Bennett v. Rancho Cal. Water Dist.

35 Cal.App.5th 908

248 Cal.Rptr.3d 21

Shawn BENNETT, Plaintiff and Respondent,

v.RANCHO CALIFORNIA WATER DISTRICT, Defendant and Appellant.

G054617

Court of Appeal, Fourth District, Division 3, California.

Filed May 29, 2019

As Modified on Denial of Rehearing June 13, 2019

OPINION

FYBEL, J.

INTRODUCTION

Plaintiff Shawn Bennett sued defendant Rancho California Water District (the District) for whistleblower retaliation in violation of Labor Code section 1102.5, subdivision (b).¹ At the jury trial, the trial court excluded evidence showing Bennett's relationship with the District was anything other than an employment relationship. Citing an administrative law judge's prior finding Bennett had been the District's employee for purposes of retirement benefits eligibility through the California Public Employees' Retirement System (CalPERS), the trial court concluded the doctrine of collateral estoppel applied and established Bennett had been the District's employee.

We reverse and remand to the trial court with directions to conduct a new trial. We hold a party is not collaterally estopped from litigating an issue when, in a prior proceeding, a dispositive finding had been made, but only by imposing a lesser burden of proof on the party invoking collateral estoppel than that which would have been applied in the subsequent proceeding. To prevail on a section 1102.5(b) claim, the plaintiff must prove employment status. In the prior CalPERS proceeding, the administrative law judge expressly assigned to the District the burden of proving Bennett had been its independent contractor and thereby entirely relieved Bennett of the burden of proof on that issue. The trial court therefore erred by finding the doctrine of collateral estoppel applicable and precluding litigation of Bennett's employment status. At the retrial, for the reasons we explain, the common law definition of employee will apply to Bennett's section 1102.5(b) claim.

The court did not err, however, by denying the District's motion for judgment notwithstanding the verdict (JNOV) brought on the ground insufficient evidence supported the findings Bennett had been employed by the District and had made disclosures within the meaning of section 1102.5(b).

We reject the District's contention its proposed statutory definition of the term "employee" applied to the section 1102.5(b) claim. Because the trial court's erroneous evidentiary ruling severely limited the presentation of evidence, the District was not entitled to judgment entered in its favor notwithstanding the verdict.

BACKGROUND

I. THE FIRST AMENDED COMPLAINT

In February 2013, Bennett filed the first amended complaint for damages against the District. He asserted claims for (1) willful improper classification as an independent contractor in violation of section 226.8 and Government Code section 53060, and (2) retaliatory employment termination in violation of section 1102.5(b). We summarize relevant allegations of the first amended complaint as follows.

The District is "a public entity which provides water and wastewater services in its service area which is generally located in the Southwest area of Riverside County." In July 2008, Bennett and the District entered into a "Professional Services Agreement" (the agreement) for Bennett "to fulfill the IT Help Desk Services position." The District classified Bennett as an independent contractor.

Bennett alleged that: The District "exercised complete control" over his activities. Bennett was "under the direction and control of not only the IT Manager, but the Systems Administrator, and Datacenter Operation's Supervisor." Bennett "performed all the services of an employee and in fact worked side by side in performing his work with other [of the District's] employees."

In June 2012, Bennett questioned whether he had been improperly classified as an independent contractor. After conducting research on the issue, on June 21, 2012, he advised one of his supervisors, Dale Badore, that he believed that he had been misclassified and requested that he be classified as an employee of the District. Around the same time, the District asked Bennett to sign a new "Professional Services Agreement."

In July 2012, Bennett was asked to report to the office of the District's chief financial officer. He met with the chief financial officer, Jeff Armstrong, and the IT manager, Jason Martin. Bennett was informed that "the ‘Board wanted to continue his relationship as a contractor’ " and presented him with "a modified Statement of Objectives [that was] significantly different from what he had been asked to sign earlier but carrying the same date and identified as the same version."

Two days later, Bennett sent an e-mail to Armstrong, advising him that Bennett believed he had been knowingly misclassified as an independent contractor and again explaining his reasoning. He asked the District to reconsider its demand that he continue working as an independent contractor. He included the District's head of human resources, Eileen Dienzo, on his e-mail to Armstrong.

At Bennett's request, Dienzo met with Bennett. He advised Dienzo that he felt the issue of his misclassification was a human resources issue. Bennett was assured that the District was taking the matter seriously and looking into the situation.

On August 13, 2012, Bennett was notified the District had decided to terminate its agreement with him. Bennett believed the District "ha[d] engaged in a pattern and practice of knowingly hiring ‘contractors’ to perform work done by employees and ha[d] knowingly mis[ ]classified those persons to avoid paying taxes and benefits."

II.

THE TRIAL COURT SUSTAINS THE DISTRICT'S DEMURRER WITHOUT LEAVE TO AMEND; WE REVERSE THE ORDER SUSTAINING THE DEMURRER AS TO THE SECTION 1102.5(B) CLAIM.

The District demurred to the first amended complaint as to the willful improper classification of an independent contractor cause of action and the section 1102.5(b) claim each on the ground, inter alia, it "fail[ed] to state facts sufficient to constitute a cause of action." The District's demurrer to the first amended complaint was sustained without leave to amend. Bennett appealed.

In our prior nonpublished opinion Bennett v. Rancho California Water District , 2015 WL 3814458 (June 18, 2015, G050892), we affirmed in part and reversed in part. We held that Bennett's first cause of action for willful misclassification as an independent contractor failed because section 226.8 does not apply to a public entity such as the District and therefore affirmed the dismissal of the willful misclassification claim. We reversed the dismissal of section 1102.5(b) claim, however, because the first amended complaint stated sufficient facts to show Bennett had reasonable cause to believe the information he gave to the District disclosed a violation of state or federal law.

III.

TWO SEPARATE ADJUDICATIONS YIELD CONTRARY FINDINGS: BENNETT IS DENIED UNEMPLOYMENT BENEFITS ON THE GROUND HE WAS NOT THE DISTRICT'S EMPLOYEE, BUT IS AWARDED CALPERS RETIREMENT BENEFITS ON THE GROUND HE WAS SUCH AN EMPLOYEE.

After Bennett was informed of the termination of his contract with the District, he applied to the California Employment Development Department (EDD) to receive unemployment benefits. Although the EDD determined Bennett was eligible for benefits under the Unemployment Insurance Code, the Unemployment Insurance Appeals Board reversed that determination on the ground Bennett had not been the District's common law employee and thus was not eligible to receive unemployment benefits.²

Bennett also pursued retirement benefits through CalPERS, contending he had been employed by the District and was therefore eligible for such benefits. CalPERS determined that Bennett had provided services as a common law employee of the District and the District appealed from that determination. The District's appeal resulted in a hearing before an administrative law judge who received oral and documentary evidence and briefing from the parties. The administrative law judge issued a decision setting forth the applicable standard and burden of proof in determining the employment issue as follows: "Absent statutory or case law establishing a different standard, the standard of proof is ‘a preponderance of the evidence.’ [Citation.] In this proceeding, [the District] had the burden of demonstrating by a preponderance of the evidence that Mr. Bennett was an independent contractor rather than an employee during the time period in question."

In the decision, the administrative law judge observed that "[e]xtensive evidence" had been presented describing in detail the relationship between Bennett and the District, stating: "Some of the factors weigh towards an employee relationship and some against it. At least in the 2010 and 2011 contracts, [the District] and Strange PC [Bennett's company] identified Strange PC as an independent contractor. As to the issue of control, the evidence was inconclusive. The control issue focuses on the employer's ‘authority to exercise complete control, whether or not that right is exercised.’ While [the District's] management asserted that it did not exercise control over Mr. Bennett's work, there was some evidence that it had authority to exercise control. Further, the evidence did not support a finding that Mr. Bennett had the complete ability to control the manner or means of providing the services he was contracted to perform.... As to this issue, [the District] did not meet its burden by a preponderance of the evidence."

The administrative law judge ultimately concluded: "Upon consideration of all relevant factors, and despite the fact that [the District] and Mr. Bennett signed contracts on two occasions that stated Strange PC was an independent contractor, [the District] did not satisfy its burden of proving by a preponderance of the evidence that Mr. Bennett was an independent contractor."³ The decision stated that the District's appeal from...