Court: District Court, N.D. California; March 17, 2017; Federal District Court
The court's order denies Field Asset Services, Inc. (FAS) motion to decertify the class of vendors performing property preservation services in California, affirming the class's compliance with Rule 23 requirements. The court grants the plaintiffs' motion for partial summary judgment, establishing that the vendors are employees entitled to overtime pay and reimbursement for expenses, as FAS retained and exercised significant control over their work. The court grants FAS's motion for summary judgment regarding class member Julia Magdaleno but denies it for Matthew Cohick and Eric Ackel.
FAS operates as a property preservation service provider managing a network of vendors, which includes sole proprietors and larger companies. FAS retains ownership of contracts with property owners and acts as an intermediary, preventing direct vendor-client contact. Vendors must complete a Vendor Qualification Packet (VQP) that outlines the terms of their relationship with FAS, including service types, insurance requirements, compliance instructions, and penalties for non-compliance, thereby emphasizing FAS's control over the vendors' operations.
Vendors must carry General Liability and Errors and Omissions (E&O) Insurance, listing FAS as an additional insured. They are required to have general liability, E&O, workers' compensation, and auto insurance. FAS provides a Master E&O policy for approved vendors. Vendors act as the eyes and ears at properties, required to report damages or unsafe conditions, with liability for unreported issues falling on them. FAS retains the 'Right to Set-Off' and requires vendors to indemnify it. Vendors are classified as 'independent contractors,' with a Lien Provision preventing them from filing liens on FAS properties. The relationship can be terminated by either party at any time, with or without notice. The Master Services Agreement, effective since 2014, automatically renews annually unless terminated with thirty days' notice and includes mutual termination rights.
After FAS receives a complete Vendor Qualification Package (VQP), it conducts background checks and insurance verification. While plaintiffs claim FAS mandates a business license and Employer Identification Number (EIN), FAS denies requiring an EIN, though an earlier VQP references it. Once approved, vendors receive access credentials for FAS's proprietary software, FAS-track, and must complete training on it before accepting work orders. Vendors maintain a 'Vendor Profile' detailing their contact information, service areas, services offered, pricing, and signed VQP. They supply their own tools and are not mandated to have prior experience.
Work orders are assigned through FAS-track, requiring a response within 24 hours; otherwise, FAS may reassign them. Each work order specifies vendor information, payment amount, property address, FAS contacts, and detailed task instructions. Accepted work must be completed within three days, and vendors must post a notice of FAS maintenance for certain services. Invoices and required photographic documentation must be uploaded within 24 hours post-completion to avoid payment delays. Late invoices incur a 10% penalty on the total amount. FAS reviews all documentation before payment approval, and work must be completed per the work order instructions to receive payment. Vendors can set limits on work orders, but FAS retains the authority to reduce these limits. Plaintiffs argue that while vendors can decline work orders, doing so may lead to reduced future opportunities.
FAS allows vendors to choose from work orders but does not track how often they decline them; this data is included as a factor on the scorecard. FAS uses 'vendor blasts' to disseminate information relevant to many vendors, including pricing guidelines and updates on Vendor Scorecards. The scorecards measure various metrics such as on-time completion rates, inspection scores, and work order acceptance. FAS’s PMK describes the scorecards as primarily beneficial for vendors to manage their performance. Although FAS claims it ceased using the scorecard system around 2013, evidence suggests it continued into December 2016.
FAS supervises vendor performance through updates, photo documentation, and quality control inspections, with clients not involved in quality assessments. The quality control program ensures services meet specifications and timelines, including random inspections, with immediate vendor notifications for insufficient invoices requiring 24-hour resolutions. Vendors must rectify poor work at no cost, and failure to respond allows FAS to engage another vendor at the original vendor's expense.
The Vendor Quality Policy (VQP) emphasizes that vendor scores depend significantly on Field QC team reviews. Field QC inspectors recommend vendor status changes based on inspection findings and determine the significance of non-compliance for potential disciplinary action. The five-stage progressive discipline system, detailing penalties and repercussions for non-compliance, was simplified around 2010 to a three-stage process with notifications leading to possible termination. Declined invoices for quality reasons affect the vendor's scorecard, and FAS provides mandatory training on its proprietary software and vendor tasks.
FAS presents vendor testimony claiming no training was provided, yet their marketing materials assert they offer "initial and ongoing training," including "REO Training Wagons" held approximately twelve times a year per region. Although FAS states attendance is not mandatory, these sessions are labeled as "MANDATORY." A vendor convention occurs in Texas, with a dispute over the mandatory nature of attendance.
Julia Magdaleno, married to plaintiff Fred Bowerman, was previously an employee of BB Home Services (BBHS) before her marriage in 2008. Afterward, she stopped receiving paychecks but considered herself a manager and later an owner of BBHS. She has been a co-signer on BBHS’s bank account and engaged in contracts on its behalf.
Matthew Cohick founded Monster Mowers in 2003 and began servicing FAS in 2006, evolving into a full-service vendor. He operated mainly from a home office and purchased equipment for FAS's requirements, employing 15 to 30 people and subcontractors. FAS provided training for his employees, and Cohick initially claimed to work exclusively for FAS until late 2012, although he later clarified he worked 99.9 percent of the time for them. He was terminated by FAS around May 2013.
Eric Ackel, through his company Kurb Appeal, Inc., began working with FAS around 2008 or 2009 for approximately two to three years. Kurb Appeal did not advertise but may have used business cards. Ackel hired about twenty people for property preservation but met only four in person. He performed an average of 14 to 16 hours of work daily, seven days a week, and reported frequent unannounced inspections by FAS. His relationship with FAS ended due to "lack of communication," and he ceased working for them primarily due to financial reasons.
Plaintiffs initiated a class action lawsuit against FAS on January 7, 2013, subsequently filing an amended complaint on February 15, 2013, which included causes of action for breach of contract, breach of the covenant of good faith and fair dealing, misclassification of independent contractor status, failure to pay overtime and wages, failure to indemnify for business expenses, violations of the Unfair Competition Law, and non-compliance with Labor Code provisions under the Private Attorney General Act.
On September 17, 2014, the court denied the plaintiffs’ motion for class certification but indicated the potential for a narrower, certifiable class. Following a renewed motion proposing a refined class definition, the court granted class certification on January 26, 2015, with a detailed decision on March 24, 2015. The certified class includes individuals who worked as independent contractors for FAS in property preservation in California from January 7, 2009, through the time of judgment, and who did not work for other entities more than 30% of the time, excluding those primarily engaged in rehabilitation or remodel work.
On May 25, 2015, notice was sent to 628 individuals identified as class members. The court defined a group of 107 "Discovery Vendors" to facilitate discovery, with varying responses regarding class membership. Fact discovery closed on December 5, 2016. On January 4, 2017, FAS sought class decertification and summary judgment concerning certain potential class members, while plaintiffs moved for summary judgment on FAS's claims regarding independent contractor status, overtime pay liability, and reimbursement for business expenses. A joint table of identified class members was submitted by the parties on March 2, 2017.
Federal Rule of Civil Procedure 23 outlines the requirements for class action certification. The trial court must rigorously analyze whether the party seeking certification has met the prerequisites, demonstrating by a preponderance of the evidence that the four threshold elements of Rule 23(a) are satisfied: numerosity (the class is too numerous for joinder), commonality (shared questions of law or fact), typicality (the representative parties' claims are typical of the class), and adequacy (the representatives will protect the class's interests). Following this, the party must show that one of the three grounds for certification applies, with plaintiffs typically invoking Rule 23(b)(3), which necessitates that common questions of law or fact predominate over individual ones and that a class action is the superior method for resolving the dispute. Factors influencing this determination include the class members' interests in individual control, existing litigation, the desirability of the forum, and management difficulties of a class action. Certification orders can be amended before final judgment, and decertification reviews follow the same standards as initial certification, with the plaintiff retaining the burden of proof.
In terms of summary judgment, it is granted when the movant demonstrates no genuine dispute exists concerning a material fact and is entitled to judgment as a matter of law. The movant must show the absence of a genuine issue regarding an essential element of the non-moving party’s claim. If this burden is met, the opposing party must identify specific facts indicating a genuine issue for trial, supported by affirmative evidence that could lead a jury to favor them. The court will draw all reasonable inferences in favor of the non-movant, while credibility determinations and evidence weighing are reserved for the jury. Moreover, speculative or conclusory testimony fails to create genuine factual issues sufficient to defeat a summary judgment motion.
California law differentiates employer responsibilities based on whether workers are classified as employees or independent contractors, with significant implications stemming from this classification.
California law provides significant benefits and protections to employees, such as overtime compensation and reimbursement for business expenses, while independent contractors receive minimal protections. An employee establishes a prima facie case of an employer/employee relationship simply by providing evidence of services rendered for an employer. In such cases, the presumption is that the worker is an employee unless the employer can present evidence proving the worker is an independent contractor.
California courts apply a common law test to differentiate between employees and independent contractors, focusing primarily on the employer's right to control the manner and means of work, rather than the actual control exercised. The central question is whether the employer has the right to dictate how the work is done. While some degree of freedom in work does not negate an employment relationship, the right to terminate at will without cause strongly indicates an employment relationship.
In addition to the right to control, courts may consider secondary factors to assess the nature of the relationship, including: 1) whether the worker operates a distinct business; 2) if the work is typically done under the principal's direction; 3) the required skill level; 4) who supplies tools and workspace; 5) the duration of the service; 6) the payment method; 7) whether the work is integral to the principal's business; and 8) the parties' belief in creating an employer-employee relationship.
The California Court of Appeal emphasizes that the label assigned to an employment relationship is not definitive; actual conduct takes precedence in determining the nature of the relationship. The Borello case outlines several factors for evaluating whether a worker is classified as an employee or independent contractor, including: the worker's opportunity for profit or loss based on managerial skill, investment in necessary equipment, requirement of special skills, permanence of the working relationship, and whether the service is integral to the employer's business. These factors should not be applied rigidly but should be assessed in combination, as their relevance can vary by case.
In the discussion of class certification, the plaintiffs contest FAS's claims regarding the disputed status of class members. A joint table identifies 126 vendors, with 31 members agreed upon by both parties. FAS contests the class status of the remaining 95 members based on issues such as late entry and lack of evidence for contracts. The court previously noted that the absence of time records for some vendors does not undermine class certification, provided that the overall threshold for class membership is met. FAS's argument against class certification centers on the complexity of the multi-factor test and factual differences among vendors, asserting that these prevent a coherent class treatment. However, the court finds FAS has not adequately challenged the sufficiency of class certification under the applicable legal standards.
Commonality is established as FAS has repeatedly expressed concern over the variability in vendors' business operations affecting independent contractor status under the Borello test. However, the court previously found commonality satisfied, emphasizing the central legal question of whether class members were misclassified under California law. Despite FAS arguing that post-discovery evidence shows broader variation among class members, the court remains unconvinced. FAS raises two main points against commonality: the right to control and distinct business factors. Some class members claim they had control over their work, while others assert FAS retained control. Additionally, FAS notes differences in how vendors completed work—some personally, others using subcontractors. The court counters these arguments by clarifying that the class definition includes only those vendors designated as independent contractors, who personally performed property preservation work and worked for FAS at least 70% of the time. The right to control, rather than the actual control exercised, is the key factor in determining employment status, and the agreement defining the parties' relationship is critical. FAS's claim that there is no single contract is refuted by the court's finding that all vendors execute similar independent contractor agreements, which include detailed job specifications. Furthermore, FAS fails to present new arguments against commonality.
On the issue of predominance, the court notes that the plaintiffs' revised class definition addresses previous concerns and minimizes variations in class members' negotiation power and reliance on FAS. The court concludes that most factors relevant to the case can be proven collectively.
The determination of class certification hinges on whether common factors regarding employee status can be applied to the entire class or if individual analysis is necessary. Plaintiffs argue that FAS maintains control through standardized policies and practices, referencing specific evidence such as detailed work orders, mandatory proprietary software training, uniform supervision methods, and standardized disciplinary rights. The court agrees that FAS's focus on the actual exercise of control is misplaced; the key factor is the right to control, not the extent to which it is exercised. The court reaffirmed that all vendors sign similar independent contractor agreements and found no compelling evidence from FAS to alter this view. While FAS points out variations among vendors' operations, the court concludes these differences do not undermine class predominance, as FAS retains necessary control over vendors' work. Ultimately, the court maintains that questions common to the class prevail over individual issues, supporting class certification.
FAS challenges the superiority of class treatment, primarily focusing on ascertainability and administrative feasibility rather than the requirements of superiority and manageability under Rule 23. This approach lacks supporting precedent, highlighting a strategic manipulation of arguments, especially given the Ninth Circuit's stance that class certification cannot be denied solely based on manageability issues, as seen in Briseno v. ConAgra Foods, Inc. The court acknowledges manageability as a factor in the superiority analysis, but emphasizes that it is not a barrier to certification. While FAS has raised these manageability concerns previously, the court had previously found that the plaintiffs' trial plan would establish liability based on common proof rather than individual claims.
FAS argues that classwide proceedings are not superior to individual adjudication due to the need for each class member to litigate individualized issues to recover. It highlights complications in identifying class members, given the variability in business structures and management. However, the court clarifies that the class definition specifies that members must have personally performed property preservation work and been designated by FAS as independent contractors, typically making the vendor-owner the class member. FAS also claims some individuals listed as class members did not meet the criteria or were not properly notified. The court will address these concerns and conduct the necessary balancing of factors.
Plaintiffs assert that the term "designated by FAS as independent contractors" in the class definition refers to specific vendors identified by FAS who worked during the relevant period, encompassing vendor-owners while excluding their workers. They argue that the identity of the contact person is irrelevant to class membership and does not impact the superiority analysis. Furthermore, neither Rule 23 nor the Due Process Clause mandates actual notice to each class member. FAS challenges this by claiming it cannot ascertain which individuals provided services or the extent of their work for FAS versus other entities, citing a lack of records from potential class members regarding their work percentages. FAS argues that determining class membership would necessitate mini-trials, overlapping with merits determinations, thus complicating manageability and infringing on its due process rights. It contends that individualized analyses would defeat the purpose of class treatment. Additionally, FAS highlights a low 12% response rate to its Vendor Questionnaire, suggesting that collecting necessary information would require individual mini-trials. Plaintiffs counter that FAS's concerns are merely rehashed ascertainability arguments, which the court has previously addressed. While some of FAS's concerns relate to manageability, these are encompassed by other provisions of Rule 23. The court notes that the burden of individual mini-trials would outweigh the benefits of allowing class members to litigate separately, affirming that class litigation remains superior for over 100 members despite FAS's focus on mini-trials and individualized damages concerns.
Class certification analysis must adhere to the requirements of Rule 23, which may intersect with the case's merits. Courts can treat the allegations in class action pleadings as true while also considering evidence relevant to Rule 23, even if it pertains to the case's merits. Evidence submitted by parties, including self-identification through declarations, is permissible for ascertaining class membership. Consumer affidavits can be used in the claims administration process post-liability determination without violating Due Process. Concerns raised by FAS regarding manageability and due process related to self-identification lack supporting case law and have been previously rejected. The plaintiffs argue that proceeding as a class is superior due to the lack of alternative avenues for class members and the resource drain of individual claims, a stance accepted by the court despite FAS's concerns. Regarding the expense reimbursement claim, FAS contends that it cannot be adjudicated class-wide due to the need for individualized evidence. However, the plaintiffs assert that liability stems from FAS's blanket policy of refusing reimbursement for business expenses, making individualized evidence unnecessary for liability determination. The court agrees, highlighting that any individual evidence would relate to damages, and notes that individualized damages do not, by themselves, negate class certification under Rule 23(b)(3), as individual claim determinations are anticipated after liability is established.
FAS's claims regarding the individual nature of class members' expense reimbursements and the argument that some members have already been reimbursed are relevant to the damages phase of the case. FAS contends that the reimbursement claim cannot proceed as a class action since expenses incurred by business entities are not eligible for reimbursement under section 2802, referencing Villalpando v. Exel Direct Inc. However, plaintiffs assert that Villalpando does not support FAS's argument, as it addressed the standing of class members to recover expenses incurred by others, not their own expenses.
Plaintiffs seek summary judgment against FAS's independent contractor defense, asserting that FAS has not demonstrated that plaintiffs qualify as independent contractors under California law. They rely on various FAS documents to show FAS's control over vendors and cite multiple cases that have determined similar delivery drivers to be employees rather than independent contractors. These cases include significant rulings from the Ninth Circuit and California courts, which support the view that the right to control work is a key factor in establishing employee status. FAS's cited cases do not effectively clarify the legal standards applicable to the current facts.
The court affirmed that a nonexclusive insurance agent was classified as an independent contractor based on legal precedent, specifically referencing **Fireman’s Fund Ins. Co. v. Davis** and **McDonald v. Shell Oil Co.**, which held that certain individuals did not qualify as employees under respective insurance policies. The excerpt further discusses the case **Cotter v. Lyft, Inc.**, where the court highlighted that prior rulings concluded the evidence strongly favored a specific worker classification, allowing no reasonable juror to decide otherwise under California's multi-factor test.
While the driver classification cases are recent, their applicability is limited due to the diverse tasks and varying skill levels involved in vendor work. The determination of worker status may, in some undisputed factual scenarios, be best suited for a jury, particularly when the inferences from subordinate to ultimate facts are legitimately disputable. The court in **Cotter** emphasized the necessity of a trial, as a reasonable jury might find Lyft drivers either as employees or independent contractors.
The excerpt stresses that conflicting factors in the employee versus independent contractor analysis indicate that a summary judgment for the defendant is inappropriate, as the degree of each factor is a factual question for the jury. However, the overall evidence suggested a strong inclination toward recognizing an employee relationship. Under California law, once a plaintiff demonstrates service provision for an employer, a prima facie case for an employer/employee relationship is established, shifting the burden to the defendants to prove independent contractor status.
FAS contends it does not control the work details of vendors, asserting that they maintain the right to manage their performance. However, plaintiffs argue that evidence contradicts FAS's claims regarding its control over vendor operations.
FAS exercises substantial control over its vendors, dictating their operational parameters, including where and when to work, specific tasks to be completed, and payment timelines. The plaintiffs argue that this level of control indicates the vendors cannot be classified as independent contractors. Under California law, the key factor in determining employment status is the defendant's right to control how work is accomplished, rather than the actual control exercised. The court emphasizes that it is sufficient for the defendant to retain "all necessary control" over job performance.
FAS’s assertion that it does not control the timing of work is challenged; while it does not specify exact hours, it requires work to be completed within three days of order receipt, which is deemed significant. The simplicity of tasks performed by vendors does not negate the need for oversight. FAS claims that its procedures are merely for quality assurance, arguing that it does not exert control over vendors' appearances, schedules, or equipment. However, plaintiffs counter that evidence suggests FAS maintains significant oversight, challenging FAS's claims regarding the negotiation of rates and supervision.
Overall, the evidence leans towards supporting the plaintiffs' position that FAS's control over vendors resembles that of an employer-employee relationship, despite FAS’s attempts to characterize its oversight as focused on ensuring job completion rather than on controlling every aspect of vendor operations.
The Ninth Circuit's decision in Alexander is referenced, where it was determined that FedEx's control over drivers was not merely about achieving results but also encompassed aspects of control such as appearance, grooming, and delivery specifications. This precedent suggests that control over certain logistical elements indicates a deeper level of control than just the outcomes. In the current case, FAS's control over vendors is scrutinized; despite FAS not dictating vendors’ appearance, it imposes significant restrictions on brands, equipment, and work order timelines. FAS also pressures vendors regarding service areas, indicating substantial control over their operations. The court emphasizes that a company's retention of necessary control over vendor performance is key, and FAS's limited control in some areas does not negate its extensive oversight in others. Furthermore, FAS's claims regarding vendors identifying as independent contractors and the absence of specific limitations on who can perform work are deemed insufficient. The right to control the vendors' work, especially in terms of compliance with legal and industry standards, is a critical consideration. FAS's requirement for vendors to conduct background screenings and its discretion over these screenings further supports claims of substantial control, aligning with California's legal definitions of employment status.
A contract provision limiting sharefarmers' ability to select employees indicates the defendant's control over them. The district court's finding that approval was based primarily on neutral factors, such as federal background checks, does not negate the restricted hiring rights of the drivers, which is significant for self-employed contractors. The Ninth Circuit cautioned against overstating the importance of whether an employee could hire their own workers. The district court erred in focusing on this hiring freedom when overwhelming evidence showed Affinity's control over the drivers. Affinity's documents demonstrate its retained control over vendors, supported by at-will termination clauses and detailed task requirements. Although Affinity framed its operations as “results-driven,” the nature of the work blurred the lines between dictating outcomes and controlling work methods. Vendor profiles indicated Affinity exercised extensive supervision and imposed penalties for non-compliance, underscoring its control. The right to control is assessed by whether vendors must obey instructions under threat of discharge. In a related case, the court found that FedEx’s Operating Agreement provided significant control over drivers, and similarly, Affinity did not contest the clarity of its control documents. The analysis does not require absolute control, as all class members worked primarily for Affinity, underwent training, and were subject to supervision and discipline, confirming Affinity's necessary control. Secondary factors in evaluating the independent contractor relationship are interconnected and should not be applied mechanically; even if some factors might suggest an independent contractor status, summary judgment is valid when all factors collectively indicate otherwise.
The legal analysis establishes that an employment relationship exists rather than an independent contractor status. The right to control the vendors' work is deemed the most significant factor, outweighing other secondary indicators that could suggest independent contractor status. Despite some factors potentially favoring independent contractor classification, the overwhelming evidence indicates that FAS retained extensive control over the vendors’ work processes, leading to the conclusion that they are employees.
The analysis references multiple cases, affirming that not all factors must align for a legal determination of worker classification. The distinct occupation factor supports the plaintiffs' position, as FAS significantly influenced the vendors' ability to earn income and controlled their workload. Although vendors had formal rights to operate as businesses, the reality of their work was closely integrated into FAS’s operations, with restrictions on client interaction, adherence to FAS specifications, and requirements for insurance and signage. Vendors were also prohibited from communicating with one another or clients, further indicating an employer-employee relationship.
The argument that class members controlled distinct businesses is weakened by the fact that each member performed property preservation work for FAS at least 70% of the time. Evidence presented by plaintiffs indicates that many vendors were so occupied with FAS work that they could not pursue other opportunities, countered by FAS's claim that vendors were not prohibited from seeking additional work. However, given their significant commitment to FAS, this factor favors the plaintiffs.
Regarding the direction under which work is done, FAS argues that vendors often complete tasks without supervision. Nonetheless, the record shows substantial supervision from FAS, including quality control inspections in California. FAS’s assertion that verification is not synonymous with supervision is challenged by the necessity of photo documentation, indicating FAS's insistence on specific work standards. This aligns with the Borello decision, which emphasizes that FAS controls critical aspects of the business relationship, favoring the plaintiffs.
The skill required for the work also favors the plaintiffs, as the majority of tasks (e.g., trash removal, lawn mowing) do not demand significant skill. While FAS points to more specialized tasks to argue for a need for skill, the overall requirement remains low, supported by vendors often lacking prior experience. Finally, the evaluation of whether FAS provides the tools and worksite is less clear but noted to be less critical to the overall analysis; nonetheless, FAS does assign worksites to vendors, indicating a level of control.
Vendors are responsible for purchasing their own tools and equipment, although plaintiffs argue that FAS requires them to use specific equipment. The duration of service is contested; plaintiffs claim vendors are engaged indefinitely and are paid at FAS's discretion, while FAS presents a contract template stipulating a one-year term that allows for cancellation with 30-days' notice. The Ninth Circuit's precedent in Narayan suggests that such contracts indicate an at-will employment relationship, which aligns with plaintiffs' view of the vendors' long tenure.
Regarding payment methods, FAS states vendors are compensated by the job, but plaintiffs interpret this as a form of control by FAS, referencing legal precedents that suggest payment methods alone do not determine employment status if control over work details exists. FAS contends it coordinates property preservation services without directly providing them; however, the business model relies on vendors performing these essential services. This reliance indicates that the work is integral to FAS's operations, favoring the plaintiffs’ position.
Finally, the vendors' signed agreements recognizing their independent contractor status weigh in favor of that classification, despite the other factors suggesting an employment relationship. Overall, multiple factors, including the indefinite nature of engagement, payment methods, and the integral role of vendors in FAS's business, support the plaintiffs’ assertion of an employment relationship.
The Ninth Circuit determined that the intent to create an independent contractor agreement was undermined by FAS's policies that allowed it to control significant aspects of the vendors' daily operations, limiting the insight into the vendors' state of mind. FAS argued that the vendors' opportunities for substantial profit and loss indicated independent contractor status, which was supported by some vendors' experiences. Additionally, FAS claimed that the vendors' freedom to hire their own workers favored independent contractor classification; however, plaintiffs pointed out that vendors were still under substantial control by FAS, citing prior cases.
Regarding the degree of permanence, FAS noted that a mutual termination clause indicated an independent contractor relationship. FAS also mentioned the vendors' ability to work for others, but the class definition indicated that the vendors had a nearly exclusive relationship with FAS. While some secondary factors suggested independent contractor status, FAS's control outweighed these, leading to the conclusion that a reasonable jury could not find the vendors as independent contractors.
On claims of overtime violations and reimbursement of expenses, California law mandates overtime pay for non-exempt employees and reimbursement for necessary business expenses. Summary judgment on these claims relies on establishing the vendors as employees, which plaintiffs assert is undisputed given that FAS did not pay overtime or reimburse expenses. Any disputes regarding specific overtime worked or the reasonableness of expenses are reserved for the damages phase.
FAS argues against summary judgment on claims for expense reimbursement and overtime, asserting that unresolved factual issues exist. Key considerations include what the employee was informed about reimbursement, whether expenses were necessary for job duties, if reimbursement was sought, and whether it was received. Citing *Sotelo v. MediaNews Group* and *Morgan v. Wet Seal Inc.*, FAS notes that mere employee status does not guarantee liability for overtime. In *Morgan*, the court emphasized the need for individualized inquiry due to insufficient resolution of liability based on written policies, a situation that FAS claims does not apply here since it does not reimburse vendors or pay overtime as a policy. Instead, vendors can negotiate certain costs. FAS maintains that employees are legally entitled to overtime and expense reimbursement, thus warranting summary judgment on class liability, while individual compensation will be addressed in a later phase.
FAS specifically challenges the claims of three individuals: Julia Magdaleno, Matthew Cohick, and Erie Ackel. FAS contends that Magdaleno is not a class member, as she did not execute a contract with FAS or have independent contractor status. Plaintiffs counter that Magdaleno qualifies as a class member based on her ownership in BBHS, where she is identified as a joint owner and had the authority to act on behalf of the company. However, FAS argues that ownership alone does not establish class membership without designation as an independent contractor by FAS, indicating that not all vendor-owners are class members unless they meet this criterion.
FAS contends that Magdaleno does not meet the class definition necessary for her claims to proceed, asserting that her claims must therefore be dismissed. However, Magdaleno's claims for breach of contract and breach of the covenant of good faith and fair dealing are not dependent on her class membership, as these claims were not included in the certification sought by the plaintiffs. FAS argues that even if Magdaleno were a class member, her contract claims fail since she did not sign a contract with them. Nonetheless, the court finds this argument unpersuasive, noting that an implied contract can be established through conduct, negating the necessity for a written agreement.
Furthermore, Magdaleno's claim for breach of the implied covenant of good faith and fair dealing is viable, countering FAS's misinterpretation of relevant case law. The court clarifies that while claims merely reiterating breach of contract are superfluous, Magdaleno's claims are based on specific terms in the Vendor Qualification Packet and allegations of FAS's failure to compensate in accordance with these terms and California law.
Regarding absent class members Cohick and Ackel, FAS argues that their successful independent businesses negate their status as employees. Cohick’s business, Monster Mowers, is described as a substantial operation with its own resources, while Ackel's Kurb Appeal was established independently before contracting with FAS. FAS maintains that their control over Cohick and Ackel’s work was minimal due to the scale of their respective operations.
FAS's control over the work of plaintiffs Cohick and Ackel is a crucial factor in determining their employment status, emphasizing the right to control rather than the actual control exercised. The common law test focuses on the hirer's retained right to dictate the means and manner of work, as established in Ayala v. Antelope Valley Newspapers, Inc. Evidence of an employment relationship includes FAS's termination of its relationship with the plaintiffs and Ackel's testimony that FAS dictated work conditions, payment methods, and schedules, leaving no room for negotiation.
While the size of the businesses involved is considered, it is deemed largely irrelevant to the core issue of FAS's control. Secondary factors, such as supervision, skill level, provision of tools, duration of service, payment methods, and the nature of the work, align similarly for all class members. FAS's strongest argument relates to the distinct business factor, where it points to the financial success and investments of Cohick’s Monster Mowers as evidence of independence. However, plaintiffs counter that FAS exercised significant control by instructing Cohick to hire helpers, providing training, supervising work, inspecting quality, and enforcing discipline through pay adjustments, indicating a strong right to control consistent with an employer-employee relationship.
Ackel's case highlights the operational characteristics of Kurb Appeal's office space and other businesses owned by him, underscoring his independence in refusing work and hiring without FAS's approval, which FAS claims demonstrates a lack of control over him. However, testimony reveals that while FAS did not provide training, they exerted significant control by directing Ackel during unannounced inspections. The distinctions FAS draws between Ackel and other vendors do not warrant their exclusion from the class, leading to FAS's motion for summary judgment being denied for Ackel and another vendor, while it is granted for a third party. The plaintiffs' motion for partial summary judgment is granted, and FAS's motion to decertify the class is denied. Key trial dates are set for damages and pre-trial conferences in 2017. The document notes discrepancies in FAS’s deposition exhibits, which were later corrected. Furthermore, FAS's claim of not providing property preservation services is challenged as semantic, and the plaintiffs argue that the definitions and terms of the Vendor Qualification Packets limit vendors' agency in modifying them. Although FAS asserts that its terms are negotiable, evidence indicates that many terms are consistently negotiated, suggesting a complex relationship between FAS and its vendors.
Plaintiffs present vendor testimony indicating a lack of knowledge or belief that negotiation with FAS was possible, with vendors asserting that negotiation only involved FAS rejecting their bids. Pricing was established by FAS and deemed non-negotiable unless additional work was required. Although vendors could submit bids for extra work, plaintiffs argue that this process was misleading, as the bids had to align with FAS's predetermined pricing to gain approval.
Plaintiffs assert that there are no significant differences in the vendor packets, while FAS claims substantial variations have occurred over time, particularly concerning contract termination clauses, independent contractor acknowledgments, indemnification, background checks, tax information, security, non-exclusivity, and job specifications. The vendor qualification packets (VQPs) require vendors to provide their contractor license number, and while FAS asserts that a general contractor's license is not mandatory for all vendors, it does require licensing for specific services that necessitate it.
Insurance requirements in the 2009 VQP mandate that vendors must be licensed contractors and provide proof before FAS can issue work orders. FAS emphasizes high-quality work and has established methods for addressing service deficiencies. Each service request generates a work order that vendors must follow closely. Additionally, vendors are obligated to conduct thorough background screenings of their employees and allow FAS or its authorized third parties to perform background checks as deemed necessary. Finally, vendor testimonies confirm that they were required to purchase certain tools and equipment for their work.
A third vehicle was purchased based on advice from Alex and Paul Buceóla at a training seminar, aimed at increasing work opportunities and expanding coverage. Plaintiffs presented an email where a vendor expressed reluctance to accept a work order due to property condition and equipment concerns, with FAS indicating that additional vendor costs would be charged back. Testimonies reveal that vendors were required to check in daily, and stringent photo documentation was mandated throughout the work process, necessitating multiple images to substantiate the completion of tasks. FAS characterized these photo requirements as a means to verify that vendor work met client specifications before payment. FAS claimed to manage all vendor relationships meticulously, tracking every order in detail. Disputes regarding Cohick's employee lawsuits and income discrepancies with Monster Mower's 1099s were deemed irrelevant. Plaintiffs highlighted that FAS issued two 1099s to Cohick in 2009, clarifying any reported discrepancies. A motion to decertify incorrectly stated a date, while plaintiffs identified 48 of 680 vendors as class members, with 30 excluded, leaving a significant portion of vendors' status uncertain. Plaintiffs reported awareness of 125 individuals fitting the class definition.
Numerous discovery disputes have been raised, as indicated by various docket numbers. The plaintiffs report that the DVG consists of 108 individuals, comprising 106 initially identified members plus two self-identified members. The claims administrator received six responses, with seven others sent directly by plaintiffs' counsel. Among 65 noticed deponents, plaintiffs assert that 19 are class members while 29 are not. Class counsel continues to interview potential class members for damages discovery; of 177 individuals who performed property preservation work for FAS during the class period, 78 self-identified as class members and 99 as non-class members.
FAS's reply brief contains repeated page numbers, and it cites testimonies from class members to support its stance, focusing on the actual control exercised rather than the right to control. Key evidence includes factors such as the rights to decline work, supervision details, training requirements, and dictated work schedules. A prior order acknowledged that evidence regarding FAS’s right to control is common across all vendors, noting that FAS’s business model relies on vendors delivering its services. The order initially denied class certification, emphasizing that individualized questions about FAS’s right to control outweighed common issues.
Disciplinary measures for vendors may involve pay deductions, reprimands, or termination. FAS presented evidence from potential class members who lack records of their work hours or do not recall performing property preservation tasks, arguing this evidence is relevant. However, plaintiffs counter that this evidence pertains to non-class members and is thus irrelevant to certification. They assert that all vendors contacted by Class Counsel can determine their class membership status, emphasizing that no deposed individual or declarant has reported uncertainty about their classification. The summary of superiority factors is also noted.
Key considerations for class action certification include the individual interests of class members in controlling separate actions, existing litigation related to the controversy, the appropriateness of the chosen forum for the claims, and potential challenges in managing the class action. Vendor declarations indicate that most vendors can self-identify as class members. Class-related expenses for vendors include mileage, insurance, tools, cell phones, and dump fees. FAS acknowledges that some vendors may be classified as employees and does not assert that all potential class members qualify as independent contractors under the Borello test. Both parties reference non-class member testimonies to support their arguments, highlighting differences in vendors’ abilities to negotiate rates for additional work. FAS notes variability in the vendor packets over time, addressing aspects such as contract termination provisions, independent contractor acknowledgments, and indemnification clauses. Plaintiffs contend that FAS’s procedural arguments are improper, asserting that challenges to class member status and independent contractor classification relate directly to defenses against the claims. The class is defined to include individuals designated as independent contractors by FAS who performed property preservation work in California during the specified period and who did not work for other entities more than 30 percent of the time, excluding those primarily engaged in rehabilitation or remodel work. FAS concedes that Magdaleno meets the class criteria.
Plaintiffs' reliance on California community property law is deemed irrelevant to class membership. Although they assert that Magdaleno was recognized as a vendor by FAS and that her status was acknowledged in FAS's response, Magdaleno is not considered a class member since she did not sign the VQP documents. The plaintiffs argue that Magdaleno, as an employee, is entitled to overtime pay and reimbursement for business expenses from FAS, independent of any written agreement; however, this argument is not addressed due to the plaintiffs' focus on classwide misclassification claims. Since Magdaleno does not meet the class definition, her claims cannot be included in the current action. The court acknowledges that FAS may be liable to Magdaleno if it failed to pay her for specific work orders she signed. FAS contends that the skills brought by Monster Mowers pertain to managing multiple properties, which does not equate to the "skill required" for the assigned work.
