Gonzales v. San Gabriel Transit, Inc.

• Decision Date: 08 October 2019
• Docket Number: B282377
• Court: California Court of Appeals Court of Appeals
• Parties: Francisco GONZALES, Plaintiff and Appellant, v. SAN GABRIEL TRANSIT, INC., et al., Defendants and Respondents.

40 Cal.App.5th 1131

253 Cal.Rptr.3d 681

Francisco GONZALES, Plaintiff and Appellant,

v.SAN GABRIEL TRANSIT, INC., et al., Defendants and Respondents.

B282377

Court of Appeal, Second District, Division 4, California.

Filed October 8, 2019

Law Offices of Thomas W. Falvey, Thomas W. Falvey, Pasadena, Armand R. Kizirian, Glendale and Michael H. Boyamian, Pasadena, for Plaintiff and Appellant.

Dunn DeSantis Walt & Kendrick, James A. McFaul, Bradley A. Lebow and Kevin V. DeSantis, San Diego, for Defendants and Respondents.

WILLHITE, Acting P. J. Appellant Francisco Gonzales formerly worked as a driver for respondent San Gabriel Transit, Inc. (SGT), a company that coordinates with public and private entities to arrange transportation services for passengers. In February 2014, Gonzales filed this putative class action seeking to represent over 550 drivers engaged by SGT as independent contractors from February 2010 to the present. Among other things, Gonzales alleged that by misclassifying drivers as independent contractors, SGT violated various provisions of the Labor Code ¹ and the Industrial Welfare Commission’s (IWC) wage orders,² particularly Wage Order No. 9-2001 (codified at Cal. Code Regs., tit. 8, § 11090 [Wage Order No. 9] ), which governs the transportation industry, and engaged in unlawful business practices under Business and Professions Code section 17200 (17200). The trial court did not evaluate individual causes of action. Rather, analyzing the action as a whole, premised on terms contained in several lease agreements in effect during the class period, the court found that Gonzales failed to demonstrate the requisite community of interest or typicality among SGT drivers under the then—prevailing legal test, and denied the motion for class certification.

While this appeal was pending, the California Supreme Court decided Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903, 232 Cal.Rptr.3d 1, 416 P.3d 1 ( Dynamex ), in which it adopted the "ABC test" used in other jurisdictions to streamline and provide consistency in analyzing the distinction between employees and independent contractors for purposes of wage order claims.³ We conclude that: (1) the ABC test adopted in Dynamex is retroactively applicable to pending litigation on wage and hour claims; (2) the ABC test applies with equal force to Labor Code claims that seek to enforce the fundamental protections afforded by wage order provisions; and (3) statutory claims alleging misclassification not directly premised on wage order protections, and which do not fall within the generic category of "wage and hour laws," are appropriately analyzed under what has commonly been known as the " Borello " test (referring to S.G. Borello and Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, 256 Cal.Rptr. 543, 769 P.2d 399 ( Borello )).⁴

Because the trial court did not have the benefit of the Dynamex decision, we reverse and remand the matter with directions. On remand, the trial court shall: (1) evaluate which alleged Labor Code claims enforce wage order requirements, and which do not; (2) as to the Labor Code claims that enforce wage order requirements, apply the ABC test as set forth in Dynamex to determine whether the requirements of commonality and typicality for purposes of certification of a class action are satisfied; (3) as to the Labor Code claims that do not enforce wage order requirements, apply the Borello test to determine whether the requirements of commonality and typicality for purposes of certification of a class action are satisfied; (4) as to the derivative claim under section 17200, apply the ABC or Borello test as appropriate for the underlying alleged unlawful business practice; and (5) in the event the court determines class certification is appropriate for any claims, complete the analysis by determining whether proceeding as a class action would be superior to alternative methods of adjudication.

FACTUAL AND PROCEDURAL BACKGROUND

I. The Action

In the operative first amended complaint, Gonzales alleges that he and a similarly situated class of SGT’s drivers during the four years immediately preceding and during the pendency of this action were misclassified as independent contractors in violation of the Labor Code, administrative regulations and wage order provisions, and that SGT engaged in unfair business practices.⁵

Specifically, Gonzales alleged causes of action for (1) unpaid wages ( § 1194 ); (2) failure to pay minimum wage ( §§ 1194, 1194.2 ); (3) failure to pay overtime compensation ( §§ 1194, 510 ); (4) failure to provide meal and rest breaks (§§ 226.7, 512); (5) failure to furnish accurate wage statements (§ 226); (6) waiting time penalties (§§ 201-203); (7) failure to reimburse business expenses (§ 2802, 226.8; Wage Order No. 9(B); (8) common law conversion; (9) unfair business practices ( § 17200 ); (10) misclassification as independent contractor (§ 226.8); (11) recovery for unlawful wage deductions (§§ 221, 223); (12) conversion (§ 450); and (13) accounting.⁶

In January 2016, Gonzales filed a motion seeking class certification for approximately 560 members of a class defined as "[a]ll non-employee Drivers, or Lessees, of [SGT] from February 14, 2010 to the present (the class period) who drove a taxicab or van and paid [SGT] a weekly vehicle lease." Alternatively, Gonzales proposed certification of three subclasses:

Subclass A : All non-employee Drivers, or Lessees, of SGT from February 14, 2010 to the present who drove a taxicab or van, paid SGT a weekly lease, and transported passengers in connection with Access Paratransit Services, Inc.

Subclass B : All non-employee Drivers, or Lessees, of SGT from February 14, 2010 to the present who drove a taxicab or van, paid SGT a weekly vehicle lease, and transported school children in connection with a school route; and

Subclass C : All other non-employee Drivers, or Lessees, of SGT from February 14, 2010 to the present who drove a taxicab or van and paid SGT a weekly vehicle lease.

The trial court denied the motion for class certification. Because we reverse the trial court’s ruling and remand the case for reconsideration, we summarize only those details necessary to make our remand instructions clear.

II. SGT’s Business During the Class Period

SGT is a transportation company which facilitates traditional taxicab passenger service. In addition, SGT maintains "house accounts," i.e., service contracts with school districts, cities and private entities (such as movie studios and hotels), to arrange transportation services for passengers. SGT also coordinates with Access Paratransit Services, Inc. (Access), to provide paratransit services for some individuals with disabilities,⁷ and with LA Taxi Cooperative, Inc., dba Yellow Cab Co (LA Taxi), to provide drivers for school routes for students with special needs in various school districts. SGT’s drivers may drive Access or school routes, service house accounts, transport passengers from Los Angeles International Airport (LAX) or within specific geographic areas, or perform some combination of these services.

A. Taxi Service

With respect to taxi passenger service during the class period, SGT used various overlapping models and written agreements with its drivers. From February 2010 until January 2013, SGT: (1) entered into various written agreements by which it "leased" taxicabs and equipment to drivers, (2) operated general dispatch services, and (3) provided insurance, marketing and other industry-related services to taxicab drivers who leased vehicles or were owner-operators for general passenger services. Driver eligibility required a valid California driver’s license and no special training. Beginning in January 2013, SGT operated two general taxicab dispatch services, available on differing bases, depending on whether the driver operates a Bell Cab leased from SGT.

Drivers could obtain passengers by "cash call" offers through SGT’s dispatch service, being hailed down in the street, waiting at sanctioned taxicab stands, or by fostering personal relationships with passengers who would contact the driver directly. SGT also made house account runs available to some drivers. Drivers whose customers paid in cash did not share any portion of the fare or their tips with SGT. Drivers whose customers paid by credit card, voucher, or coupon agreed to pay SGT processing or administrative fees of up to 10 percent per fare.

B. Access Service

In February 2010, SGT began coordinating with Access to transport paratransit passengers. Access drivers must satisfy specific criteria not required of drivers who provide traditional taxicab service. These criteria, established by Access but enforced by SGT, include undergoing background checks and special training, wearing identification badges and uniforms (clothing and shoes of specified colors), and agreeing to abide by a code of conduct dictated by Access. Access determines fare rates for Access trips and pays SGT. SGT, in turn, pays drivers after deducting a 10 percent fee to cover SGT’s "waiting time" cost—the time from when an Access trip is taken to when Access pays SGT for that trip.

C. School Runs

In coordination with LA Taxi, SGT also provides drivers for school runs for students with special needs in various school districts. To be eligible to service school runs, drivers must receive special training from LA Taxi, and agree to abide by LA Taxi rules, school district requirements and adhere to parental direction. LA Taxi sets the payment rate for school runs and pays SGT directly. SGT then pays the driver, after deducting a 10 percent processing fee.⁸

D. LAX Service

Drivers who choose to transport passengers from LAX must satisfy certain requirements and agree to comply with rules dictated by the Los Angeles Department of Transportation (LADOT), and abide by LAX franchise requirements. LAX drivers are dispatched to terminals by LAX employees, not SGT.

E. IRS 1099...