Becerra v. Mcclatchy Co.

69 Cal.App.5th 913

284 Cal.Rptr.3d 784

Veronica BECERRA et al., Plaintiffs and Appellants,

v.The MCCLATCHY COMPANY et al., Defendants and Respondents.

F074680

Court of Appeal, Fifth District, California.

Filed September 30, 2021

Callahan & Blaine, Daniel J. Callahan, Michael J. Sachs, and Scott D. Nelson, Santa Ana, for Plaintiffs and Appellants.

Lewis Brisbois Bisgaard & Smith, Allison Arabian, Costa Mesa, and John S. Poulos, Sacramento; Law Offices of William C. Hahesy and William C. Hahesy, Tulare; Perkins Coie, Eric D. Miller, San Francisco, and Jill L. Ripke, Los Angeles; Pillsbury Winthrop Shaw Pittman and Derek M. Mayor for Defendants and Respondents.

OPINION

DETJEN, J.

INTRODUCTION

This appeal arises from a class action brought by and on behalf of newspaper home delivery carriers for The Fresno Bee newspaper (hereinafter plaintiffs or the carriers).¹ In the trial court, the matter proceeded to a bifurcated bench trial on the issue of whether the owner of The Fresno Bee and its holding company, respectively, The McClatchy Company and McClatchy Newspapers, Inc. (hereinafter collectively referred to as the newspaper or The Bee), violated the unfair competition law (UCL) ( Bus. & Prof. Code, § 17200 et seq. ) by failing to pay the carriers' mileage expenses as required by Labor Code section 2802. The primary issue at trial was whether the carriers were employees or independent contractors. The trial court determined the carriers were independent contractors and, as a result, entered judgment in favor of The Bee.

On appeal, the carriers contend (1) the trial court misallocated the burden of proof; (2) the trial court erred in relying on a regulation promulgated by the Employment Development Department (EDD), which the carriers contend is irrelevant; (3) the trial court erred in its application of the relevant test, as set out in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, 256 Cal.Rptr. 543, 769 P.2d 399, ( Borello ); (4) under Borello , the carriers are employees; (5) the trial court erred in relying on equitable considerations to determine The Bee's liability; and (6) the trial court improperly relied on testimony from unrepresentative class members. In supplemental briefing, the carriers additionally argue the test for employment set out in Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903, 232 Cal.Rptr.3d 1, 416 P.3d 1 ( Dynamex ) applies, and the carriers are employees under that test.

We agree that the question of whether the carriers are employees or independent contractors must be determined under the Borello test. As such, the trial court erred in deferring to the EDD regulations, which we conclude are inapplicable. Ultimately, the trial court also failed to properly analyze the factors required by Borello , and we therefore must reverse. However, we decline to resolve whether the carriers are employees or independent contractors, and instead remand for the trial court to address this question in light of the principles set forth herein. We address the carriers' remaining arguments to the extent necessary to provide guidance on remand.

FACTUAL AND PROCEDURAL BACKGROUND

I. Contracts for Delivery of The Bee

Between December 19, 2004, and January 2010, all the carriers signed a contract with The Bee to provide newspaper home delivery services. Although there were some variations in the contracts used at different times during this period, the differences were not substantial. The contracts were titled, "Independent Contractor Home Delivery Distribution Agreement" (boldface & some capitalization omitted) and referred to the carriers as "Contractor."

The contracts contained a paragraph titled, "Independent Contractor Status,"² which stated:

"Contractor represents that it operates an independently established business and desires to contract with [the newspaper] to distribute newspapers and other materials as an independent contractor. Contractor's agreement to provide results under this Agreement as an independent contractor for all purposes is an essential term of this Agreement.... Contractor may operate Contractor's business as Contractor chooses. [The newspaper] is interested only in the results to be obtained by Contractor as described in this Agreement, and the manner and means of obtaining those results are matters entirely within the authority and discretion of Contractor. For example, Contractor is (a) free to obtain and utilize one or more vehicles of Contractor's selection; (b) free to set Contractor's own working hours; (c) free to set Contractor's own order of deliveries; (d) free to purchase equipment and supplies wherever Contractor chooses; (e) not subject to the [newspaper's] rules and regulations for its employees; (f) not required or requested to attend meetings of the employees of [the newspaper]; (g) free to perform distribution services for other companies, including but not limited to competitors of [the newspaper]; and (h) free to hire or retain employees or subcontractors to perform Contractor's obligations pursuant to this Agreement, even if Contractor is an individual and not a corporation or other business organization. Publisher has no authority to impose disciplinary action upon Contractor and may only assert rights available to it under this Agreement or as available under application law."

The contracts also specified that the carriers would be treated as independent contractors for tax purposes.

The contracts provided space to fill in the location and time the carrier could pick up the newspapers and related materials for delivery. Pursuant to the contract, the carriers each agreed to "assemble and deliver a complete newspaper on the date published in a dry and undamaged condition to each subscriber on the Subscriber List at a time and at a place that satisfies the reasonable delivery requests of each subscriber." The contracts included blank spaces for the newspaper to specify a time by which the newspapers were to be delivered, and stated that "delivery to a porch, driveway, or tube, as requested by [the] subscriber" would be considered reasonable. The carriers were prohibited from encouraging subscribers to change their delivery location and from providing copies of the newspaper to others, with limited exceptions. The carriers also were prohibited from including markings, stampings, inserts or imprinted wrapping, coverings or containers not pre-approved by The Bee. Additionally, the newspaper was not to be delivered in damaged, soiled, or wet condition.

The contracts required the carriers to agree to avoid missed or damaged deliveries, or deliveries to unsatisfactory locations. The contracts contained blank spaces to specify the amount the newspaper would charge carriers for various types of complaints. Carriers were prohibited from deterring subscribers from contacting the newspaper with complaints. If the newspaper received a specified number of complaints regarding a carrier, the contract was subject to termination.

The carriers were required to furnish and maintain their own vehicles and equipment. Carriers had the option to purchase delivery supplies, such as bags and rubber bands, from the newspaper and were invoiced for such supplies each billing cycle. Carriers had the right to hire employees, subcontractors or substitutes to assist in the performance of the agreement. Carriers were required to either deposit a cash bond with the newspaper or to purchase a commercial bond, and to maintain various types of insurance and any necessary licenses. The carriers assumed all risk of loss regarding the newspapers once the newspapers were made available for delivery.

Early agreements during this period required the carriers to purchase and resell the newspapers being distributed. Later agreements provided that carriers were paid a piece rate, i.e., a specified amount for each newspaper delivered.

The agreement could be terminated without cause upon 35 days' written notice. The agreement also could be terminated without notice for a material breach.

II. Initial Proceedings

On December 19, 2008, the carriers filed, on behalf of themselves and others similarly situated, a putative class action complaint against The Bee. On June 6, 2013, the carriers filed the operative pleading, a second amended complaint consisting of nine causes of action: (1) failure to pay minimum wages and overtime wages ( Lab. Code, §§ 1194, 1197, 1197.1 ; Industrial Welfare Commission (IWC) Wage Order No. 1-2001; Cal. Code Regs., tit. 8, § 11010 ); (2) failure to provide meal periods or compensation in lieu thereof ( Lab. Code, §§ 226.7, 512 ; IWC Wage Order No. 1-2001; Cal. Code Regs., tit. 8, § 11010 ); (3) failure to provide rest periods or compensation in lieu thereof ( Lab. Code, § 226.7 ; IWC Wage Order No. 1-2001; Cal. Code Regs., tit. 8, § 11010 ); (4) failure to reimburse reasonable expenses ( Lab. Code, § 2802 ); (5) unlawful deductions from wages ( Lab. Code, §§ 221, 223 ); (6) failure to pay for training ( 29 C.F.R. § 785.27 et seq. ); (7) failure to provide itemized wage statements ( Lab. Code, §§ 226, 226.3 ); (8) failure to keep accurate payroll records ( Lab. Code, § 1174 ); and (9) unfair business practices ( Bus. & Prof. Code, § 17200 et seq. ).

On July 15, 2013, the trial court certified a class as to the fourth, seventh, eighth, and ninth causes of action as follows: " ‘All individuals currently or formerly engaged by [the newspaper] as newspaper home delivery carriers of [T]he Fresno Bee newspaper, who signed contracts directly with [the newspaper] in the State of California, between December 19, 2004 and January, 2010.’ " Omitted from the class were carrier substitutes, single-copy carriers, and helpers.

On January 9, 2014, the trial court granted the newspaper's motion for judgment on the pleadings as to the eighth cause of action. The carriers then moved for a separate trial on the ninth cause of action. After the trial court...