DYNAMEX OPERATIONS WEST v. S.C.

Amicus Curiae, Division of Labor Standards Enforcement, Supplemental Brief

Cal.February 21, 2017

ware SUPREME COURT - 2 FILED FEB 21 2017 larae Navarrete Clerk IN THE SUPREME COURTOF CALIFORNI A _ Case No. S222732 ~ Deputy DYNAMEX OPERATIONS WEST,INC. Petitioner and Defendant, VS. THE SUPERIOR COURTOF THE STATE OF CALIFORNIA, ~ COUNTY OF LOS ANGELES, Respondent, CHARLES LEE and PEDRO CHEVEZ, individually, and on behalfofall others similarly situated, Plaintiffs and Real Parties in Interest. After Decision of the Court of Appeal, Second Appellate District, Div. Seven (B249546) Superior Court of Los Angeles County (BC332016) Hon. MichaelL. Stern AMICUS CURIAEBRIEF OF DIVISION OF LABOR STANDARDS ENFORCEMENT, DEPARTMENT OF INDUSTRIAL RELATIONS, STATE OF CALIFORNIA DIVISION OF LABOR STANDARDS ENFORCEMENT State of California, Departmentof Industrial Relations By: DAVID BALTER,SBN:136273 455 Golden Gate Avenue, 9"Fl. San Francisco, California 94102Telephone: (415) 703-4863 Facsimile: (415) 703-4807 eMail: dbalter@dir.ca.gov Attorneys for Amicus Curiae, DIVISION OF LABOR STANDARDS ENFORCEMENTthroughits Chief, JULIE A. SU, LABOR COMMISSIONER FOR - THE STATE OF CALIFORNIA TABLE OF CONTENTS I. INTRODUCTION.occccceeccsscseeeseneessecseceeeeaecsseaecsesseeseaecsaeeeeeeaseaeeaesaesseseeesesensensas 5 Il. THE LABOR COMMISSIONER’S ENFORCEMENT ACTIVITIES DO NOT INCLUDE THE PROSECUTION OF CLASS ACTIONS, AND ACCORDINGLY, THE LABOR COMMISSIONER HAS NO SPECIAL EXPERTISE ON THE CERTIFICATION QUESTION PRESENTED................0000 7 Il. THE PROVISIONS OF THE LABOR COMMISSIONER MANUAL ~ RELATING TO THE INDEPENDENT CONTRACTOR DEFENSE HAVE NOT BEEN UPDATED SINCE MARTINEZ WAS ISSUED. ......eceeeesessstetsesseeseensees 11 TV. CONCLUSION.20... ceccecccccccsscsstsssacessssecseseecesaceeteaesesseuaeseenanesaneseageaesaesaeeaetesaeenaeaeens 12 TABLE OF AUTHORITIES CASES Arias v. Superior Court (2009) 46 Cal.4th 969...ccccccccsccssceessseesseeesseesesasessecseseeseeecssssescesseceseseaesessens 10 Bradstreet v. Wong (2008) 161 Cal.App.4th 1440, 1445occcccssecseeeecesseeseeeesssesscsssessessecaeees 10 Dept. ofIndustrial Relations v. UI Video Stores, Inc. (1997) 55 Cal.App.4th 1084, 1088ooocccscessessssseseneccsecessesesssecssesssssascauseaes 9 Martinez v. Combs (2010) 49 Cal.4th 35ooeeseceseesseesseeesssessesssssssssesseseeseeessesessseseeseenes passim S. G. Borello & Sons, Inc. v. Dept. ofIndustrial Relations (1989) 48 Cal.3d 341oecsccssecsssceeesseesecessesesseceseesesssecesseesesseseecsusscssase passim Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109.ccccscsccssseesseseecsecseseeseessssecseessecesscsensessesstssssesssssneees 8 CALIFORNIA STATUTES Labor Code Section 90.5 oeesccssesesscsesecessecseceeeaeeceaeesessesseneeesssesesssesseessesseeeeeaesseneeseecsseseses 9 Labor Code Section 9O.S(C)...cccccscccssccssssesseessessecessenseeecssesseeecssesssesaseseeecsusessesssssssesccsesrssseacareeees 9 Labor Code SECON 92 oo. eeeceescesecnseeseeseesceesececsecseceeseeseseseneeseesesseseesseseeseseeessecseessesecsseneseaaees 9 Labor Code SeCtHON 93 oeeeeeseeseesseeseeseeseeceeeesscseessaeescersecsecseecsaesessesseeseeeesesseseeneesecseesessessaeses 9 Labor Code Section 95 eee eeeeccsessecsceeeeseseeeseeseeseaeeseeeseesessescesesecsesssessecaesseesseeeseessveseasersasseseass 9 Labor Code Section 98 ooo iccceccccccccccccscssscscessssccccecccsscececeesccesssausceceesesetstscaneeseesseesseees Veseseeseccesaesees 8 Labor Code SeCtiON OB.) eeeccccccccessccecccccescsececesceseeccusvsncuecessecscsccececescecaususaucecceseesausuusuauanesescs 8 ‘Labor Code Sectin 98.2(a) - (C) .....eceeseeaeesueaceesaneeeesceseeessessssscussessaaeessseceseseeeescessseesusecens 8 Labor Code SeECtION 98.2(€) oc. cceccccsssccccessessecsseeesssnecsssseeesessessesssesessessssecesesaeeecssessscssstsesssasseraneeees 8 Labor Code SECHON 98.3 vo ccccccssesessesesssstesesesesseesensnseecseeecsneasssscsesesesesesesesscsesessssensesesdeeeeseneeasetees ) Lab. Code Section 226.3 ..occccccccccssscccsssessesssssesscseccseeeecssessssesseecssscesssesseseeceessecssscessaesenseeees 9,10 Labor Code Section 558 ....cccececcesssccceesssessecseccessatecsseecessccssssescessnssseseesesesesecsessssesusessesseeesas 9,10 Labor Code Section LILOocccccccssscssscccssscccesssnseceesseeeseecesssecesseeecenseesssssseseseusssseeessaes 9,10 Labor Code Section 1193.6ccc ccccsccccssssssssssseessessecessesecesscessscsscecssscesseesessaeecssssssecesseeeessesens 9, 10 I. INTRODUCTION. This Court has requested that the Labor Commissioner' file an amicus curiae brief expressing its views on the following question: In resolving the [issue presented for review in this case], what relevance,if any, should the court give to the Division of Labor Standards Enforcement (DLSE) Enforcement Policies and Interpretations Manual (2002 update as revised March 2006) and, in particular, to the sections of the manualthat discuss the independent contractor/employeedistinction (§§ 2.2, 2.2.1, 28- 28.4.2.4). As expressed by the Court’s Order, issued on December 21, 2016, the underlying issue presented for review is whether “in a wage and hourclass action involving claims that the plaintiffs are misclassified as independent contractors, may a classbe certified based on the Industrial Welfare Commission definitions as construed in Martinez v. Combs (2010) 49 Cal.4th 35 (Martinez), or should the commonlawtest for distinguishing between employees and independent ‘The terms “Division of Labor Standards Enforcement” (DLSE)and “Labor Commissioner” are often used interchangeably whenreferring to the enforcement functions that are performed bythis state agency. contractors discussed in S.G. Borello & Sons, Inc. v. Dept. ofIndustrial Relations (1989) 48 Cal.3d 341 (Borello) control?” The Court’s inquiry concernstwodistinct parts of the DLSE Enforcement Policies and Interpretations Manual (“the Manual’). First, Sections 2.2 and 2.2.1 set forth the Wage Order’s definition of employer, and Section 2.2.1 notes that two or more entities may be joint employers whoshare responsibility for wages. Significantly, these provisions of the Manual do not addressthe discrete legal issue of whether workers are employees or independent contractors in resolving issues of class certification. Second, Sections 28.2 through 28.3.3.2 are part of Chapter 28 of the Manual, titled “Independent Contractor vs. Employee,” and addressthe distinction between employees and independent contractors. These provisions discuss “the multi- factor Borello test” and its progeny as the means by which the Labor Commissioner makes a determination as to whether a workeris an employeeor an independent contractor (Manual, §§28 - 28.4.2.4). But,it is important to emphasize that the DSLE’s enforcementactivities do not involve class actions, and thus the Manual does notdiscuss, nor do the portions cited specifically bear on, the standardsforclass certification presentedin this case. Similarly, the Labor Commissioner does not possessparticular administrative expertise on that procedural question. The sections of the Manual describing the Borello analytical framework for evaluating independent contractor defenses are intended for use in DLSE’s enforcement of wage and hourlaws. Thoughnotspecifically cited in the Court’s question, the Labor Commissioner has revised the Manualto reference the Martinez decision in an annotation to the definitions contained in the Industrial Welfare Commission Orders, repeating these definitions without analysis. Similar to Sections 2.2 and 2.2.1, the Section 55.2 revision, infra, does not address the legal distinction between employees and independent contractors for the purposesof class action certification. Ultimately, there has been no occasion or need for the Labor Commissioner to address whether Martinez is germaneto the analysis of whether workers are employeesor independent contractors for the purposesofclass action certification. The lack of any mention ofMartinez in Chapter 28 of the Manual, therefore, should not be interpreted as an expression of a view on the underlying question presented for review in this case. Il. THE LABOR COMMISSIONER’S ENFORCEMENT ACTIVITIES DO NOT INCLUDE THE PROSECUTION OF CLASS ACTIONS, AND ACCORDINGLY, THE LABOR COMMISSIONER HAS NO SPECIAL EXPERTISE ON THE CERTIFICATION QUESTION PRESENTED. The Labor Commissioner has two primary functions related to the enforcement of California labor laws concerning wage and hourissues. First, the 7 Labor Commissioneradjudicates individual administrative wage claimsthat are filed with the agency pursuant to Labor Codesections 98 et seq. This is known to as the “Berman”hearing process. (See Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1128 [explaining the Berman administrative wage claim and hearing process].) In this process, claims found to be within the Labor Commissioner’s jurisdiction whichare not informally resolved are heard by hearing officers who renderorders, decisions, or awards. (Lab. Code § 98.1.) These administrative decisions may be appealed de novoto the superior courts. (Lab. Code § 98.2, subds. (a) -(c).) Final awards that are not appealed may be entered and enforced as superior court judgments. (Lab. Code § 98.2, subd. (e).) Significantly, this Berman administrative wage claim process involvessolely individual claims; and does not provide the Labor Commissioner with experience or expertise in issues germaneto certification of class claims. Within the Berman administrative hearing process, the Labor Commissioner continues to use Borello as the analytical framework for evaluating independent contractor defenses. Borello has provideda satisfactory basis for analyzing disputes concerning independentcontractor status in these individual cases and there has been no cause for the Labor Commissionerto address the issue of whetherthe holding in Martinez suggests an alternative framework for analyzing C A M S tp n! independentcontractor status in Wage Orderbased claims before the Labor Commissioner. The second mannerin which the Labor Commissioneris involved in the litigation of wage and hour laws emanates from its field enforcement program. The Labor Commissioner’s Bureau of Field Enforcement (“BOFE”) accepts and investigates complaints concerning alleged labor law violations(i.e., complaints concerning an employer, worksite, group of employers within an industry,etc., as opposed to claims of unpaid wages by individual employees). (See Lab. Code §§ 90.5, 92, 93, and 95.) The focusof the field enforcement program is primarily on industries and areas in which employeesarerelatively low paid and unskilled and/or areas in whichthere has been a history of violations. (See Lab. Code § 90.5, subd. (c).) The Labor Commissioner’s BOFEhasbroadinvestigatory powersandviolations of state labor laws maybe addressed through the issuance of civil penalty assessments. (See, e.g., Lab. Code §§ 226.3, 558, and 1197.1.) Additionally, or alternatively, the Labor Commissioner may exerciseits police powersthroughthe filing of civil enforcementactions in superior court, including for the collection of wagesorotherrelief on behalf of workers, pursuant to Labor Code sections 98.3 and 1193.6. (See, e.g., Dept. ofIndustrial Relations v. UI Video Stores, Inc. (1997) 55 Cal.App.4th 1084, 1088; Bradstreet v. Wong (2008) 161 Cal.App.4th 1440, 1445.) In citations issued pursuant to Labor Codesections 558 and 1197.1, the Labor Commissioner addresses employer violations of the minimum wage, overtime, mealperiod, rest period, and reporting time provisions of the Wage Orders and Labor Code. Thesecitations are issued and enforced in the nameofthe agency, but the remedies sought and obtained mayincluderestitution of wages owed to the affected employees, as well as civil penalties payable to the State. Similarly, when the Labor Commissionerfiles civil actions it does so in the name of the agency, but seeks wagerestitution for the affected workers as well as civil penalties. Labor Commissionerpenalty citations and lawsuits, however, are not class actions, and neither seek nor require class certification. The only plaintiff is the Labor Commissioner. (See also Arias v. Superior Court (2009) 46 Cal.4th 969 [private attorney general actions brought by private parties in place of the Labor Workforce and Development Agency to enforce penalty provisions of the Labor Code do notrequire class certification].) Thus, as with theBerman hearing process, the Labor Commissioner’s enforcementactivity through its BOFE, does not involve anyclasslitigation. As 10 such, the Labor Commissionerhas no special experience or expertise relevant to class action procedures, including certification, either in its adjudicative or prosecutorialroles. HI. THE PROVISIONS OF THE LABOR COMMISSIONER MANUAL RELATING TO THE INDEPENDENT CONTRACTOR DEFENSE HAVE NOT BEEN UPDATED SINCE MARTINEZ WASISSUED. Asindicated earlier, sections 28.2 through 28.3.3.2 of the Manual discuss the distinction between employees and independentcontractors, the application of the Borello analysis, factors, and line of cases that are used in making the determination of employeestatus. In the years since Borello was decided, the Labor Commissionerhas routinely and consistently applied the Borello analysis in its Berman hearing process wage adjudication cases, in workers’ compensation cases in which employeestatus may be an issue (as in when the BOFEissues a citation against an employerfor failing to maintain workers’ compensation insurance), and in other BOFEactions in which disputes mayarise as to employee versus independent contractorstatus. Chapter 28 of the DLSE Manualhas not been updated subsequentto the issuance of this Court’s decision in Martinez v Combs, supra, 49 Cal.4th 35. As stated previously, however,that these sections of the Manual have not been updated should not be interpreted as a statement of any position taken by the Labor Commissioner on the underlying question presented in this case. The Labor 1] Commissioner has not been presented with that particular question, and accordingly, has not addressed it within the Manualor otherwise. As also referenced above, the only provision of the Manual referencing Martinez is found in Chapter 55, titled “IWC Definitions.” That section now providesas follows: 55.2 Definition Of “Employer”. The definition of employer for purposes of California ’s labor lawsis set forth in the Wage Orders promulgated by the Industrial Welfare Commission. : To employ underthe IWC definitions has three alternative definitions. “Tt means(a) to exercise control over the wages, hours or working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a common-law employmentrelationship.” Martinez v Combs (2010) 49 Cal.4th 35 (Manual, section 55.2.) Thus, the revision to Section 55.2 solely acknowledges the Court’s holding in Martinez as authority, setting forth the [WC’s definition of the meaning of “employ.” It, like Sections 2.2, 2.2.1, 28-28.4.2.4, does not address the issue pertaining to class certification before the Court. IV. CONCLUSION. The sections of the Manual referenced in the Court’s Order do not address the underlying question presented in this case. The Labor Commissioner continues to use the Borello analysis in adjudicating individual wage claimsand prosecuting 12 BOFEactions when threshold questions of employee versus independent contractor status arise, but has not been called uponto, and has not taken a position as to the relevance ofMartinez in resolving question ofclass certification where the defense of independent contractoris raised. Dated: February 21, 2017 DIVISION OF LABOR STANDARDS ENFORCEMENT, 7ofIndustrial Relations, State of California ho aa LEC tome Attorney for the LABOR COMMISSIONER 13 CERTIFICATE OF WORD COUNT Pursuant to Rules of Court 8.204(c), the undersigned counsel hereby certifies that the foregoing Division of Labor Standards Enforcement Amicus Brief is double spaced, printed in Times New Roman 14-point text, and contains 1988 words. The above word count was determined using the Word Countfunction of the Microsoft Word 2010 program, and includes wordsin this certificate, the Table of Contents and the Table of Authorities. Executed on February 21, 2017, at San Francisco, California. ---~ ( By: /2a “David Balter Attorney for the Labor Commissioner 14 PROOF OF SERVICE BY MAIL Dynamex Operations West, Inc. v. Charles Lee and Pedro Chevez Second Appellate District, Division 7 Case No.: B249546 Superior Court of Los Angeles Case No.: BC332016 Supreme Court Case No.: $222732 I, Joanne M. Leduc, do hereby declare that I am employed in the county of San Francisco, over 18 years of age, not a party to the within action, and that Iam employed at and my business address is 455 Golden Gate Avenue, 9" Floor, San Francisco, California, 94102. On February 21, 2017, I served the following document(s): AMICUS CURIAE BRIEF OF DIVISION OF LABOR ENFORCEMENT, DEPARTMENT OF INDUSTRIAL RELATIONS, STATES OF CALIFORNIA X__ by placing true copies thereof in an envelope(s) and then sealing the envelope with postage thereon fully prepaid, depositing it in the United States mail in the city and county of San Francisco byordinary first-class mail, addressed as follows: Robert Gordon Hulteng Littler Mendelson PC 333 Bush Street, 34th Floor Kevin Francis Ruf San Francisco, CA 94104 Glancy Binkow and Goldberg LLP 1925 Century Park East, Suite 2100 Frederick Bennett Los Angeles, CA 90067 Superior Court of Los Angeles County Alan Mark Pope 111 North Hill Street, Room 546 Pope Berger and Williams LLP Los Angeles, CA 90012 3555 Fifth Avenue, Suite 300 San Diego, CA 92103 I declare under penalty of perjury under the laws of the State of California the foregoingis true and correct. Executed this 21st day of February, 2017, at San Francisco, California. f \ Joanne Ms LeDuc 15