2009-00033950-CU-OE

Lorianne Sawin vs. McClatchy Company

Nature of Proceeding: Motion for Summary Judgment and/or Adjudication

Filed By: Howard, Lauren T.

Defendants’ Motion for Summary Judgment or in the Alternative for Summary
Adjudication of Issues is DENIED.

The Court rules on Plaintiffs’ Evidentiary Objections as follows: objections no. 3 (Dec.
of McCollester) is SUSTAINED, the remainder are OVERRULED. Plaintiffs must
submit a separate, formal Order on evidentiary objections in compliance with California
Rules of Court, Rule 3.1354(c) for the Court’s signature at the time the proposed order
on the motion is submitted.

The Court rules on Plaintiffs’ Evidentiary Objections to the Reply evidence as follows:
objections nos. 10-18 are SUSTAINED, the remainder are OVERRULED. Plaintiffs’
objection to the Reply Separate Statement is OVERRULED.Plaintiffs must submit a
separate, formal Order on evidentiary objections in compliance with California Rules of
Court, Rule 3.1354(c) for the Court’s signature at the time the proposed order on the
motion is submitted.

The Court rules on Defendants’ Evidentiary Objections as follows: the objections to the
Nelson Dec., nos. 4, 6, 8, 13 and 22 are SUSTAINED, the remainder is OVERRULED;
Defendants’ Evidentiary Objections to the Sawin Dec., the Holliman Dec. and the
Trahin Dec. are OVERRULED. Defendants must submit a separate, formal Order on
evidentiary objections in compliance with California Rules of Court, Rule 3.1354(c) for
the Court’s signature at the time the proposed order on the motion is submitted.

Defendants’ Motion to Seal plaintiff’s Exhibits is GRANTED. Cal. Rules of Court, Rule 2.550(d). The documents filed conditionally under seal are either subject to the
Protective Order, contain third parties’ social security numbers, contain contact
information for Bee subscribers and/or contain defendants’ proprietary information
constituting trade secrets. The Clerk is instructed to file under seal the
documents set forth in the formal order.

Defendants’ Request for Judicial Notice is GRANTED.

Plaintiffs’ Request for Judicial Notice is GRANTED.

Plaintiffs’ Fourth Amended Complaint sets forth nine causes of action against
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defendants: the 1 for Failure to Pay Minimum Wage and Overtime Wages (Labor
Code, secs. 1194,1197, 1197.1; IWC Wage Order No. 1-2001; C.C.R, Title 8, § 11010)
the 2nd for Failure to Provide Meal Periods, or Compensation in Lieu Thereof (Lab.
Code §§226.7, 512; IWC Order No. 1- 2001; Cal. Code Regs., Title 8 §11010), the 3rd
for Failure to Provide Rest Periods or Compensation in Lieu Thereof (Lab. Code,
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§§226,226.7; IWC Order No. 1-2001; C.C.R , Title 8, §11010), the 4 for Failure to
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Reimburse for Reasonable Business Expenses (Labor Code, sec. 2802), the 5 for
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Unlawful Deductions from Wages (Labor Code §§221,223), the 6 for Failure to Pay
for Training (29 C.F.R. §§ 785.27, et seq.), the 7th for Failure to Provide Itemized

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Wage Statements (Labor Code §§226, 226.3), the 8 for Failure to Keep Accurate
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Payroll Records (Labor Code §1174) and the 9 for Unfair Business Practices (Bus. &
Prof. Code §17200).

This Court’s Minute Order of June 15, 2013, certified the 4th cause of action (Labor

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Code, sec. 2802, indemnification of expenses), the 8 cause of action (Labor Code,
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sec. 1174, payroll records) and 9 cause of action (Bus. & Prof. Code, sec. 17200) as
class claims. The remaining causes of action were to be maintained as individual
plaintiffs’ claims only.

Plaintiffs’ motion, granted by this Court’s Minute Order on Sept. 26, 2013, dismissed
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the 4 and 8 class causes of action and all of the remaining individual Labor Code
causes of action. (Amended MO of 09/26/13.)

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This Court therefore only addresses the single remaining 9 class action cause of
action for violation of Bus. & Prof. Code, sec. 17200.

The moving party bears the initial burden to make a prima facie showing of the
nonexistence of any genuine issue of material fact. A prima facie showing is one that
is sufficient to support the position of the party in question. The burden of the moving
party is to “persuade the court that there is no material fact for a reasonable trier of fact
to find. All doubts as to whether any material, triable issues of fact exist are to be
resolved in favor of the party opposing summary judgment. LPP Mortgage, Ltd. v.
Bizar (2005) 126 Cal. App. 4th 773, 776.

Undisputed Material Facts

McCIatchy Newspapers, Inc. (“The Bee”) is a newspaper publishing company. (UMF
4.) Its business is journalism, carried out in the collection and generation of content for
digital publication and a daily newspaper – The Sacramento Bee. The Bee has always
contracted with third party independent contractors for home delivery of The Bee.
(UMF 5.)

The Class is defined as “all individuals currently or formerly engaged by Defendants as
newspaper home delivery carriers of the Sacramento Bee newspaper, and who signed
contracts directly with Defendants, in the State of California, between February 2005
and [July 31, 2009].” (UMF 1)

Distributors are expressly excluded from the Class. As plaintiff has established that
McCollester was only a distributor of the Bee during the Class period, the objections to
his deposition testimony are sustained, and his declaration is not considered for the
purposes of this motion.

Summary judgment on Issue 1 is DENIED.

Defendants contend that they are entitled to summary judgment on all of plaintiffs’
causes of action because the class members were independent contractors, not
employees, because they had the right to control the means and manner of
performance and the class members were independent contractors, not employees
because the secondary factors confirm the class members’ contractor status. (UMF 1-
65.)

The existence of an employment relationship is a question for the trier of fact, but can
be decided by the court as a matter of law if the evidence supports only one
reasonable conclusion. Beaumont-Jacques v. Farmers Group, Inc. (2013) 217 Cal.
App. 4th 1138, 1142-1143.

Test for Whether Plaintiffs are Employees or Independent Contractors

The 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. S. G. Borello & Sons, Inc. v. Department of Industrial Relations
(1989) 48 Cal. 3d 341, 350; Vernon v. State of California (2004) 116 Cal. App. 4th 114,
124.

The process of distinguishing employees from independent contractors is fact specific
and qualitative rather than quantitative. Right of control retains significance, but is no
longer determinative. State Compensation Ins. Fund v. Brown (1995) 32 Cal. App. 4th
188, 202.

However, the courts have long recognized that the “control” test, applied rigidly and in
isolation, is often of little use in evaluating the infinite variety of service arrangements.
While conceding that the right to control work details is the “most important” or “most
significant” consideration, the authorities also endorse several “secondary” indicia of
the nature of a service relationship. Id.

The secondary factors usually considered by courts are (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 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. Sotelo v. Medianews Group, Inc. (2012) 207 Cal. App.
4th 639, 656-657

Right to control

The key factor in this determination is the right to control the manner and means of
accomplishing the result desired. With an independent contract, the parties have
contracted for the “result” of the work rather than the “means by which it is
accomplished” (the traditional “control” test) S. G. Borello & Sons, Inc. v. Department
of Industrial Relations, supra, 48 Cal. 3d 341, 351, fn. 5.

Per the class definition, every class member signed an Independent Contractor Home
Delivery Distribution Agreement directly with The Bee. (UMF 7.)

Moving party asserts that the parties’ rights emanated from the form Independent
Contractor Home Delivery Distribution Agreement (IC agreement) signed by each of its
carriers. The contract sets forth the deliverables required of the carrier by the
defendants. The carriers agreed that while providing the contractually defined delivery
service, they would maintain certain insurance, provide a bond, indemnify The Bee for
claims arising from the contractor’s provision of services, and comply with applicable
laws. (UMF 12, 13, paras. 2-5, 7-8, 12-18, 21-23).

The IC Agreement at para. 16 provides for the Independent Contractor status of the
carriers. It provides that, in all other respects, the contractor “may operate Contractor’s
business as Contractor chooses.” (UMF 14.) The IC agreement states, among other
things: “Publisher 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. . . . 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 applicable law.” (UMF 8-9 &
13-14, para. 16).

However, the fact that the contract the carriers entered into labeled them as
independent contractors is of little to no significance. “The label placed by the parties
on their relationship is not dispositive, and subterfuges are not countenanced.” Borello,
supra, 48 Cal. 3d 341, 349; see also Antelope Valley Press v. Poizner (2008) 162 Cal.
App. 4th 839, 856.

The IC Agreements provided that: (a) Contractor is free to utilize one or more vehicles
of Contractor’s selection; (b) Contractor is free to set Contractor’s own working hours;
(c) Contractor is free to set Contractor’s own order of deliveries; (d) Contractor is and
to purchase equipment and supplies wherever Contractor chooses; (h) is free to accept or reject any suggestions, tips or instructions provided by Publisher regarding
the manner and means by which Contractor performs its obligations pursuant to this
agreement. (i) Contractor is 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. Contractor agrees to
exercise sole and exclusive control and supervision of such persons. (IC Agreement,
paras. 16, 17.)

In opposition, plaintiffs assert that since all carriers signed the same standard contract,
this fact reflects the Bee’s carriers relative lack of control as compared to the
defendants. Plaintiffs contend that the standardized Bee contract reflects that the
carriers are employees, not independent contractors, as they were required to sign the
contract to deliver newspapers. (AMF 1)

Moving party asserts that the carriers negotiated changes to their contractual fees.
(MF 39) However, only the testimony of Morales, who was a carrier for only 30 days,
is admissible to support this material fact. Further testimony of Morales cited by
plaintiffs reflects that during that 30 day period she was losing $15 to $20 dollars a
day, due to high gas prices, as the Bee would only pay a per newspaper price even for
her rural route in Clarksburg. In opposition, plaintiff provides evidence that some of the
carriers were not able to negotiate any of the terms of the contract they entered into.
(AMF 2, Sawin and Holliman Decs.)

Similarly, moving parties assert that the contractors negotiated changes to the amount
of contractual complaint charges, and changes to the Bee’s delivery deadlines, again
relying only on the testimony of Morales. (MF 40, 41.) Plaintiffs dispute these Material
Facts, with citations to the declarations of carriers who declare they had no opportunity
to negotiate any terms. (AMF 2)

Secondary Factors

(1) At Will

Defendants assert that the 30 day notice requirement set forth in the IC Agreement,
before terminating the carrier’s relationship with the Bee, without cause, suggests a
contractor relationship. (MF 7, 15) Beaumont-Jacques v. Farmers Group, Inc. (2013)
217 Cal. App. 4th 1138, 1147.

Plaintiffs do not dispute that notice was required, but assert that the right to terminate
at will is strong evidence of an employment relationship.

In Antelope Valley Press v. Poizner (2008) 162 Cal. App. 4th 839, 846 the contract
provided “Either party can terminate the contract without cause with 30 days’ written
notice. Either party can terminate the contract, effective immediately with written
notice, if the other party commits a material breach.”

(2) Distinct occupation or business

Moving parties assert that a distinct occupation or business, including simultaneous
work for multiple principals, indicates contractor status. State Comp. Ins. Fund (1995)
32 Cal.App.4th 188, 203; Taylor v. Waddell & Reed, Inc., No. 09-2909 AJB (WVG),
2013 U.S. Dist. LEXIS 14939 (S.D. Cal. Feb. 1, 2013) (“Courts have often deemed tax
treatment and the way workers characterize their tax status as indicative of the true
nature of their status.”).

The Carriers were permitted by the IC Agreement to perform Transportation services
for other companies, including but not limited to competitors of the Publisher. (IC
Contract, para. 16.)

Here, moving party asserts that some of the carriers had Contractors had business
licenses, business names, business cards, interacted with customers, adjusted
complaints, filed business tax returns and worked for multiple principals at the same
time. (UMF 27- 28, 30, 32-34, 36-38.)

However, plaintiff’s objections to the McCollester declaration have been sustained, as
he was a distributor, not a carrier. Thus MF 29-31 are not considered and portions of
the evidence in support of MF 35-37 are stricken.

(3) Under direction or without supervision

Moving parties assert that its carriers work without direction or supervision by the Bee.
(MF 4-5.)

Plaintiffs submit carriers’ declarations that they were instructed how to assemble their
newspapers, Bee managers watched them assemble their papers, giving verbal
instructions, they were told that the Bee monitored their home deliveries, and the Bee
managers would talk to them about customer complaints.

In opposition, plaintiffs assert that here, as in Antelope Valley Press v. Poizner (2008)
162 Cal. App. 4th 839, 854, The Bee monitored plaintiffs’ performance through the
use of the many financial penalties, as well complaints of customers, and the visual
surveys to determine whether papers have been delivered, all of which enabled the
Bee to maintain significant supervision over the carriers. Moreover, The Bee has
control over the price paid by customers to the Bee, which includes both the cost of the
newspaper and the delivery service. (AMF 8-18)

(4) Skill Required

Delivering papers requires no particular skill. As in Antelope Valley Press v. Poizner
(2008) 162 Cal. App. 4th 839, 855, this factor indicates the carriers are employees.

(5) Who supplies the instrumentalities, tools, and the place of work

Moving party asserts that the UMF demonstrate that the carriers provided their own
instrumentalities and tools.

Defendants rely on the testimony of only three carriers (Jones, Morels and
McCollester) to establish the relevant facts. (UMF 37, 43-47) Of those three,
McCollester was not a class member, but a distributor for the Bee during the relevant
period, thus his testimony has been excluded.

Therefore moving parties have only shown that one carrier, Jones, bought small cars
and bagged his own newspapers to keep them from getting wet. Morales testified that she evaluated, on a case by case basis, if it was worth redelivering a customer’s
newspaper, and Jones had a fax line for customer communications.

Plaintiff submits the declarations of other carriers that they always got their supplies
from the Bee, including poly bags and rubber bands, which were deducted from their
wages.

It is undisputed that the location of work, home delivery of newspapers, was away from
the defendant’s premises. (UMF 12, 49-58) However, some plaintiffs declare that
they worked out of the Bee’s distribution center.

(6) Length of time of services

The duration of the carriers’ work for the Bee varied, so this factor is not dispositive.

(8) Regular business of the principal

There is no dispute that home delivery of newspapers is part of the regular business of
the Bee.

(9) Belief in employer-employee relationship

The form contracts all provided that the carriers were engaged as “an independent
contractor and not as an employee” and represented that he, she or it was an
independent business and was contracting with The Bee as such, including that The
Bee would treat the contractor as an independent contractor for tax purposes. (MF 7-9)

In Antelope Valley Press v. Poizner, supra, 162 Cal. App. 4th 839, 856 the appellate
court concluded that, despite the carriers having signed contracts that purport to
decide they function as independent contractors rather than employees, substantial
evidence supports the findings that they are employees.

(10) Classification bona fide or subterfuge

However, the fact that the contract the carriers entered into labeled them as
independent contractors is of little to no significance. “The label placed by the parties
on their relationship is not dispositive, and subterfuges are not countenanced.” Borello,
supra, 48 Cal. 3d 341, 349.

(11) Carrier’s investment, independent business

Moving parties’ sole admissible evidence on this issue is that Mike Jones purchased
small cars to deliver newspapers. (UMF 43) The evidence of McCollester is
inadmissible.

Plaintiff asserts that, as in Poizner, supra, the carriers’ only investment was the use of
their vehicle and their time. They had no capital investment other than their vehicles.

(12) Carrier’s employees

Defendants rely on the testimony of only three people (Jones, Morales and
McCollester) to establish that their contractors could use helpers, substitutes or
subcontractors to deliver the papers. (MF 17-21.) Of those three, McCollester was not
a class member, but a distributor for the Bee during the relevant period, thus his
testimony has been excluded. Morales was only a carrier contracted with the Bee for
30 days.

(13) Carrier’s opportunity for profit or loss

A carrier’s remuneration is in very large part dependent on nonnegotiated financial
terms in the contract rather than on the carrier’s initiative, judgment or managerial
abilities. Antelope Valley Press v. Poizner, supra, 162 Cal. App. 4th 839, 855.

Payment for the carriers is essentially in piecework fashion, like turning out dresses for
a clothing manufacturer, with a certain number of papers needing to be delivered each
day. Id. at 856.

As above, the testimony of Morales cited by plaintiffs reflects that during that 30 day
period when she had a delivery contract with the Bee she was losing $15 to $20
dollars a day, due to high gas prices, as the Bee would only pay a per newspaper price
even for her rural route in Clarksburg.

(14) Service rendered is an integral part of the business.

Moreover, delivery of the Bee’s publications to homes, retail stores, and newspaper
vending machines is part and parcel of the newspaper business. Indeed, there was
evidence that Bee’s has “admitted employees” who make deliveries of its publications.
Poizner, supra at 856.

The Court finds that the evidence in support of the many factors, especially the right to
control, remains in dispute. The Court must leave the determination of whether the
facts support the conclusion that the plaintiffs were employees or independent
contractors to the finder of fact at trial.

Summary judgment on Issue 2 is DENIED.

Defendants contend that they are entitled to summary judgment on all of plaintiffs’
causes of action because the class members were independent contractors; they are
precluded from proceeding under Labor Code and Business and Professions Code
section 17200. (MF 1-65 and 67)

As this issue is dependent on the outcome of the first issue, it must also be denied.

Summary judgment on Issue 3 is MOOT.

Defendants contend that they are entitled to summary judgment on plaintiff’s’ first,
second, third, fourth, fifth, sixth, seventh and eighth causes of action based on the
applicable statutes of limitations. (UMF 2 and 69.)

Each of the Labor Code causes of action has been voluntarily dismissed by the
plaintiff. Therefore, there is no need to rule on the application of the applicable
statutes of limitations to causes of action no longer before this Court.

As summary adjudication of each cause of action is not granted, the motion for summary judgment is also denied.

The prevailing party is directed to prepare a formal order complying with C.C.P. §437c
(g) and C.R.C. Rule 3.1312.