Becerra v. The McClatchy Co. ( 2021 )

Filed 9/30/21
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIFTH APPELLATE DISTRICT
VERONICA BECERRA et al.,
F074680
Plaintiffs and Appellants,
(Super. Ct. No. 08CECG04411)
v.
THE MCCLATCHY COMPANY et al., OPINION
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of Fresno County. Kristi Culver
Kapetan, Judge.
Callahan & Blaine, Daniel J. Callahan, Michael J. Sachs, and Scott D. Nelson for
Plaintiffs and Appellants.
Lewis Brisbois Bisgaard & Smith, Allison Arabian and John S. Poulos; Law
Offices of William C. Hahesy and William C. Hahesy; Perkins Coie, Eric D. Miller and
Jill L. Ripke; Pillsbury Winthrop Shaw Pittman and Derek M. Mayor for Defendants and
Respondents.
-ooOoo-
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, (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 (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
1 Appellants are: Veronica Becerra, Williams Herrera Luis, Vanessa Castro, Alma
Landeros, Randy Leyva, and Roger Carpenter.
2.
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
2 We quote from the contract contained in trial exhibit 109.
3.
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.
4.
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,
5.
§§ 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 denied the motion for a separate
trial, the carriers sought to dismiss their fourth and seventh causes of action, as well as
their individual claims. Following a case management conference, the parties filed, and
on March 25, 2014, the court approved, the following “STIPULATION AND
FURTHER RECITALS” regarding the remaining claims:
“1. At the conference, the parties and the Court discussed a
number of subjects and the Court made various rulings thereon, some of
which will be reflected in this stipulation and further orders of the Court.
[The carriers] are voluntarily dismissing, without prejudice, the Fourth
Cause of Action under Labor Code Section 2802 and the Seventh Cause of
Action under Labor Code Sections 226 and 226.3, along with all of [the
carriers’] individual claims, subject to Court approval. [The carriers] have
filed a Declaration consistent with Rule 3.770 of the California Rules of
Court. [The carriers] confirm that they will be proceeding solely with their
Ninth Cause of Action under Business [and] Professions Code Section
17200.
“2. The Court has determined that the case shall be bifurcated for
trial and certain discovery. The Court has determined that the trial shall be
bifurcated into two phases . . . . The first phase will involve a trial of the
employee/independent contractor status of the class members and the
remaining liability issues including the issues relating to the reasonable and
necessary automobile expenses incurred by the class members and not
6.
indemnified. Because [the carriers] have the burden of proof on those
issues, they will proceed first. Only if [the carriers] are able to prove that
the class members are employees and the other liability elements would the
parties proceed to the second phase. The second phase, if necessary, would
concern only the issue of restitution for unindemnified reasonable and
necessary automobile expenses.”
III. Trial and Judgment
A bifurcated bench trial on the issue of liability on the ninth cause of action
commenced on November 19, 2014, and continued over the course of numerous
nonconsecutive days, with the presentation of evidence concluding on March 4, 2015.
On July 2, 2015, the trial court denied the newspaper’s motion to decertify the
class. However, the trial court also ordered briefing and argument on “the issue of
creating a subclass or, in the alternative, excluding from the class, regional carriers and/or
large distributors.” After receiving further briefing, on September 28, 2015, the trial
court excluded “large distributors” from the class and declined to create a subclass of
regional carriers.
On September 9, 2016, the trial court issued its statement of decision, concluding
the carriers were properly classified as independent contractors, rather than employees.
The court began its analysis by considering the effect of section 4304-6 of title 22 of the
California Code of Regulations,3 which was promulgated by the EDD and which contains
factors to be considered in determining whether newspaper carriers are employees or
independent contractors for purposes of the Unemployment Insurance Code. The court
determined it was required to “analyze the language of the contracts [between the carriers
and the newspaper] with a view to both the common law, and the common law as
specifically applied by the [EDD] to the newspaper industry.” Accordingly, the court
examined the contracts “[w]ithin the framework of the [EDD] regulations,” and based
3 Subsequent regulatory citations refer to California Code of Regulations, title 22.
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thereon, determined the carriers acted with independence, free from the control of the
newspaper.
The court then stated, “Even if the court did not consider the EDD Regulations,
application of the [common law] factors . . . would lead to the same conclusion.” The
court then examined 14 “secondary factors” bearing on the independent contractor
determination, some of which suggested the carriers were independent contractors rather
than employees. The court declined to consider two cases relied on by the carriers, Brose
v. Union-Tribune Publishing Co. (1986) 183 Cal.App.3d 1079 and Antelope Valley Press
v. Poizner (2008) 162 Cal.App.4th 839 (Poizner), on the ground these cases were limited
to claims arising under the Workers’ Compensation Act. Finally, the court noted that this
is an action in equity, and that it would be “unfair for [T]he Bee to be penalized for
relying upon the [EDD] Regulations and following them.” The court thereby concluded
that both the EDD regulations and the common law test supported a conclusion that the
carriers were properly classified as independent contractors.
On September 15, 2016, the court entered judgment in favor of the newspaper.
This timely appeal followed.4
4 During the pendency of this appeal, the newspaper filed a voluntary bankruptcy
petition and the appeal was stayed. (11 U.S.C. § 362.) On September 25, 2020, the
bankruptcy court filed its “Findings of Fact, Conclusions of Law, and Order Approving
the Disclosure Statement and Confirming the First Amended Joint Chapter 11 Plan of
Distribution of JCK Legacy Company and its Affiliated Debtors and Debtors in
Possession.” (Boldface, underlining & some capitalization omitted.) This order
terminated the automatic bankruptcy stay and, on February 8, 2021, the stay of appeal
was lifted. At the same time, we ordered the parties to brief whether the bankruptcy
court’s order rendered the appeal moot.
An appeal becomes moot when “ ‘ “ ‘the occurrence of events renders it
impossible for the appellate court to grant appellant any effective relief.’ ” ’ ” (La
Mirada Avenue Neighborhood Assn. of Hollywood v. City of Los Angeles (2016) 2
Cal.App.5th 586, 590; accord, Paul v. Milk Depots, Inc. (1964) 62 Cal.2d 129, 132.)
Generally, the burden is on the party claiming mootness to establish that an appeal is
moot. (See Smith v. State Savings & Loan Assn. (1985) 175 Cal.App.3d 1092, 1099-
1100.) Here, the parties responded to the court’s request for further briefing with a
8.
DISCUSSION
I. Motions for Judicial Notice
In the course of briefing the instant appeal, the carriers filed two motions for
judicial notice, both of which the newspaper opposed.
A reviewing court must take judicial notice of “(1) each matter properly noticed
by the trial court and (2) each matter that the trial court was required to notice under
[Evidence Code s]ection 451 or 453.” (Evid. Code, § 459, subd. (a).) In addition, a
reviewing court has discretion to take judicial notice of any matter specified in Evidence
Code section 452. (Evid. Code, § 459, subd. (a).)
A. Motion Filed November 6, 2017
The carriers’ first motion seeks judicial notice of (1) a 2002 update of the Division
of Labor Standards Enforcement (DLSE) Enforcement Policies and Interpretations
Manual (Revised) section 28 (Exhibit A); (2) a DLSE opinion letter dated May 17, 2000
(Exhibit B); (3) a Department of Industrial Relations (DIR) publication entitled
“Independent Contractors” (Exhibit C); (4) a purported DIR webpage concerning
independent contractors (Exhibit D); (5) the EDD rulemaking file concerning section
4304-6 of the California Code of Regulations (Exhibit E); and (6) section 4304-6 of the
California Code of Regulations (Exhibit F).
Both parties sought judicial notice of Exhibit F in the trial court and the trial court
granted their request. We will grant the carriers’ motion to take judicial notice of
Exhibit F. (Evid. Code, § 459, subd. (a).)
stipulation, which suggests that effective relief remains available to the carriers should
they prevail in this appeal. Accordingly, the newspaper has not established that the
appeal is moot, and we will proceed to address the appeal on the merits.
9.
As to the remaining exhibits, our determination is discretionary.5 (Evid. Code,
§ 459, subd. (a).)
Our Supreme Court recently noted that the provisions of the DLSE manual
contained in Exhibit A are not entitled to deference, and a party’s reliance on the manual
was therefore found unpersuasive. (Dynamex, supra, 4 Cal.5th at p. 946.) While we are
not prohibited from considering this material (see Alvarado v. Dart Container Corp. of
California (2018) 4 Cal.5th 542, 559), it carries little weight. Thus, while we will grant
the carriers’ request for judicial notice of Exhibit A, we remain mindful of our duty to
independently determine the meaning and scope of the provisions at issue in this case
without deference to this material.
Likewise, Exhibit B is not entitled to deference. (Brinker Restaurant Corp. v.
Superior Court (2012) 53 Cal.4th 1004, 1029, fn. 11 (Brinker) [DLSE opinion letters are
not controlling].) Nor is it relevant. We will deny the carriers’ request for judicial notice
of Exhibit B. (Stockton Citizens for Sensible Planning v. City of Stockton (2012) 210
Cal.App.4th 1484, 1488, fn. 3 (Stockton).)
Exhibits C and D are interpretive documents. Like Exhibits A and B, they are not
entitled to deference. (Martinez v. Combs (2010) 49 Cal.4th 35, 50, fn. 15 [“[W]e give
the DLSE’s current enforcement policies no deference because they were not adopted in
compliance with the Administrative Procedure Act.”]; Tidewater Marine Western, Inc. v.
Bradshaw (1996) 14 Cal.4th 557, 576 [declining to give weight to DLSE policy
interpretations].) Moreover, these documents are dated well after the conclusion of the
5 In the trial court, the carriers’ cited Exhibit A and Exhibit B in their objections to
the trial court’s proposed statement of decision, but did not request judicial notice. Nor
do the carriers contend they sought judicial notice of Exhibits C and E in the trial court.
The trial court denied the carriers’ request for judicial notice of Exhibit D because the
document was not authenticated and was not shown to be an official agency act.
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class period. They are not relevant, and we will therefore deny the request for judicial
notice on that basis. (Stockton, supra, 210 Cal.App.4th at p. 1488, fn. 3.)
Exhibit E is the rulemaking file for the regulation at the heart of this case, section
4304-6 of the California Code of Regulations. The rulemaking file is the mandatory
record of the rulemaking proceeding. (Gov. Code, § 11347.3, subd. (a).) It must contain,
among other things, a statement of reasons for the regulation, supporting data, and
petitions from interested persons. (Gov. Code, § 11347.3, subd. (b).) A rulemaking file
is the proper subject of judicial notice (see Friends of Sierra Madre v. City of Sierra
Madre (2001) 25 Cal.4th 165, 188), and indeed ensures effective judicial review of
contested regulations. (POET, LLC v. State Air Resources Bd. (2013) 218 Cal.App.4th
681, 744.) The newspaper presents no reason to deny judicial notice, other than that
judicial notice was not requested below. We will exercise our discretion to grant judicial
notice as to Exhibit E.
Accordingly, we grant the carriers’ November 6, 2017 motion for judicial notice
as to Exhibits A, E, and F. In all other respects, the motion is denied.
B. Motion Filed August 14, 2018
In their second motion, the carriers request that we take judicial notice of the
statement of decision for phase 1 of the trial in Sacramento County Superior Court case
No. 34-2009-00033950, Sawin, et al. v. The McClatchy Company, et al. (Sawin).
According to the carriers, the court in Sawin applied the correct legal test, thereby
demonstrating that the trial court in the instant case applied an incorrect test. The carriers
assert the facts in Sawin are “nearly identical” to those at issue here. The newspaper
argues Sawin is irrelevant and, in any event, that this court may not judicially notice the
truth of the facts set forth in that decision.
Under Evidence Code section 452, subdivision (d), a court may take judicial
notice of the records of any court of this state. The statement of decision in Sawin is
indisputably a record of a court within the State of California and is therefore a proper
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subject of judicial notice. In Sawin, the court applied Borello and its progeny to conclude
that a class of newspaper carriers were employees, not independent contractors.
However, the Sawin decision has no binding or precedential effect. (Harrott v. County of
Kings (2001) 25 Cal.4th 1138, 1148.) It has, at most, some persuasive value. Although
we grant the carriers’ August 14, 2018 motion for judicial notice, we again remain
mindful of the limited relevance of this material.
II. Borello Governs the Carriers’ Claim
The trial court concluded the carriers were properly classified as independent
contractors on two grounds. First, the court concluded the carriers were properly
classified as independent contractors based on the factors set forth in section 4304-6 of
the California Code of Regulations (section 4304-6). Second, the court concluded the
carriers were properly classified as independent contractors under the common law test.
In this section, we explain that the determination of whether the carriers were
employees or independent contractors for purposes of Labor Code section 2802 is
governed by the common law test set out in Borello and its progeny. Although the law
governing independent contractor and employee status has changed significantly since
the trial in this case (see Dynamex, supra, 4 Cal.5th 903; see also Assem. Bill No. 5
(2019-2020 Reg. Sess.) Stats. 2019, ch. 296, § 1), those changes do not apply to the
carriers’ claim. Further, as we explain, the EDD regulations relied on by the trial court
are inapplicable to the carriers’ claim that the newspaper engaged in unfair competition
by violating Labor Code section 2802. Borello remains the governing standard.
A. The Common Law Test
At common law, the question of whether a worker should be classified as an
employee or an independent contractor initially arose in the tort context to determine
whether a hirer should be held vicariously liable for an injury resulting from a worker’s
actions. (Dynamex, supra, 4 Cal.5th at p. 927; Borello, supra, 48 Cal.3d at p. 350.) In
this context, “the ‘control of details’ test” had long been “the principal measure of the
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servant’s status for common law purposes.” (Borello, supra, 48 Cal.3d at p. 350.) Under
the control of details test, “ ‘[t]he principal 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.’ ” (Ibid.) Our Supreme Court eventually extended the
control of details test beyond the tort context to determine whether workers should be
considered employees or independent contractors for purposes of “the variety of 20th
century social welfare legislation that had been enacted for the protection of employees.”
(Dynamex, at p. 927; see Tieberg v. Unemployment Ins. App. Bd. (1970) 2 Cal.3d 943,
946 [unemployment insurance]; Isenberg v. California Emp. Stab. Com. (1947) 30 Cal.2d
34, 35, 39 [same]; Perguica v. Ind. Acc. Com. (1947) 29 Cal.2d 857, 858-861 [workers’
compensation]; Empire Star Mines Co. v. Cal. Emp. Com. (1946) 28 Cal.2d 33, 43-44
[unemployment insurance], overruled on another ground in People v. Sims (1982) 32
Cal.3d 468, 479-480, fn. 8.)
In addition to the control of details, a number of “ ‘secondary’ ” factors were also
held relevant to the common law determination of an employment relationship.
(Dynamex, supra, 4 Cal.5th at p. 928; accord, Borello, supra, 48 Cal.3d at pp. 350-351.)
Foremost among these secondary factors was the hiring entity’s right to discharge a
worker at will, without cause, which was considered “ ‘[s]trong evidence in support of an
employment relationship.’ ” (Borello, at p. 350; accord, Ayala v. Antelope Valley
Newspapers, Inc. (2014) 59 Cal.4th 522, 531 (Ayala).) Additionally, the following
factors derived from the Restatement Second of Agency section 220 were held to be
relevant: “(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
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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.” (Borello, supra, 48 Cal.3d at p. 351;
accord, Dynamex, supra, 4 Cal.5th at p. 928.)
In 1989, our Supreme Court decided Borello, which has been characterized since
as the “seminal decision” on the appropriate standard for distinguishing between
employees and independent contractors. (Dynamex, supra, 4 Cal.5th at p. 929.) Borello
involved a controversy over whether agricultural laborers hired to harvest cucumbers
pursuant to a “ ‘sharefarmer’ ” agreement were independent contractors or employees for
purposes of California’s workers’ compensation statutes, where the grower did not
directly supervise the harvest and compensated the farmworkers based on the quantity,
size, and quality of the cucumbers harvested. (Borello, supra, 48 Cal.3d at pp. 345-347.)
The grower argued the farmworkers were independent contractors under the control of
details test because “they manage[d] their own labor, share[d] the profit or loss from the
crop, and agree[d] in writing that they [were] not employees.” (Id. at p. 345.) However,
the high court rejected this contention, summarizing its conclusion as follows:
“The grower controls the agricultural operations on its premises from
planting to sale of the crops. It simply chooses to accomplish one
integrated step in the production of one such crop by means of worker
incentives rather than direct supervision. It thereby retains all necessary
control over a job which can be done only one way. [¶] Moreover, so far
as the record discloses, the harvesters’ work, though seasonal by nature,
follows the usual line of an employee. In no practical sense are the
‘sharefarmers’ entrepreneurs operating independent businesses for their
own accounts; they and their families are obvious members of the broad
class to which workers’ compensation protection is intended to apply.”
(Borello, at p. 345.)
Accordingly, the court concluded the farmworkers were employees as a matter of law.
(Id. at p. 346.)
14.
In reaching this conclusion, the Borello court acknowledged that the hiring entity’s
right to control necessary work details is the “ ‘most important’ or ‘most significant’ ”
consideration. (Borello, supra, 48 Cal.3d at p. 350.) However, the court also recognized
the relevance of the secondary factors listed above, the standards set forth for contractor’s
licensees under Labor Code section 2750.5,6 and a six-factor test developed in other
jurisdictions.7 (Borello, at pp. 354-355.)
Additionally, the court recognized that the concept of “ ‘employment’ ” for
purposes of the Workers’ Compensation Act “is not inherently limited by common law
principles.” (Borello, supra, 48 Cal.3d at p. 351.) Instead, the “definition of the
employment relationship must be construed with particular reference to the ‘history and
fundamental purposes’ of the statute.” (Ibid.) Thus, our Supreme Court has recently
characterized the Borello test as “calling for resolution of the employee or independent
contractor question by focusing on the intended scope and purposes of the particular
statutory provision or provisions at issue. In other words, Borello calls for application of
a statutory purpose standard that considers the control of details and other potentially
relevant factors identified in prior California and out-of-state cases in order to determine
which classification (employee or independent contractor) best effectuates the underlying
6 Under Labor Code section 2750.5, proof of independent contractor status must
include proof “(a) That the individual has the right to control and discretion as to the
manner of performance of the contract for services in that the result of the work and not
the means by which it is accomplished is the primary factor bargained for. [¶] (b) That
the individual is customarily engaged in an independently established business. [¶]
(c) That the individual’s independent contractor status is bona fide and not a subterfuge to
avoid employee status.” (Ibid.)
7 “Besides the ‘right to control the work,’ the [six] factors include (1) the alleged
employee’s opportunity for profit or loss depending on his managerial skill; (2) the
alleged employee’s investment in equipment or materials required for his task, or his
employment of helpers; (3) whether the service rendered requires a special skill; (4) the
degree of permanence of the working relationship; and (5) whether the service rendered
is an integral part of the alleged employer’s business.” (Borello, supra, 48 Cal.3d at
pp. 354-355.)
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legislative intent and objective of the statutory scheme at issue.” (Dynamex, supra, 4
Cal.5th at p. 934.)
B. Recent Changes to Employee and Independent Contractor Status
Our Supreme Court and the Legislature have recently departed from the Borello
test for distinguishing between employees and independent contractors in certain
circumstances. We requested supplemental briefing on some of these changes. The
newspaper filed an application for permission to file a supplemental brief addressing
others.8 We now address the current state of the law. As we explain, despite these
changes, Borello remains the applicable test for determining whether the carriers were
independent contractors or employees.
i. Dynamex
In 2018, our Supreme Court issued its opinion in Dynamex, supra, 4 Cal.5th 903.
Although the underlying litigation in Dynamex involved a variety of claims, our Supreme
Court considered only a single issue: “[W]hat standard applies, under California law, in
determining whether workers should be classified as employees or as independent
contractors for purposes of California wage orders, which impose obligations relating to
the minimum wages, maximum hours, and a limited number of very basic working
conditions (such as minimally required meal and rest breaks) of California employees.”
(Id. at pp. 913-914; see id. at p. 919.) In that context, our Supreme Court determined that
the phrase “suffer or permit to work,” which is contained in the definition of “employ” in
the applicable wage order, is the applicable standard for distinguishing employees from
independent contractors for purposes of wage order claims. (Id. at pp. 943-944.) Our
8 The newspaper filed its application for permission to file a supplemental brief on
November 19, 2019. We deferred consideration of the motion pending consideration of
the appeal on the merits. Since that time, the parties have filed a stipulation that this
court may issue its opinion “without oral argument or further input from the Parties.”
Accordingly, we deny the newspaper’s November 19, 2019 application for permission to
file a supplemental brief.
16.
Supreme Court then announced that, under that standard, a worker should be considered
an employee unless the hiring entity establishes “(A) that the worker is free from the
control and direction of the hiring entity in connection with the performance of the work,
both under the contract for the performance of the work and in fact; and (B) that the
worker performs work that is outside the usual course of the hiring entity’s business; and
(C) that the worker is customarily engaged in an independently established trade,
occupation, or business of the same nature as the work performed.” (Id. at p. 957.) This
test, commonly referred to as the “ABC” test (see id. at p. 916), differs significantly from
the Borello test.
Since Dynamex, courts have declined to extend the ABC test, as set out in
Dynamex, outside the context of wage orders and related Labor Code claims. (See, e.g.,
Vendor Surveillance Corporation v. Henning (2021) 62 Cal.App.5th 59, 68-69 (Vendor
Surveillance) [declining to extend Dynamex to claims relating to failure to pay
unemployment insurance tax]; Garcia v. Border Transportation Group, LLC (2018) 28
Cal.App.5th 558, 570-572 (Garcia) [declining to extend Dynamex to non-wage order
claims for overtime, wrongful termination in violation of public policy, waiting time
penalties, and UCL claims resting on such violations]; see also Vazquez v. Jan-Pro
Franchising International, Inc. (2021) 10 Cal.5th 944, 951-952 (Vazquez) [stating that
Dynamex “was based upon a determination concerning how the term ‘suffer or permit to
work’ in California wage orders should be interpreted for purposes of distinguishing
between employees who are covered by the wage orders and independent contractors
who are not,” and that Dynamex did not overrule any prior Supreme Court decision or
disapprove any prior Court of Appeal decision].) Additionally, although our Supreme
Court has concluded that the Dynamex interpretation of the phrase “suffer or permit to
work” applies retroactively, this holding was limited to nonfinal cases governed by wage
orders worded similarly to that in Dynamex. (Vazquez, at pp. 949-952.)
17.
In sum, the Dynamex ABC test is limited to claims governed by wage orders that
employ the “suffer or permit to work” standard. Here, the carriers proceeded to trial on a
UCL claim, which was based on the newspapers’ alleged violation of Labor Code section
2802.9 At least one court has characterized claims for business-related transportation
expenses brought pursuant to Labor Code section 2802 as non-wage-order claims. (See
Dynamex, supra, 4 Cal.5th at pp. 915, 916, fn. 5, 942 [discussing holding of the Court of
Appeal].) We agree and conclude that neither the carriers’ UCL claim nor the Labor
Code violation it is based upon relies on a wage order to distinguish between employees
and independent contractors. (See Garcia, supra, 28 Cal.App.5th at pp. 570-571.)
Dynamex does not provide a basis for applying the ABC test to the carriers’ claims.
ii. Subsequent Legislation
“After Dynamex was decided, the Legislature enacted Assembly Bill [No.] 5
[2019-2020 Reg. Sess.] (Stats. 2019, ch. 296), which amended both the Labor Code and
Unemployment Insurance Code. The stated legislative purpose in enacting Assembly
Bill [No.] 5 was to ‘codify’ the Dynamex decision and to ‘clarify’ the decision’s
application in state law. (Stats. 2019, ch. 296, § 1(d).)” (Vendor Surveillance, supra, 62
Cal.App.5th at pp. 72-73, fn. omitted.) To this end, the bill added former section 2750.3
to the Labor Code, which “broadly adopt[ed] the Dynamex holding for purposes of all
benefits to which employees are entitled under the Unemployment Insurance Code, the
Labor Code, and all applicable wage orders.”10 (People v. Uber Technologies (2020) 56
9 The carriers occasionally have asserted that their UCL claim is premised on Wage
Order 1-2001, because subdivision (9) of this wage order “complements” and “applies”
to Labor Code section 2802.
10 Assembly Bill No. 5 (2019-2020 Reg. Sess.) also amended section 621 of the
Unemployment Insurance Code, which previously distinguished between independent
contractors and employees based on the “usual common law rules,” and which now
distinguishes between independent contractors and employees based on the ABC test.
(Stats. 2019, ch. 296, § 5; see former Unemp. Ins. Code, § 621.)
18.
Cal.App.5th 266, 277; see Stats. 2019, ch. 296, § 2.) Thus, under Labor Code former
section 2750.3, a person providing labor or services for remuneration was to be
considered an employee for purposes of the Labor Code and the Unemployment
Insurance Code, unless the hiring entity established that the ABC test was satisfied.
(Lab. Code, former § 2750.3, subd. (a)(1).) Labor Code former section 2750.3 specified
that, with the exception of “wage orders of the Industrial Welfare Commission and
violations of the Labor Code relating to wage orders,” the ABC test was not retroactive
but instead applied only to work performed on or after January 1, 2020. (Lab. Code,
former § 2750.3, subd. (i)(1), (i)(3).)
In the same legislative session, the Legislature passed, and the Governor signed,
Assembly Bill No. 170 (2019-2020 Reg. Sess.), which excluded newspaper carriers from
the ABC test. (Stats. 2019, ch. 415, § 1; see Lab. Code, former § 2750.3, subd. (b)(7).)
For newspaper carriers, determination of employee or independent contractor status was
to be governed by Borello. (Lab. Code, former § 2750.3, subd. (b)(7).) The exclusion
for newspaper workers initially was set to expire on January 1, 2021. (Lab. Code, former
§ 2750.3, subd. (b)(7)(B).)
The following year, the statutes regarding employee status and the application of
the ABC test were “revise[d] and recast.” (Stats. 2020, ch. 38; see Lab. Code, § 2775
et seq.) Under the revised statues, the ABC test remains the operative test for
determining whether a worker is an employee for purposes of the Labor Code, the
Unemployment Insurance Code, and all wage orders. (Lab. Code, § 2775, subd. (b)(1);
see Stats. 2020, ch. 38, § 2.) However, newspaper carriers remain excepted from this
rule, and their employment status continues to be determined by Borello. (Lab. Code,
§ 2783, subd. (h).) The exception for newspaper carriers now expires on January 1, 2022,
unless extended by the Legislature. (Lab. Code, § 2783, subd. (h)(3).)
In sum, the Legislature has statutorily expanded the reach of the ABC test beyond
the wage order context addressed in Dynamex. Nonetheless, the employee status of
19.
newspaper carriers is, and was at the time the carriers’ claims arose, determined by
application of the Borello test. (See Estrada v. FedEx Ground Package System, Inc.
(2007) 154 Cal.App.4th 1, 10 [“Because the Labor Code does not expressly define
‘employee’ for purposes of section 2802, the common law test of employment
applies.”].) Borello governs the claim at issue here.
C. Section 4304-6 is Inapplicable to the Carriers’ Claim
The trial court relied in part on section 4304-6 of the California Code of
Regulations – a regulation promulgated by the EDD – to conclude the carriers were
properly classified as independent contractors. We conclude section 4304-6 is
inapplicable to the carriers’ claim that The Bee engaged in unfair competition by
violating Labor Code section 2802.
i. The Trial Court’s Statement of Decision
In the trial court, the newspaper argued that section 4304-6 provided a safe harbor
defense to the carriers’ UCL claim. The trial court rejected this argument, a
determination which is not challenged on appeal.
Nonetheless, the trial court found the regulation “relevant and persuasive” in
determining the carriers were independent contractors. Indeed, the trial court determined
the EDD regulations were entitled to “substantial deference” or at least carried “strong
persuasive power” because they were promulgated by the EDD and pertained to a subject
within the agency’s jurisdiction. The trial court further surmised that the EDD
regulations set forth the same factors as relied on at common law. The trial court
therefore determined that the contract and the trial evidence “must be examined”
“[w]ithin the framework of the regulations,” and that the court “need[ed] to analyze the
language of the contracts [between the carriers and The Bee] with a view to both the
common law, and the common law as specifically applied by the [EDD] to the newspaper
industry.”
Examining the contract, the court explained:
20.
“Looking to [T]he Bee’s right to control the manner and means of
accomplishing the contracted for result, the evidence adduced at trial
demonstrated that although [T]he Bee contracted for and ‘controlled’ the
outcome, i.e., timely delivery of a dry, readable paper delivered to the
location requested by the subscriber, the means of accomplishing that
outcome was not subjected to any particular control. The Bee did not care
how the paper got delivered, only that it did and that the delivery was
timely and the paper readable. Similarly, although [T]he Bee required that
certain advertisements be placed where the clients demanded, the ‘check’
[T]he Bee performed was only to ensure that what [T]he Bee’s clients paid
for the contractors provided. The contracted task was timely delivery of a
dry readable paper. The way it was accomplished was of no moment. The
fact that [T]he Bee checked to ensure that the subscriber received what it
was paying for does not convert an independent contractor into an
employee.”
The court then noted:
“The contracts all focus on the carriers providing a result to the customer,
namely, a readable newspaper which is delivered in a manner that protects
the papers after delivery. The specific contract provisions that are
indicative of independence and are contained within the contract are
provisions (1) allowing negotiation of compensation (22 CCR [§]
4304-6(c)(1)); (2) the Hold Harmless provision (I[bi]d.); (3) The posting of
a bond at the carrier’s expense (I[bi]d.); (4) negotiation for rates of pay for
routes (22 CCR [§] 4304-6(c)(4)); (5) charging customer complaints to the
carrier with [T]he Bee handling [c]omplaints (4304-6(c)(5)); (6) the carrier
obtaining his or her own substitute without the principal’s approval
(4304-6(c)(7)); (7) If the principal did have to hire a substitute on behalf of
the carrier, [T]he Bee charged the carrier (4304-6(c)(7)); (8) Carrier
compensation was either flat fee or per copy (4304-6(c)(2)).
“Further, several provisions of the contract may not be used as
evidence of employment pursuant to [section] 4304-6: The fact that [T]he
Bee provided an opportunity to participate in an insurance program
(4304-6(c)(3)); The requirement of timely delivery of the paper in a
readable condition (4304-6(c)(4)); The Bee’s right to terminate if there was
a material breach (4304-6(c)(6)); The Bee’s right to terminate a carrier with
35 days’ Notice (4304-6(c)(6)); The Bee limiting the carriers’ use of the
subscriber list (4304-6(c)(1)); The Bee not allowing the carriers to attach
any unauthorized material (4304-6(c)(1)); The Bee’s provision of incentive
bonuses to carriers for new subscriptions (4304-6(c)(2)); The requirement
that the carriers maintain a current subscriber list that must be given to the
principal upon request (4304-6(c)(4)).
21.
“At trial the [carriers] emphasized [T]he Bee’s requirement that the
carriers deliver a dry, readable paper as evidence of ‘control.’ As set forth
above, this is not to be used as evidence of control so long as ‘other factors
indicate the absence of control by the principal of the manner and means
of delivery.’ 4304-6(c)(4) (emphasis added). Contract provisions relating
to results are irrelevant to the right to control the manner and means of
performance. [The carriers] also stressed the fact that the carriers were
charged for customer complaints and [T]he Bee as opposed to the carriers
often responded to those complaints and remedied the issue. The
Regulations specifically state that this is evidence of independence; not
employment. 4304-6(c)(5).” (Fns. omitted.)
ii. The EDD Regulations
Section 4304-6 is one of several regulations promulgated by the EDD for purposes
of determining whether a worker is an employee for purposes of the Unemployment
Insurance Code. (See generally, Cal. Code Regs., § 4304-1 et seq.) Section 4304-1 of
the California Code of Regulations (section 4304-1) states:
“Whether an individual is an employee for the purposes of Sections 621(b)
and 13020 of the [Unemployment Insurance C]ode will be determined by
the usual common law rules applicable in determining an employer-
employee relationship. Under those rules, to determine whether one
performs services for another as an employee, the most important factor is
the right of the principal to control the manner and means of accomplishing
a desired result. If the principal has the right to control the manner and
means of accomplishing the desired result, whether or not that right is
exercised, an employer-employee relationship exists. Strong evidence of
that right to control is the principal’s right to discharge at will, without
cause.”
Section 4304-1 goes on to identify 10 factors that are to be considered “indicia of
the right to control.” (Cal. Code Regs., § 4304-1, subd. (b); see ibid., subd. (a).) “In both
purpose and effect, the regulation restates the Borello factors.”11 (Vendor Surveillance,
supra, 62 Cal.App.5th at p. 71.)
11 Notably, however, most of the text of section 4304-1 predates our Supreme
Court’s 1989 decision in Borello. (See Cal. Code Regs., § 4304-1, Register 84, No. 8
(Feb. 23, 1984); Register 86, No. 37 (Sept. 9, 1986).)
22.
Section 4304-6 provides that the “determination of whether a carrier is an
employee or an independent contractor in the newspaper distribution industry will be
determined generally by the rules set forth in [section] 4304-1,” but “specific application
of those rules to services in the newspaper distribution industry are set forth in [section]
4304-6.” (Cal. Code Regs., § 4304-6, subd. (a).) Section 4304-6 goes on to provide
“ ‘Basic Guidelines’. . . to be considered in determining the employment/independent
contractor status of newspaper carriers, some of which evidence employment status and
some of which evidence independent contractor status.” (Espejo v. The Copley Press,
Inc. (2017) 13 Cal.App.5th 329, 351 (Espejo).) The detailed “Guidelines,” which were
relied on extensively by the trial court, provide:
“(1) Written agreements. A written agreement signed by both
parties shall be evidence of intent. However, if the terms of the agreement
are not complied with in practice, the agreement shall not determine the
intent or the relationship of the parties. A written agreement to the extent it
provides for negotiation of terms, including fees, expense adjustments and
other items of compensation to the carrier, shall tend to indicate the
existence of an independent contractor relationship. The outcome of any
such negotiations shall not be evidence of the existence of either an
employment or an independent contractor relationship.
“A provision prohibiting the carrier from affixing to, or inserting in,
the newspaper any materials unauthorized by the principal or from making
use of the principal’s subscriber list without the principal’s consent shall
not be evidence of employment or independence.
“A provision by which the carrier holds the principal harmless from
liability shall be evidence of independence.
“A provision whereby the carrier agrees to post a bond with the
principal at the carrier’s expense shall be evidence of independence unless
the principal increases the carrier’s remuneration to pay the cost of such
bond.
“(2) Compensation. Compensation to the carrier in the form of an
hourly rate shall be evidence of an employment relationship.
Compensation to the carrier in the form of a flat fee per route or per copy
delivered shall be evidence of an independent contractor relationship.
23.
“Other bases for compensation, combining factors of distance,
difficulty and expense of delivery, shall be evidence of an employment
relationship to the extent that such terms are nonnegotiable and of an
independent contractor relationship to the extent that they are negotiable.
“Bonuses which are paid as an incentive to the maintenance or
improvement of customer satisfaction on the carrier’s route, such as might
be indicated by a slowed rate of cancellations or an increased rate of starts,
shall not be evidence of employment or independence.
“(3) Benefits plans. The fact that a principal provides the
opportunity for a carrier to participate in a health, medical, life insurance, or
retirement insurance program shall not be evidence of an employment
relationship if the carrier is charged for premiums necessary for
participation in such program. Any adjustment in remuneration of the
carrier to compensate him or her for the payment for participation in such
benefits plans shall be evidence of employment.
“(4) Conditions of service. The fact that a principal and carrier agree
that the carrier shall deliver a newspaper to each customer on his or her
route in a timely manner and in a readable condition shall not be evidence
of an employment relationship as long as other factors indicate the absence
of control by the principal of the manner and means of such delivery.
“Timeliness of delivery may be indicated by agreement for delivery
or completion of a route by a certain hour.
“Readability may be indicated by agreement for protecting the
newspaper against damp conditions or by placement on the customer’s
premises, as the situation may require, in a location readily accessible to the
customer and protected from theft, animals or moisture.
“The fact that carriers are assigned routes by the principal and that
such assignments are not negotiated with regard to remuneration shall be
evidence of employment. However, if a route is offered to a carrier and the
remuneration for servicing the route is negotiable, it shall be evidence of
independence.
“The fact that the carrier is required to maintain a subscriber list and
update such list and provide copies to the principal upon request for the
benefit of the principal shall not be evidence of either an employee or
independent contractor relationship.
24.
“Where the principal requires the carrier to deliver billings without
agreement on compensation to the subscribers, such requirement shall be
evidence of employment; however, where the carrier is given the option of
delivering billings for additional remuneration, such evidence shall tend to
indicate independence. The fact that the principal bills the subscribers and
is responsible for collecting the accounts receivable shall not be evidence of
employment or independence.
“The fact that the principal provides transportation for the carrier’s
delivery of the newspaper, at less than a fair market cost to the carrier, shall
be evidence of employment.
“(5) Customer complaints. Customer complaints as to missed
delivery, late delivery or delivery in an unreadable condition may be taken
by the principal and referred to the carrier without giving rise to the
inference of either an employment or an independent contractor
relationship. The fact that the principal requires the carrier to respond to or
correct such problems shall tend to indicate an employment relationship.
The fact that the principal responds to or corrects such problems directly
and charges the carrier with a penalty or with the principal’s cost of
corrective action shall tend to indicate the existence of an independent
contractor relationship; the absence of such a charge will be evidence of
employment. The fact that the principal gives the carrier the option of
either personally correcting the problem or being charged with a penalty or
with the principal’s cost of correction shall tend to indicate an independent
contractor relationship.
“(6) Termination. When, by terms of an agreement or by practice of
the principal, the relationship between the principal and carrier may be
unilaterally terminated without 30 days’ notice, it will be evidence of
employment. A right of termination without such notice for breach of
statutory or regulatory requirements, for the protection of the public or for a
material breach by the carrier of the terms and conditions of service
including, but not limited to, abandonment or complete failure to deliver a
route, or late, incomplete or damaged delivery over a period of time, or
other significant interference with customer relationships, shall not be
evidence of employment.
“(7) Substitutes. The fact that the principal provides substitute
carriers for the regular carriers shall be evidence of employment. However,
if the principal provides a substitute in an emergency situation and charges
the carrier for such delivery, it is evidence of independence. The fact that
the carrier can obtain his or her own substitute without the principal’s
approval shall be evidence of independence. If a substitute carrier is paid
25.
directly by the principal in non-emergency situations, whether the substitute
is chosen by the carrier or principal, it shall be evidence of employment.
“(8) Recruitment advertising and applications. Terminology in
carrier recruitment advertising and carrier application forms will be
evidence of independence or employment.
“(9) Workers’ Compensation Insurance. The fact that a principal
carries workers’ compensation insurance on all carriers, whether in an
employment or independent contractor relationship, shall not create an
inference of employment or independence.” (Cal. Code Regs, § 4304-6,
subd. (c).)
iii. General Principles of Agency Deference
There are “two classes of [administrative] rules—quasi-legislative and
interpretive.” (Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th
1, 10 (Yamaha).) Quasi-legislative rules are a form of substantive lawmaking by an
agency, within the agency’s jurisdiction, on a subject for which the Legislature has
delegated lawmaking power to the agency. (Ibid.) Review of quasi-legislative rules is
narrow: the rule must only “lay within the lawmaking authority delegated by the
Legislature,” and be “reasonably necessary to implement the purpose of the statute.” (Id.
at pp. 10-11.) In contrast, interpretive rules represent “the agency’s view of the statute’s
legal meaning and effect, questions lying within the constitutional domain of the courts.”
(Id. at p. 11.) Courts give limited deference to an agency’s determination of a statute’s
meaning and effect. (Center for Biological Diversity v. Department of Fish & Wildlife
(2015) 62 Cal.4th 204, 236; accord, Yamaha, at pp. 8, 11.) Thus, “ ‘[t]he standard for
judicial review of agency interpretation of law is the independent judgment of the court,
giving deference to the determination of the agency appropriate to the circumstances of
the agency action.’ ” (Yamaha, at p. 8.)
Not all administrative rules can be neatly categorized as either quasi-legislative or
interpretive. (Yamaha, supra, 19 Cal.4th at p. 6, fn. 3; accord, Ramirez v. Yosemite Water
Co. (1999) 20 Cal.4th 785, 799.) Rather, the two classes constitute “opposite ends of an
26.
administrative continuum, depending on the breadth of the authority delegated by the
Legislature.” (Yamaha, at p. 6, fn. 3.) “Regulations that fall somewhere in the
continuum may have both quasi-legislative and interpretive characteristics, as when an
administrative agency exercises a legislatively delegated power to interpret key statutory
terms.” (Ramirez, at p. 799.) For example, although the Legislature delegated to the
IWC the power to elaborate on the meaning of key statutory terms, our Supreme Court
has held that a wage order construing a portion of the Labor Code within the IWC’s
authority “has both quasi-legislative and interpretive characteristics.” (Id. at pp. 799-
800.) We analyze such hybrid regulations under the standards of review applicable to
both. (New Cingular Wireless PCS, LLC v. Public Utilities Com. (2016) 246 Cal.App.4th
784, 811; accord, Ramirez, at pp. 800-801.)
iv. Analysis
We begin our analysis by reiterating the nature of the carriers’ claim. The
carriers’ sole remaining claim at trial alleged that the newspaper engaged in unfair
competition within the meaning of Business and Professions Code section 17200, based
on the allegation that the newspaper violated Labor Code section 2802 by failing to pay
the carriers’ necessary mileage expenses. The DLSE is the state agency empowered to
enforce and interpret the Labor Code. (See Brinker, supra, 53 Cal.4th at p. 1029, fn. 11;
see also Lab. Code, §§ 79, 82.)
In contrast, the EDD is the state agency vested with jurisdiction over the state’s
unemployment insurance program. (Unemp. Ins. Code, § 301; American Federation of
Labor v. Unemployment Ins. Appeals Bd. (1996) 13 Cal.4th 1017, 1024; Rebolledo v.
Tilly’s Inc. (2014) 228 Cal.App.4th 900, 919.) Under this authority, the EDD
promulgated sections 4304-1 and 4304-6, to determine whether a worker qualifies as an
employee for purposes of the Unemployment Insurance Code. (See §§ 4304-1, 4304-6.)
Indeed, the regulation is expressly limited to determinations relating to unemployment
compensation. (See § 4304-1; Unemp. Ins. Code, §§ 621, 13020.)
27.
In promulgating section 4304-6, the EDD did not purport to engage in rulemaking
regarding a worker’s right to indemnification for necessary expenditures under Labor
Code section 2802, nor would such a rule be within the EDD’s jurisdiction. We are
aware of no authority that suggests a regulation is entitled to deference on a question
outside the promulgating agency’s jurisdiction. Whatever relevance section 4304-6 may
have in the context of unemployment compensation,12 the regulation is instructive at best
in relation to the Labor Code. We decline to defer to the language of section 4304-6
beyond the narrow purpose for which it was drafted.13
Nor do we find section 4304-6 particularly instructive. Contrary to the
newspaper’s assertion, section 4304-6 does not represent a straightforward application of
Borello, but rather diverges from the common law test in material ways. For example,
the regulation provides that termination without cause and without 30 days’ notice is
evidence of employment (Cal. Code Regs., § 4304-6, subd. (c)(6)), while case law
applying Borello has regularly found that termination without cause supports a finding of
employment, regardless of whether 30 days’ notice is required. (See, e.g., Poizner,
12 The validity of section 4304-6 as applied to the Unemployment Insurance Code is
not before us. We note, however, that section 4304-6 identifies itself an interpretive aid
for determining whether a worker qualifies as an employee for purposes of sections 621
and 13020 of the Unemployment Insurance Code. (See §§ 4304-1, 4304-6.) In 2019,
section 621 of the Unemployment Insurance Code was amended to define “employee”
under the ABC test. (See Unemp. Ins. Code, § 621, subd. (b); Stats. 2019, ch. 296, § 5.)
It therefore appears that sections 4304-1 and 4304-6 have been abrogated by statute.
Relatedly, we note that proposed amendments to these regulations have been placed on
the EDD’s 2020 and 2021 rulemaking calendars. ( [as of Sept. 30, 2021]; [as of Sept. 30, 2021].)
13 Because section 4304-1 effectively reiterates the Borello test (see Cal. Code Regs.,
§ 4304-1, subd. (a); Vendor Surveillance, supra, 62 Cal.App.5th at pp. 70-71), we see no
reason to rely on, let alone defer to, this regulation in lieu of the substantial body of case
law applying Borello. Application of section 4304-1 would not add to or alter our
analysis.
28.
supra, 162 Cal.App.4th at p. 854 [finding right to discharge at will, without cause, where
30 days’ notice was required]; see also Espejo, supra, 13 Cal.App.5th at pp. 346, 348
[finding that newspaper carriers were employees where contract was terminable on 30
days’ notice].) Additionally, the regulation provides that hourly pay shall evidence an
employment relationship, whereas flat fee or per copy compensation shall evidence an
independent contractor relationship. (Cal. Code Regs., § 4304-6, subd. (c)(2).)
Meanwhile, case law applying Borello has recognized that piece rate compensation –
such as per copy compensation – may be consistent with an employment relationship.
(See, e.g., Espejo, at pp. 338-339, 351-352; Poizner, at pp. 855-856; accord, Bluford v.
Safeway Stores, Inc. (2013) 216 Cal.App.4th 864, 871; Gonzalez v. Downtown LA
Motors, LP (2013) 215 Cal.App.4th 36, 40.) Perhaps most significantly, the regulation
provides that the newspaper may require a carrier to deliver a newspaper to customers by
a particular time and in a readable condition without giving rise to an employment
relationship, so long as the newspaper does not otherwise control the “manner and
means” of delivery. (Cal. Code Regs., § 4304-6, subd. (c)(4).) However, as we discuss
in greater detail below in our analysis of the instant contract, this aspect of the regulation
ignores Borello’s mandate that a reviewing court consider whether the hiring entity
exercised “all necessary control” over the delegated operations. (Borello, supra, 48
Cal.3d at p. 357.) Finally, by emphasizing matters not implicated by the common law
test, the regulations have the effect of minimizing the weight given to the factors
identified at common law. Indeed, section 4304-6 itself specifies that the common law
factors discussed in section 4304-1 are to be applied only where “a specific application is
not interpreted by [section] 4304-6.” (Cal. Code Regs., § 4304-6, subd. (a).)
We see numerous reasons to reject the newspaper’s attempt to import this standard
into the common law test for determining employment under the Labor Code. First, we
note that section 4304-6 predated Borello by two years. (Cal. Code Regs., § 4304-6,
Register 87, No. 38 (Sept. 17, 1987).) Thus, to the extent section 4304-6 purported to set
29.
forth the common law test for employment, it necessarily referred to the pre-Borello test.
(See Dynamex, supra, 4 Cal.5th at p. 930 [explaining that the Borello test is not limited
by earlier common law principles and requires consideration of the purposes of the
statute at issue].) To the extent section 4304-6 conflicts with Borello, it would appear to
have been abrogated by that decision.
Second, at least one other court has rejected such an extension of section 4304-6.
In Espejo, the Court of Appeal held that a trial court is not required to apply section
4304-6 in a claim brought under the UCL for violation of Labor Code section 2802.
(Espejo, supra, 13 Cal.App.5th at pp. 340-341, 351-352.) The court opined that the
factors set forth in section 4304-6 are merely guidelines, rather than an absolute test, and
thus the trial court was free to ignore those guidelines and rely solely on the common law
factors set forth in Borello and repeated in section 4304-1. (Espejo, at pp. 351-352.)
Although Espejo did not expressly reject application of section 4304-6, we note that
many of the contract provisions at issue in that case would not have been considered
evidence of employee status under section 4304-6. Nonetheless, the Espejo court
affirmed the trial court’s determination that these factors supported a finding that the
carriers were employees, rather than independent contractors. (Espejo, at pp. 346-348
[contract specified the workers were independent contractors (contra Cal. Code Regs.,
§ 4304-6, subd. (c)(1)), prohibited workers from inserting materials with the newspaper
(contra ibid.), required delivery by a specified deadline (contra id., subd. (c)(4)),
permitted carriers to be charged with a penalty for excessive complaints (contra id.,
subd. (c)(5)), required carriers to post a bond (contra id., subd. (c)(1)), and specified that
customers would be invoiced by the newspaper (contra id., subd. (c)(4))].)
Relatedly, we note the existence of a fairly well-developed body of case law
addressing the question of whether newspaper carriers are employees or independent
contractors. Not a single published decision has relied on section 4304-6 to resolve this
question. (See Espejo, supra, 13 Cal.App.5th at pp. 351-352; Poizner, supra, 162
30.
Cal.App.4th at pp. 852-853; Gonzalez v. Workers’ Comp. Appeals Bd. (1996) 46
Cal.App.4th 1584, 1589-1590; see also, Ayala, supra, 59 Cal.4th at pp. 530-532; Sotelo v.
Medianews Group, Inc. (2012) 207 Cal.App.4th 639, 656-657, disapproved on another
ground in Noel v. Thrifty Payless, Inc. (2019) 7 Cal.5th 955, 986, fn. 15.) Indeed, Espejo
appears to be the only published decision to reference California Code of Regulations
section 4304-6 in the regulation’s nearly 34-year history.
Finally, we note that our Legislature has expressed the view that section 4304-6 is
incompatible with the Borello test. While considering the 2019 legislation that ultimately
excluded newspaper carriers from the ABC test, the Senate Rules Committee, Office of
Senate Floor Analyses explained:
“Newspaper distributors and newspaper[] carriers have a uniquely complex
regulatory and legal history when it comes to independent contractor law.
The core of this complexity comes from an Employment Development
Department (EDD) regulation: 22 CCR §4304-6. Created in 1987 under
the Deukmajian administration, this regulation is designed to specifically
address the question of when a newspaper carrier or newspaper distributor
is an employee for the purposes of Unemployment Insurance Code.
[¶] . . . [¶]
“In all contexts, however, 22 CCR §4304-6 shows its age: coming 2 years
before the Borello test and related decisions, the regulation does not reflect
the 1989 decision and its focus on factors of control in determining an
employer-employee relationship. Despite this, in recent litigation, some
newspaper publishers have used the EDD regulation to defend against wage
and hour litigation – something that the regulation cannot be extended to
without ignoring both case law and the permissible scope of EDD
regulations. [¶] . . . [¶]
“A[ssembly ]B[ill No.] 170 addresses these problems by definitely placing
newspaper distributors and newspaper carriers under the Borello decision
for both the purposes of unemployment insurance and wage and hour
requirements, effectively nullifying 22 CCR §4304-6, which was already
dubious law. By placing newspaper distributors and carriers under the
Borello test until January 1, 2021, A[ssembly ]B[ill No.] 170 gives the
newspaper industry a year to remedy their contracts with newspaper
carriers and newspaper distributors in order to come into compliance with
31.
the 2018 California Supreme Court decision in Dynamex and the recently-
passed Assembly Bill [No.] 5 (Gonzalez), which codifies the Dynamex
decision.” (Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading
analysis of Assem. Bill No. 170 (2019-2020 Reg. Sess.) as amended
Sept. 10, 2019, pp. 2-4.)
We acknowledge these statements were made in relation to the passage of legislation that
does not directly bear on the carriers’ claim. Nonetheless, in determining which factors
are relevant to whether a worker is an employee for purposes of Labor Code section
2802, “[o]ur fundamental task is to ascertain the Legislature’s intent and effectuate the
law’s purpose.” (Kaanaana v. Barrett Business Services, Inc. (2021) 11 Cal.5th 158,
168.) Our Supreme Court has determined the Borello test is the standard for determining
whether employment status effectuates the Legislature’s intent in the context of a
particular statute. (Dynamex, supra, 4 Cal.5th at p. 934.) Our Legislature has given no
indication it intended to circumscribe that standard, for purposes of the Labor Code, with
the factors set forth in section 4304-6. We find it relevant that the Legislature has since
expressly disapproved of attempts to do so.
Based on the foregoing, we conclude the trial court erred in deferring to section
4304-6 to determine the carriers were independent contractors.
III. The Trial Court Failed to Properly Analyze the Borello Factors
After finding the carriers were independent contractors under section 4304-6, the
trial court also purported to find, in the alternative, that the carriers were independent
contractors under the common law test. As we explain, however, the trial court failed to
fully set aside the EDD regulations in attempting to apply Borello. Because the trial
court failed to properly analyze the factors required by Borello, we must reverse. (See
Linton v. DeSoto Cab Co., Inc. (2017) 15 Cal.App.5th 1208, 1225 (Linton).)
A. Standard of Review
We review questions of law under a de novo standard of review. (See Ruiz v.
Musclewood Property Investments, LLC (2018) 28 Cal.App.5th 15, 20.) We will reverse
32.
if the court misapplied the law and the error was prejudicial. (See Orange County Water
Dist. v. Alcoa Global Fasteners, Inc. (2017) 12 Cal.App.5th 252, 313-314.)
When the trial court applies the proper legal standard, “[t]he determination of
employee or independent-contractor status is one of fact if dependent upon the resolution
of disputed evidence or inferences.” (Borello, supra, 48 Cal.3d at p. 349.) The decision
will be upheld if the court’s factual findings are supported by substantial evidence.
(Ibid.) “If the evidence is undisputed, the question becomes one of law.” (Ibid.)
B. Right to Control
As explained in detail above, the trial court’s analysis of the newspaper’s right of
control was based primarily on the guidelines set forth in section 4304-6. In the sole
paragraph of the court’s analysis that did not cite to section 4304-6, the court found that
the newspaper contracted for a specific outcome (timely delivery of a newspaper in dry,
readable condition), but exercised no particular control over how that outcome was
accomplished, and merely checked to see that its clients and subscribers received the
services they paid for. However, this is simply a restatement of section 4304-6, which
provides that a requirement for delivery of a newspaper in “a timely manner and in a
readable condition shall not be evidence of an employment relationship as long as other
factors indicate the absence of control by the principal of the manner and means of such
delivery.” (See Cal. Code Regs., § 4304-6, subd. (c)(4).) Indeed, the trial court relied on
California Code of Regulations section 4304-6, subdivision (c)(4) to make this same
finding later in its statement of decision.
This is not an adequate application of the common law test. Contrary to section
4304-6, Borello held there is often “little use” in determining whether the principal has
the right to control the manner and means of accomplishing the result desired. (Borello,
supra, 48 Cal.3d at p. 350; accord, Dynamex, supra, 4 Cal.5th at p. 958 [“a business need
not control the precise manner or details of the work in order to be found to have
maintained the necessary control that an employer ordinarily possesses over its
33.
employees”].) Thus, while the trial court relied on factors such as the carriers’ freedom
to choose between throwing a newspaper from their car or hand delivering it to the
subscriber’s porch to conclude the carriers were generally free of the newspaper’s
direction, Borello required the court to consider whether the newspaper retained “ ‘all
necessary control’ ” over the delegated operations. (Ayala, supra, 59 Cal.4th at p. 531;
accord, Dynamex, at p. 958; Borello, at p. 357.) The hiring entity’s right to control the
necessary operations is the “ ‘most important’ or ‘most significant’ consideration” under
Borello. (Borello, at pp. 350, 357; accord, Ayala, at p. 531.) Yet, the trial court did not
purport to consider this factor.14 Because the trial court failed to consider necessary
elements of the Borello test, and instead relied on the EDD standard, we must reverse.
(See Linton, supra, 15 Cal.App.5th at p. 1225.)
Having so concluded, the carriers ask us to hold that they are employees as a
matter of law. However, the question of whether the carriers were employees or
independent contractors is one of law only if the evidence is undisputed. (Borello, supra,
48 Cal.3d at p. 349.) We acknowledge that many of the facts found by the trial court are
suggestive of employee status. As in Borello, it appears that newspaper delivery
“involves simple manual labor which can be performed in only one correct way,”
rendering “detailed supervision and discipline unnecessary.” (Id. at pp. 356-357.) Thus,
14 The trial court also failed to consider “the intended scope and purposes”
(Dynamex, supra, 4 Cal.5th at p. 934) of Labor Code section 2802 in order to determine
whether employee or independent contractor classification “best effectuates the
[statute’s] underlying legislative intent and objective,” a necessary consideration under
Borello. (Dynamex, at p. 934.)
Labor Code section 2802 “shows a legislative intent that duty related losses
ultimately fall on the business enterprise, not on the individual employee.” (Janken v.
GM Hughes Electronics (1996) 46 Cal.App.4th 55, 74, fn. 24.) “[T]he obvious purpose
of [Labor Code section 2802] is to protect employees from suffering expenses in direct
consequence of doing their jobs.” (Grissom v. Vons Companies, Inc. (1991) 1
Cal.App.4th 52, 60; see Janken, at p. 74, fn. 24; accord, Cochran v. Schwan’s Home
Service, Inc. (2014) 228 Cal.App.4th 1137, 1144.)
34.
unsurprisingly, courts have determined that newspaper carriers operating under contracts
similar to those presented here were subject to pervasive control by the contracting
newspaper. (See Espejo, supra, 13 Cal.App.5th at pp. 343-346; Poizner, supra, 162
Cal.App.4th at pp. 853-854;15 Gonzalez v. Workers’ Comp. Appeals Bd., supra, 46
Cal.App.4th 1584, 1589-1593.)
Nonetheless, the carriers and the newspaper each point us to evidence they
contend is indicative of either the newspaper’s right to control or a lack thereof. Much of
this evidence is disputed. For the most part, the trial court did not resolve whether the
evidence was credible or whether the evidence described policies applicable to the entire
class. We therefore cannot find the carriers are employees as a matter of law, and instead
remand for the trial court to address, in the first instance, the newspaper’s right to control
the necessary operations in light of the principles set forth in this opinion.
C. Secondary Factors
The court considered 14 secondary factors derived from Borello. (See JKH
Enterprises, Inc. v. Department of Industrial Relations (2006) 142 Cal.App.4th 1046,
1064, fn. 14 [“These factors substantially include: (1) whether there is a right to fire at
will without cause; (2) whether the one performing services is engaged in a distinct
occupation or business; (3) 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; (4) the skill required in the particular occupation; (5) whether the
principal or the worker supplies the instrumentalities, tools, and the place of work for the
15 The trial court declined to consider Poizner because it was a workers’
compensation case and involved deferential review of an agency decision. Although
differently postured, the facts nonetheless may support a finding of employee status for
different types of social welfare legislation. (See Dynamex, supra, 4 Cal.5th at pp. 914-
915, 919 [approving extension of Borello analysis beyond the workers’ compensation
context; accord, Espejo, supra, 13 Cal.App.5th at p. 348 [relying on Poizner in a case
involving Labor Code violations].)
35.
person doing the work; (6) the length of time for which the services are to be performed;
(7) the method of payment, whether by the time or by the job; (8) whether or not the
work is a part of the regular business of the principal; (9) whether or not the parties
believe they are creating an employer-employee relationship; (10) whether the
classification of independent contractor is bona fide and not a subterfuge to avoid
employee status; (11) the hiree’s degree of investment other than personal service in his
or her own business and whether the hiree holds himself or herself out to be in business
with an independent business license; (12) whether the hiree has employees; (13) the
hiree’s opportunity for profit or loss depending on his or her managerial skill; and
(14) whether the service rendered is an integral part of the alleged employer’s
business.”].)
Here, too, the trial court seemingly relied on the EDD regulations to resolve at
least some of the secondary factors. For example, the court concluded that the contract
did not create an at-will employment relationship because it was terminable only for
material breach or upon 35 days’ notice. (See Cal. Code Regs., § 4304-6, subd. (c)(6);
contra, Poizner, supra, 162 Cal.App.4th at p. 854; Espejo, supra, 13 Cal.App.5th at
p. 346.) The court also considered the carriers’ lack of an hourly wage as evidence of
independence. (See Cal. Code Regs., § 4304-6, subd. (c)(2); contra, Borello, supra, 48
Cal.3d at pp. 357-358; Poizner, at pp. 855-856.) And, the court seemingly considered the
carriers’ ability to use substitutes of their own choosing as evidence of independence.
(See Cal. Code Regs., § 4304-6, subd. (c)(7); contra, Poizner, at p. 856.) On remand, the
trial court is directed to consider the secondary factors without resort to section 4304-6,
and with an eye toward determining whether employee or independent contractor status
best effectuates the intended scope and purposes of Labor Code section 2802. (Dynamex,
supra, 4 Cal.5th at p. 934.)
36.
IV. The Carriers’ Remaining Arguments
A. The Trial Court Misapplied the Burden of Proof
The trial court held the carriers “at all times” bore the burden of proof. We agree
with the carriers that the trial court erred; the newspaper bore the burden of proving the
carriers were independent contractors.
Allocation of the burden of proof presents a question of law, which we review de
novo. (See In re Aurora P. (2015) 241 Cal.App.4th 1142, 1157.)
Evidence Code section 500 provides, “Except as otherwise provided by law, a
party has the burden of proof as to each fact the existence or nonexistence of which is
essential to the claim for relief or defense that he is asserting.” Under Evidence Code
section 500, the plaintiff generally bears the burden of establishing the elements of his or
her cause of action. (Sargent Fletcher, Inc. v. Able Corp. (2003) 110 Cal.App.4th 1658,
1668.) However, the burden of proof may be reallocated by statute or common law. (See
id. at p. 1670.)
In Borello, our Supreme Court explained that “[o]ne seeking to avoid liability has
the burden of proving that persons whose services he has retained are independent
contractors rather than employees.” (Borello, supra, 48 Cal.3d at p. 349.) In so holding,
the high court relied on Labor Code section 3357, which contains a statutory presumption
that a person rendering service for another is an employee, and Labor Code section 5705,
which provides that independent contractor status is an affirmative defense to a claim that
a person was injured while performing service for an alleged employer. (Lab. Code,
§ 5705, subd. (a).) Both provisions are contained in division 4 of the Labor Code, which
pertains to Workers’ Compensation and Insurance.
Here, the carriers did not proceed to trial on a workers’ compensation claim.
Thus, the presumptions set out in Labor Code sections 3357 and 5705 do not directly
apply. Nonetheless, courts have routinely extended these presumptions to other contexts.
(See, e.g., Robinson v. George (1940) 16 Cal.2d 238, 242 [holding in the personal injury
37.
context, that “the fact that one is performing work and labor for another is prima facie
evidence of employment and such person is presumed to be a servant in the absence of
evidence to the contrary” (italics omitted)]; Linton, supra, 15 Cal.App.5th at p. 1221
[holding that “the rebuttable presumption of employment in [Labor Code,] section 3357
applies to actions brought under Labor Code provisions falling outside workers’
compensation”]; accord, Cristler v. Express Messenger Systems, Inc. (2009) 171
Cal.App.4th 72, 76, 82-84 [burden was on employer to establish independent contractor
status on claims for failure to pay overtime compensation, failure to provide itemized
wage statements, failure to indemnify business expenses, and unfair and unlawful
business practices].) Our Supreme Court recently cited to this line of authority with
approval, stating: “[T]he rule that a hiring entity has the burden of establishing that a
worker is an independent contractor rather than an employee has long been applied in
California decisions outside the workers’ compensation context.” (Dynamex, supra, 4
Cal.5th at p. 957, fn. 24; see id. at pp. 914-915.)
The newspaper nonetheless suggests that the carriers bear the burden of proof
pursuant to Evidence Code 500 because their claim is not brought under the Labor Code,
but rather the UCL. However, where, as here a UCL claim is derivative of an underlying
violation of law, it must stand or fall with the underlying claim. (See Medical Marijuana,
Inc. v. ProjectCBD.com (2020) 46 Cal.App.5th 869, 896-897.) Accordingly, the burden
to prove an unlawful act or practice rests with the party who bears the burden on the
underlying claim. (Parada v. East Coast Transport Inc. (2021) 62 Cal.App.5th 692, 695,
698-699 [placing burden on employer to prove worker was an independent contractor on
a UCL claim based on an alleged wage order violation]; Maldonado v. Epsilon Plastics,
Inc. (2018) 22 Cal.App.5th 1308, 1320, 1327 [placing burden on employer to prove
worker was an independent contractor on a UCL claim based on alleged violation of Lab.
Code, § 510 for failure to pay overtime].) It was the newspaper’s burden to establish the
38.
carriers were independent contractors for purposes of Labor Code section 2802. The
same is true on the carriers’ derivative UCL claim.
The newspaper also suggests the carriers stipulated that they bore the burden of
proof. This argument strains credulity. The “stipulation” cited by the newspaper is one
of several “stipulations and further recitals” agreed to by the parties. (Boldface,
capitalization & underlining omitted.) The purported stipulation memorializes certain
rulings of the trial court for conduct of the bifurcated trial. Additionally, the purported
stipulation indicates these rulings were derived from the newspaper’s “Case Management
Conference Statement.”16 The paragraph at issue states, among other things, “Because
[the carriers] have the burden of proof on those issues, they will proceed first.” However,
the record does not suggest this is anything other than an agreement that the court so
ruled. The newspaper directs us to no point in the record in which the carriers agreed
they bore the burden to prove employee status. To the contrary, the carriers asserted in
the trial court that they bore only an initial burden to demonstrate the carriers were
performing work for the newspaper, whereas the newspaper bore the ultimate burden to
prove the carriers were independent contractors.
Accordingly, we conclude the newspaper bore the burden of proving the carriers
were independent contractors. The trial court misallocated the burden of proof.
B. Equitable Considerations do not Bear on Liability
The carriers argue the trial court erred in relying on equitable considerations to
determine the newspaper’s liability. To the extent the trial court did so, we agree it was
error.
In considering whether the language of the contracts concerning independent
contractor status was merely subterfuge, the trial court stated as follows:
16 The Case Management Conference Statement itself is not contained in the record
before us.
39.
“This is an action in equity. The [newspaper] complied with and
relied upon California’s EDD regulations regarding which factors are not to
be taken as evidence of employment in the context of newspaper carriers.
In fact, Tom Cullinan[17] testified that in 2000 the [S]tate of California
conducted an analysis of the [newspaper’s] relationship with its carriers and
concluded that the carriers were properly classified as independent
contractors. [Citation.] Although intent is not an element in an unfair
business practices case, the understanding of the parties is relevant to an
analysis of employment versus independence. It would be unfair for the
[newspaper] to be penalized for relying upon the Regulations and following
them. Given their close adherence to the EDD Regulations, the
[newspaper] believed that the carriers who contracted with it were
independent contractors. This belief was validated by the EDD’s audit of
[the newspaper] in 2000. [The carriers] submitted nothing to refute the
[newspaper’s] bona fide belief in the independent contractor status of the
carriers. The contracts were not a mere subterfuge. As set forth above, the
court considered both the common law test and the EDD Regulations and
finds that application of both support a conclusion that the carriers were
properly classified as independent contractors.”18 (Italics added.)
Our Supreme Court has explained the proper role for equitable considerations in a
Business and Professions Code section 17200 proceeding. “The UCL imposes strict
liability when property or monetary losses are occasioned by conduct that constitutes an
unfair business practice.” (Cortez v. Purolator Air Filtration Products Co. (2000) 23
Cal.4th 163, 181 (Cortez).) Thus, equitable considerations generally cannot defeat a
defendant’s liability: “[E]quitable defenses may not be asserted to wholly defeat a UCL
17 Cullinan is the president and publisher of The Fresno Bee.
18 The carriers also argue this ruling is not factually supported because Cullinan
testified it was the EDD, rather than the state, which audited the newspaper.
Additionally, the carriers contend, without citation to the record, that the EDD held the
carriers to be employees, and this finding was overturned by an administrative law judge.
Prior to trial, the trial court declined to take judicial notice of the administrative law
judge’s decision.
There may be merit to the carriers’ arguments. However, because these arguments
are not properly presented, we do not address them. (See Cal. Rules of Court, rule
8.204(a)(1)(B); Consolidated Irrigation Dist. v. City of Selma (2012) 204 Cal.App.4th
187, 201 [failure to comply with rule requiring each argument be presented under a
separate heading forfeits the argument].)
40.
claim since such claims arise out of unlawful conduct.” (Id. at p. 179.) To the extent the
trial court determined it would be unfair to hold the newspaper liable for improperly
classifying the carriers as independent contractors, the trial court erred.
Equitable defenses such as good faith may be considered in fashioning a remedy
under Business and Professions Code section 17200. (Cortez, supra, 23 Cal.4th at
pp. 180-181; People ex rel. Harris v. Aguayo (2017) 11 Cal.App.5th 1150, 1173.)
However, the court is required to consider the relative equities on both sides of the
dispute, and not merely the unfairness to one party. (Cortez, at p. 180; see id. at p. 182(conc. opn. of Werdegar, J.) [“[E]quitable considerations normally should not lead a trial
court to reduce or eliminate a UCL restorative order when it is established that the
defendant committed an unlawful practice, but the defendant claims that its violation was
unintentional or committed in a good faith belief the action was lawful. Rather, in
general, as between a person who is enriched as the result of his or her violation of the
law, and a person intended to be protected by the law who is harmed by its violation, for
the violator to retain the benefit would be unjust.”].) In any event, here, any weighing of
the equities was premature, as the bifurcated trial proceeded only on the issue of liability.
C. The Trial Court’s Reliance on Unrepresentative Testimony
The carriers contend the trial court improperly relied on testimony from
unrepresentative absent class members to conclude the carriers were independent
contractors.
We are unable to evaluate the merits of this argument. The record in this case is
comprised primarily of appellant’s appendix, which spans 20 volumes and more than
11,000 pages. The reporter’s transcript is comprised of nearly 8,000 pages. Although the
carriers direct us to portions of the statement of decision they contend were based on
“cherry-picked witness testimony,” they do not direct us to the testimony at issue. “It is
not the function of this court to comb the record looking for the evidence or absence of
evidence to support [a party’s] argument.” (People ex rel. Reisig v. Acuna (2010) 182
41.
Cal.App.4th 866, 879; see People ex rel. Strathmann v. Acacia Research Corp. (2012)
210 Cal.App.4th 487, 502-503 [if a party fails to support its argument with necessary
citations to the record the argument will be deemed waived].)
Moreover, we note the authority cited by the carriers provides that a party seeking
to extrapolate facts regarding classwide liability from the testimony of a small sample of
absent class members must develop their sampling strategy with the input of an expert.
(Duran v. U.S. Bank National Assn. (2014) 59 Cal.4th 1, 13, 38-40.) However, in
motions in limine regarding the testimony of absent class members, the newspaper
disavowed any intent to extrapolate classwide data from the testimony of absent class
members, stating, “On the contrary, [the newspaper] will offer class member testimony to
show that certain facts do not apply classwide.” It was on this representation that such
testimony was permitted. The trial court is directed to remain mindful of this limitation
on remand.
DISPOSITION
The judgment is reversed. Costs are awarded to the carriers. (California Rules of
Court, rule 8.278(a)(1).)
DETJEN, J.
WE CONCUR:
HILL, P. J.
FRANSON, J.
42.