employment Status in California

October 23, 2012

“The California Supreme Court has developed a multi-factor test for determining employment status.” Ruiz v. Affinity Logistics Corp. (9th Cir. 2011) 667 F.3d 1318, 1324, quoting S.G. Borello & Sons, Inc. v. Dept. of Indust. Rel. (1989) 48 Cal.3d 341 (“Borello”).  “[U]nder California law, once a plaintiff comes forward with evidence that he provided services for an employer, the employee has established a prima facie case that the relationship was one of employer/employee.” Narayan v. EGL, Inc. (9th Cir. 2010) 616 F.3d 895, 900, citing Robinson v. George, (1940) 16 Cal.2d 238, 243-244. “Once the employee establishes a prima facie case, the burden shifts to the employer, which may prove, if it can, that the presumed employee was an independent contractor.” Id. (citation omitted).

Under California law, primary 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, at 350. While the right to control work details is the most important factor, there are also “’secondary’ indicia of the nature of a service arrangement.” Id. These secondary factors, principally derived from the Rest.2d Agency, include

(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.”

Id. “Generally, the individual factors cannot be applied mechanically as separate tests; they are intertwined and their weight depends often on particular combinations.” Id.

Under California law, “[e]very employer shall pay to each employee wages not less than the applicable minimum wage] for all hours worked. . . .” (IWC Wage Order 9-2001, §4(A)).

Labor Code §226 requires an employer to provide accurate wage statements to its employees which record all hours worked, compensation provided and the rate at which such compensation was calculated. Labor Code §226 also requires an employer to maintain accurate records for three years, while the Fair Labor Standards Act (“FLSA”) requires such records be kept for at least two years. (See 29 CFR Part 516).

Both the United States Supreme Court and California courts have held that where an employer is subject to a recordkeeping requirement, the burden shifts to that employer to rebut employee proof of monies owed once a prima facie case has been made. See Anderson v. Mt. Clemens Pottery Co. (1946) 328 U.S. 680, 686-688; Ghazaryan v. Diva Limousine Ltd.  (2008) 169 Cal.App.4th 1524m 1536m FN 11 [refusing to allow an employer to use any shortcomings in its records to resist employee wage claims]; Cicairos v. Summit Logistics, Inc. (2005) 13 Cal.App.4th 949, 961 [“’[w]here the employer has failed to keep records required by statute, the consequences for such failure should fall on the employer, not the employee’”]; see also Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1055, fn 1 (Werdegar, J., concurring).

The Private Attorneys General Act (“PAGA”) authorizes an employee to act as a Private Attorney General to recover civil penalties for Labor Code violations for himself and other current or former “aggrieved” employees. The aggrieved employees who bring the suit retain 25% of the civil penalties and may recover attorneys’ fees, while the remaining 75% of the penalties go to the government.

Labor Code §1102.5 prohibits retaliation for refusing to participate in any action that would lead to the violation of any state or federal statute. “The employer shall have the burden of proof to demonstrate by clear and convincing evidence that the alleged action would have occurred for legitimate, independent reasons even if the employee had not engaged in activities protected by Section 1102.5.”  Labor Code §1102.6 (Emphasis supplied).

Employees alleging violations of the FLSA may bring an action on behalf of themselves and all others “similarly situated.” 29 U.S.C. §216(b). The standard for determining if employees are “similarly situated” is a lenient one that is much less stringent than the standard imposed for certification under Fed. R. Civ. P. 23. Church v. Consolidated Freightways, Inc. (N.D. Cal.  1991) 13 F.R.D. 294, 305. Indeed, the requirements of Rule 23, such as numerosity, typicality, commonality and representativeness do not apply to FLSA collective actions. Specifically, the plain language of the FLSA does not impose a numerosity requirement. Roberson v. Danny Ontiveros Trucking (E.D. Cal.) 2008 WL 4809960 at *4-5.

Courts in the Ninth Circuit follow a two-tiered approach to certification of FLSA collective actions. Edwards v. City of Long Beach (C.D. Cal. 2006) 467 F.Supp.2d 986, 989-990. Under this approach,

[T]he first step is for the court to decide, ‘based primarily on the pleadings and any affidavits submitted by the parties, whether the potential class should be given notice of the action.’ Given the limited amount of evidence generally available to the court at this stage in the proceedings, this determination is usually made ‘under a fairly lenient standard and typically results in conditional class certification.’ It is the plaintiffs’ burden to show that ‘the proposed lead plaintiffs and the proposed collective action group are similarly situated for purposes of §216(b).’ ‘Plaintiff need not show that his position is or was identical to the putative class members’ position; a class may be certified under the FLSA if the named plaintiff can show that his position was or is similar to those of the absent class members. However, unsupported assertions of widespread violations are not sufficient to meet Plaintiff’s burden.’

Id. at 990 (citations omitted). Courts making a determination as to whether to certify a collective action and permit notice to be distributed to putative class members “tend to require ‘nothing more than substantial allegation that the putative class members were together the victims of a single decision, policy, or plan.” Sarviss v. Gen. Dynamics Information Tech, Inc. (C.D. Cal. 2009) 663 F.Supp.2d 883, 903 (citation omitted).

The California Supreme Court has held that a plaintiff need not satisfy class action requirements in order to bring a representative action under the PAGA. Arias v. Superior Court (2009) 46 Cal.4th 969, 981.

Author: Richard Hoyer
Category: Arbitration, Class Actions, Independent Contractor / Employee Misclassification, Legal Procedure, Retaliation, Wage and Hour
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