Depianti et al v. Jan-Pro Franchising International, Inc.

Filing 369

ORDER RE MOTION FOR CLASS CERTIFICATION AND MOTIONS FOR SUMMARY JUDGMENT. Signed by Judge William Alsup. (whalc4, COURT STAFF) (Filed on 8/2/2022).

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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GLORIA ROMAN, GERARDO
VAZQUEZ, and JUAN AGUILAR,

No. C 16-05961 WHA

United States District Court
Northern District of California

Plaintiffs,
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v.
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ORDER RE MOTION FOR
CLASS CERTIFICATION
AND MOTIONS FOR
SUMMARY JUDGMENT

JAN-PRO FRANCHISING
INTERNATIONAL, INC.,
Defendant.

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INTRODUCTION
In this wage-and-hour misclassification action, plaintiffs move for class certification as to

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all claims. Plaintiffs and defendant move for summary judgment as to all claims. Plaintiffs’

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motion for class certification is GRANTED IN PART AND DENIED IN PART. Plaintiffs’ motion

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for summary judgment is GRANTED IN PART AND DENIED IN PART. Defendant’s motion for

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summary judgment as to all certified issues is DENIED. A separate order on the instant briefing

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shall resolve the parties’ motions for summary judgment as to the uncertified, individual claims

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and issues that remain in this action.

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STATEMENT

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1.

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Plaintiffs Gloria Roman, Gerardo Vazquez, and Juan Aguilar performed janitorial

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services on behalf of defendant Jan-Pro Franchising International, Inc. Plaintiffs claim

PROCEDURAL HISTORY.

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defendant misclassified them and the putative class members as independent contractors.

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They allege defendant violated California minimum wage, overtime, expense reimbursement,

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and unlawful deduction laws, and they seek compensation on behalf of the putative class.
A prior order in this action granted summary judgment in favor of defendant as to the

United States District Court
Northern District of California

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misclassification claim. Plaintiffs appealed that order. During the appeal, the California

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Supreme Court adopted the “ABC test” for determining employee classification for claims

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governed by California wage orders. Dynamex Operations W., Inc. v. Super. Ct., 4 Cal. 5th

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903 (2018). Thereafter, our court of appeals directed the parties to brief the effect of Dynamex

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on the merits of this case. Our court of appeals did not discuss the factor test outlined in

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Borello, which California courts use to determine employee classification for purposes of non-

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wage-order claims. S. G. Borello & Sons, Inc. v. Dep’t of Indus. Rels., 48 Cal. 3d 341 (1989).

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Our court of appeals certified the issue of whether Dynamex applied retroactively to the

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California Supreme Court. The high court answered yes. Based on that answer and the

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parties’ briefing, our court of appeals vacated the previous summary judgment order and

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remanded for this order to consider the merits in light of Dynamex. Vazquez v. Jan-Pro

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Franchising Int’l, Inc., 986 F.3d 1106, 1110 (9th Cir. 2021). Specifically, our court of appeals

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stated that this order “should consider all three prongs of the ABC test . . . .” Id. at 1122. Our

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court of appeals also provided significant guidance on whether summary judgment is

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appropriate as to the misclassification claim. Id. at 1122–28.1

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2.

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At all material times, defendant has been an international janitorial cleaning business.

FACTUAL BACKGROUND.

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It uses a franchising model with three tiers. The top tier consists of defendant, Jan-Pro

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International, Inc. The middle tier consists of “master franchisees” or “master owners” —

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regional, third-party entities — to whom defendant sells exclusive rights to use the

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This action began in the District of Massachusetts in 2008. That district severed plaintiffs’
claims and transferred them to this district. Although the District of Massachusetts eventually
dismissed the original action (and the Court of Appeals for the First Circuit affirmed), our court of
appeals rejected defendant’s contention that res judicata or the doctrine of law of the case bar
plaintiffs’ claims in this severed action.
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trademarked “Jan-Pro” logo. As of 2009, there were at least 91 master franchisees in the

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United States. The bottom tier consists of “unit franchisees” who contract with master

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franchisees to clean businesses. Unit franchisees do not contract with defendant. A given unit

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franchisee can be an individual or a few partners, and those persons can hire additional workers

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to help them clean. The First Circuit explained defendant’s franchising model:

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Jan-Pro and its master owners are separate corporate
entities, and each has its own staff. Moreover, master owners may
sell or transfer their individual businesses without approval from
Jan-Pro. Jan-Pro also reserves the right to inspect any premises
serviced by either the master owner or any of the master owner’s
[unit] franchisees to ensure the Jan-Pro standards are being
maintained. Still, master owners have their own entity names and
internal business structures, and are responsible for their own
marketing, accounting, and general operations.

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United States District Court
Northern District of California

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As for master owners and their unit franchisees, under the
terms of the model franchise agreement, master owners agree to
provide their franchisees with an initial book of business, as well
as start-up equipment and cleaning supplies. Moreover, the master
owner furnishes a training program for its unit franchisees. Once
initial set-up and training is complete, the master owner agrees to
(1) assist in the unit franchisee’s customer relations (by, for
example, providing substitute employees or contractors to supply
services in the event of an emergency impacting the unit
franchisee); (2) provide the unit franchisee with invoicing and
billing services; (3) advance the unit franchisee amounts that have
been billed but not yet collected from customers; and (4) make
available to the unit franchisee any improvement or changes in
services or business methods that are made available to other
franchisees. Additionally, the agreement notes that a unit
franchisee is at all times an independent contractor solely in
business for itself. As such, the unit franchisee may, for example,
hire its own employees and decide what to pay them, as well as
decide whether or not to pursue certain business opportunities.

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Depianti v. Jan-Pro Franchising Int’l, Inc., 873 F.3d 21, 23–24 (1st Cir. 2017).

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Our plaintiffs were and are unit franchisees who purchased their unit franchises from two

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different master franchisees. (The master franchisees in question are not parties herein.)

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Plaintiff Vazquez purchased a unit franchise from New Venture of San Bernardino, LLC, for

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$2800. Plaintiff Roman purchased a unit franchise from Connor-Nolan, Inc., for $2800.

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Plaintiff Aguilar, with a business partner, also purchased a unit franchise from Connor-Nolan,

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for which he and his partner paid $9000.

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United States District Court
Northern District of California

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The diagram below shows the general structure of defendant’s three-tier business.

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Solid lines represent revenue from cleaning services. Cleaning customers (CCs) pay master

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franchisees (MFs) for cleaning services based on “pricing agreements” between them.

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For some cleaning customers, master franchisees supplement the pricing agreements with

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“bid worksheets,” which show calculations of cleaning costs. Master franchisees then pay unit

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franchisees (UFs) from that revenue (because unit franchisees do the cleaning), with the

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exception that master franchisees deduct and pay four percent of that revenue to defendant (D).

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Dotted lines represent revenue from franchise fees. Unit franchisees each pay master

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franchisees a franchise fee. Then, master franchisees pay ten percent of the franchise fee to

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defendant. Additionally, master franchisees profit by collecting other fees from unit

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franchisees, such as “management fees” and “sales and marketing fees” (not depicted), which

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defendant does not collect.

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D
$

$

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$

MFs

CCs

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$

$
UFs

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Plaintiffs seek to certify the following class: all unit franchisees who have signed

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franchise agreements with master franchisees in the state of California and have performed

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cleaning services for defendant since December 12, 2004.

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This order grants plaintiffs’ motion for class certification and summary judgment as to

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(1) failure to pay minimum wage for mandatory training, (2) failure to reimburse for expenses

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incurred for (a) required uniforms and (b) necessary cleaning supplies and equipment, and

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(3) unlawful deductions of (a) management fees and (b) sales and marketing fees for the

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following group: all unit franchisees who signed a franchise agreement with a master

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franchisee in the state of California and who performed cleaning services for defendant from

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December 12, 2004, to the latest date on which a named plaintiff terminated employment.
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This order denies class certification as to the remaining labor code claims and issues.

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A separate order on the instant briefing shall resolve the parties’ motions for summary

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judgment as to the uncertified, individual claims and issues that remain in this action.

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This order defers resolving damages until a later phase of the action.

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This order follows full briefing and oral argument.
ANALYSIS

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publishes wage orders that regulate the hours, wages, and working conditions of California

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employees. The wage orders encompass some, but not all, of the provisions in the California

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United States District Court
Northern District of California

Here is the relevant legal framework. The Industrial Welfare Commission of California

labor code.
Whether a wage order encompasses a labor code claim dictates the applicable

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misclassification test. When a wage order encompasses a labor code claim (or a discrete issue

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within a claim), courts determine employee classification under Dynamex for purposes of that

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claim or issue. When the wage orders do not cover a labor code claim (or a discrete issue

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within a claim), such as expense reimbursements for gas and tolls, courts determine employee

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classification under Borello for purposes of that claim or issue. See Dynamex, 4 Cal. 5th

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at 915–16 n. 5.

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Given this legal framework, this order proceeds as follows:

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First, this order applies the FRCP 23(a) criteria (numerosity, commonality, typicality,

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and adequacy) to the misclassification claim and simultaneously to the labor code claims.

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This order finds the FRCP 23(a) criteria satisfied for all claims.

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Second, this order considers whether plaintiffs have met their burden under

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FRCP 23(b)(3) to establish predominance and superiority as to the misclassification question

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under (1) Dynamex and (2) Borello. Those considerations show that plaintiffs satisfy

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FRCP 23(b)(3) for the misclassification question under Dynamex but not under Borello.

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This order then applies FRCP 23(b)(3) to each of the labor code claims that rely on

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misclassification under Dynamex. Those applications show that plaintiffs satisfy

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FRCP 23(b)(3) for only the following labor code issues: (1) failure to pay minimum wage for
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mandatory training; (2) failure to reimburse for expenses incurred for (a) required uniforms,

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and (b) necessary cleaning supplies and equipment; and (3) unlawful deductions of

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(a) management fees, and (b) sales and marketing fees.

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basis, for plaintiffs or for defendant as to the misclassification claim under Dynamex.

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Those considerations show summary judgment in favor of plaintiffs is warranted as to the

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misclassification claim under Dynamex.

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United States District Court
Northern District of California

Third, this order considers whether summary judgment is appropriate, on a class-wide

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Fourth, this order considers whether summary judgment is appropriate as to the certified
labor code issues. Those considerations show summary judgment in favor of plaintiffs is
appropriate as to all certified labor code issues.
Fifth, this order denies as moot both parties’ motions for summary judgment regarding
itemized wage statements.

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Plaintiffs must show that the proposed class action satisfies each of the four prerequisites

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FEDERAL RULE OF CIVIL PROCEDURE 23(a).

of FRCP 23(a), which are:

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(1) the class is so numerous that joinder of all members is
impracticable;

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(2) there are questions of law or fact common to the class;

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(3) the claims or defenses of the representative parties are typical
of the claims or defenses of the class; and

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(4) the representative parties will fairly and adequately protect the
interests of the class.

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A district court must do a rigorous analysis to determine whether the requirements of

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FRCP 23 are satisfied. “Frequently that rigorous analysis will entail some overlap with the

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merits of the plaintiff’s underlying claim. That cannot be helped. The class determination

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generally involves considerations that are enmeshed in the factual and legal issues comprising

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the plaintiff’s cause of action.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350–51 (2011).

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(cleaned up).

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NUMEROSITY.

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The proposed class includes all unit franchisees who signed franchise agreements with

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master franchisees in California since December 2004. Just one master franchisee had over

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100 unit franchisees who signed agreements in California during the class period

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(Dkt. No. 292-17 at 265). Thus, given there were many master franchisees in California, this

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order finds numerosity is satisfied.

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United States District Court
Northern District of California

A.

B.

COMMONALITY.

The commonality element requires that there be a common contention among all class
members which is “of such a nature that it is capable of class-wide resolution — which means

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that determination of its truth or falsity will resolve an issue that is central to the validity of

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each one of the claims in one stroke.” Wal-Mart Stores, 564 U.S. at 350.

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Here, the common misclassification contention is necessarily central to the labor code

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claims because no class member can recover if defendant’s classification of unit franchisees as

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independent contractors was proper. And, defendant relies on the classification of unit

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franchisees as an affirmative defense to all of plaintiffs’ labor code claims (Dkt. No. 245 at 7).

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This order finds commonality is satisfied.

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C.

TYPICALITY.

“Under [FRCP 23(a)(3)]’s permissive standards, representative claims are ‘typical’ if

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they are reasonably co-extensive with those of absent class members; they need not be

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substantially identical.” Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998).

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Here, plaintiffs’ defining contention is that defendant improperly classified them as

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independent contractors. That is also the defining contention of the class. Defendant allegedly

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injured plaintiffs and the putative class members by failing to provide them with minimum

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wage, overtime pay, and expense reimbursements, and plaintiffs allege unlawful deductions.

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Those alleged injuries arose from defendant’s conduct of classifying plaintiffs and the putative

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class members as independent contractors. Thus, plaintiffs and the putative class members

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allege the same injuries arising from the same conduct. Although there may be some

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differences between plaintiffs’ experiences and those of the putative class members, plaintiffs’
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claims are reasonably co-extensive with those of the putative class members. This order finds

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typicality is satisfied.

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ADEQUACY.

As to adequacy, the representative plaintiffs and class counsel cannot have conflicts of

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interest with the putative class members and must prosecute the action vigorously on behalf of

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the class. Staton v. Boeing Co., 327 F.3d 938, 957 (9th Cir. 2003).

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Here, plaintiffs’ lead counsel submitted a declaration describing her qualifications and

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extensive experience in wage-and-hour litigation, including serving as class counsel in

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numerous wage-and-hour misclassification actions. Her law partner also has experience in

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United States District Court
Northern District of California

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wage-and-hour litigation (Liss-Riordan Decl. ¶¶ 2–17).

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Thus far, plaintiffs’ counsel have vigorously litigated this case. Plaintiffs’ counsel have

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deposed defendant’s President and Chief Executive Officer, Vice President, Vice President of

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Field Services, and Director of Training (Dkt. No. 247-4). They have also successfully

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appealed the prior order on summary judgment in this matter.

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Plaintiffs each submitted declarations stating that they understand their duty to always

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consider the best interests of the class before their own and to actively participate in the

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lawsuit. They also declare that they have no conflicts of interest with the putative class

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members (Vazquez Decl. ¶ 3; Aguilar Decl. ¶ 3; Roman Decl. ¶ 3). Defendant has provided no

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reason to doubt those declarations. This order finds none. This order finds adequacy of

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representation is satisfied.

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E.

DEFENDANT WAIVED THE RIGHT TO ENFORCE ARBITRATION
AGREEMENTS.

Defendant argues the named plaintiffs cannot satisfy typicality and adequacy because it

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has waived the right to arbitrate against the named plaintiffs but not against the absent class

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members. This supposed difference is not disqualifying.

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The short answer is that an otherwise typical plaintiff ought not be rendered atypical at

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the whim of a defendant by that defendant simply giving up a defense only against that named

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plaintiff. That neat trick will not be blessed. Otherwise, it could defeat class certification
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every time. And, defendant has not actually moved to compel arbitration. It has only said it

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intends to do so in the future.

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absent class members by seeking in court to litigate the merits of its franchise scheme on a

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system-wide basis, i.e., on a class- wide basis. Having done so, and having now seen how the

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judicial winds are blowing, defendant should not be allowed to reverse field and play the

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arbitration card.

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United States District Court
Northern District of California

The long answer is that defendant has waived its right to compel arbitration against the

This order considers now whether the issue of waiver is properly before the district court.

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“The court’s role under the [Federal Arbitration] Act is . . . limited to determining (1) whether

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a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the

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dispute at issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir.

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2000). Our court of appeals has stated:

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[T]he Supreme Court [has] distinguished between two
categories of gateway issues on motions to compel arbitration,
each of which has a different presumption as to whether a court or
an arbitrator should decide. The first category of gateway issues is
a “question of arbitrability” — that is, “whether the parties have
submitted a particular dispute to arbitration.” . . . . These disputes
are “for judicial determination unless the parties clearly and
unmistakably provide otherwise.” In contrast, the second category
— “procedural” issues — is “presumptively not for the judge, but
for an arbitrator, to decide.”
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We have made clear that waiver by litigation conduct is
part of the first category of gateway issues.

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Martin v. Yasuda, 829 F.3d 1118, 1122–23 (9th Cir. 2016) (citations omitted). Thus, here, this

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order may determine whether defendant has waived the right to enforce the arbitration

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agreements unless the parties clearly and unmistakably provided otherwise.

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Although defendant’s incorporation of the American Arbitration Association rules could

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constitute clear and unmistakable evidence that the parties agreed to arbitrate arbitrability

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under Brennan v. Opus Bank, that decision is off point. Brennan expressly limited its holding

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to commercial contracts between sophisticated parties. 796 F.3d 1125, 1131 (9th Cir. 2015).

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Here, therefore, the employment contracts with janitors fall outside of Brennan
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(unit franchisees are primarily immigrant workers, of whom many do not speak English).

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Moreover, although defendant argues the Federal Arbitration Act preempts the sophistication

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requirement, the Third Circuit decision it cites for support is not binding here.

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Arbitration Association rules and included broad language to arbitrate any dispute “arising out

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of or related to” the agreement. 533 F.3d 1114, 1117 (9th Cir. 2008). Nevertheless, Cox held

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the waiver issue was “properly heard by the district court.” Id. at 1120. Thus, defendant’s

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argument fails. This order may adjudicate the waiver issue.

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United States District Court
Northern District of California

In Cox v. Ocean View Hotel Corp., an arbitration agreement incorporated the American

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This order now considers the merits of whether defendant has waived its right to enforce
the arbitration agreements. Our court of appeals has stated:
[W]here the waiver of the right to compel arbitration implicates
questions of arbitrability that “affect the allocation of power”
between a court and arbitrator, we have applied a federal law
standard for determining whether an arbitration agreement has
been waived.

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Newirth by & through Newirth v. Aegis Senior Communities, LLC, 931 F.3d 935, 940

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(9th Cir. 2019) (citation omitted). Because the waiver issue affects the allocation of power

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between the district court and an arbitrator, the federal law standard applies here.

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“Waiver . . . ‘is the intentional relinquishment or abandonment of a known right.’

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To decide whether a waiver has occurred, the court focuses on the actions of the person who

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held the right . . . .” The Supreme Court recently held “prejudice is not a condition of finding

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that a party waived its right to . . . compel arbitration under the [Federal Arbitration Act].”

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So the test for waiver now has only two elements. Thus, “a party waives its contractual right to

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arbitration if it [1] knew of the right; [and] [2] ‘acted inconsistently with that right.’”

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Morgan v. Sundance, Inc., No. 21-328, 596 U.S. ___ (2022) (citations omitted).

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Ninth Circuit precedent provides us with the following general rules regarding acts

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inconsistent with the right to arbitrate. If, before moving to compel arbitration, a party moves

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to dismiss on a key merits issue, then the party’s action is inconsistent with the right to

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arbitrate. Moreover, a motion for summary judgment is inconsistent with the right to arbitrate.

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Conversely, resisting discovery or seeking a stay is not inconsistent with the right to arbitrate.
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Failure to raise arbitration as an affirmative defense is not inconsistent with the right to

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arbitrate. Newirth, 931 F.3d at 942; Martin, 829 F.3d at 1125–26; Britton v. Co-op Banking

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Grp., 916 F.2d 1405, 1413 (9th Cir. 1990); Freaner v. Valle, 966 F. Supp. 2d 1068, 1086

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(S.D. Cal. 2013) (Judge Janis L. Sammartino); see Morgan Stanley & Co. LLC v. Couch,

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659 F. App’x 402, 405 (9th Cir. 2016).
Here, defendant has had knowledge of an arbitration defense for well over a decade.

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One of defendant’s motions to dismiss in the District of Massachusetts in 2008 relied on the

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outcome of an arbitration proceeding between some unit franchisees and their master

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franchisees (Dkt. No. 17). Defendant cannot claim ignorance of an arbitration defense.
Moreover, defendant has acted inconsistently with the right to arbitrate. In two motions

United States District Court
Northern District of California

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to dismiss for failure to state a claim in the District of Massachusetts, defendant sought a

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victory in court on the misclassification claim and the wage and hour claims — key merits

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issues (Dkt. Nos. 4, 17). Although its failure to raise arbitration as an affirmative defense was

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not, in and of itself, a waiver, defendant has moved for summary judgment three times

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(Dkt. Nos. 65, 246, 299), which includes two motions in this district.2
In fact, defendant’s pending motion for summary judgment seeks a system-wide victory

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on the classification issue. For two and one-half pages, defendant argues its entire franchise

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system complies with state and federal franchise laws and, therefore, that all unit franchisees

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— not just the named plaintiffs — were independent contractors rather than employees

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(Dkt. No. 328 at 21–24).

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True, defendant couched that argument as an opposition to plaintiffs’ motion for

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summary judgment on misclassification. But defendant quoted a Ninth Circuit decision that

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shows it moved for summary judgment on misclassification on a system-wide basis:
“The franchise system creates a class of independent businessmen;
it provides the public with an opportunity to get a uniform product
at numerous points of sale from small independent contractors,
rather than from employees of a vast chain.”

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To ignore defendant’s conduct in the District of Massachusetts would not account for
“the totality of [defendant’s] actions” to seek decisions on the merits. Newirth, 931 F.3d at 941.
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(Dkt. No. 328 at 22) (quoting GTE Sylvania Inc. v. Cont’l T.V., Inc., 537 F.2d 980, 999

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(9th Cir. 1976)).

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for summary judgment. In 2017, defendant moved for and obtained summary judgment on the

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misclassification issue. Although that motion sought relief on an individual basis, defendant

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made the following system-wide argument on the merits:

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United States District Court
Northern District of California

Defendant also made system-wide arguments on the merits prior to the pending motion

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Given that [defendant] has a Master Franchise structure, moreover,
which inherently means it has no regional control, [defendant] is
even further attenuated from the franchise relationships . . . that
this court found not to constitute an employment relationship.
(Dkt. No. 246 at 18–19).
When plaintiffs appealed that summary judgment decision, moreover, defendant sought
system-wide relief on the merits. In its answering brief in 2017, defendant stated:
[T]he California Supreme Court in Patterson duly recognized:
“we cannot conclude that franchise operating systems necessarily
establish the kind of employment relationship that concerns us
here. A contrary approach would turn business format franchising
on its head.” Given this guidance, the district court properly
granted summary judgment to [defendant] on [plaintiffs’]
employment misclassification claims and attendant Labor Code
violations.

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(App. Br. 13–14) (quoting Patterson v. Domino’s Pizza, LLC, 60 Cal. 4th 474, 499 (2014)).

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The foregoing intentional acts doom defendant’s argument here.

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When all a defendant does is bring a motion aimed at the individual circumstances of a

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single, named plaintiff, it would perhaps be unfair to say that that motion amounts to a class-

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wide motion or that a class-wide waiver of arbitration has occurred. But when, as here, a

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defendant brings a motion aimed at vindicating its system-wide practices, then it is effectively

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seeking class-wide relief, even if a class has not yet been certified. Bringing such a system-

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wide motion on the merits in a court is inconsistent with arbitration on the merits. Once a

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defendant seeks system-wide vindication of its practices in a court and on the merits, therefore,

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it has waived any right to compel an arbitration on the merits. And, this is true regardless of

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whether a class has yet been certified. To hold otherwise would allow a defendant to litigate
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United States District Court
Northern District of California

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the system-wide merits of an individual case, see which way the judicial winds are blowing,

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and then, if the winds seem unfavorable, reverse field and demand arbitration against all absent

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class members once a class is certified.

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Defendant, however, argues that until a class is certified, there is no occasion to arbitrate

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against absent class members. Defendant cites Moser v. Benefytt, 8 F.4th 872 (9th Cir. 2021),

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for support. In that action, the defendant corporation asserted a personal jurisdiction defense at

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the class certification stage. Specifically, the defendant, which was not a California resident,

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argued the California district court would not have specific personal jurisdiction over claims by

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non-California-resident class members for unlawful telemarketing. The defendant argued,

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therefore, the district court could not certify a nation-wide class. But the district court rejected

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the defendant’s argument, holding the defendant had waived the defense by failing to raise it at

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the motion to dismiss stage pursuant to FRCP 12(g)(2). The district court then certified a

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nation-wide class. Moser v. Health Ins. Innovations, Inc., 2019 WL 3719889, at *4 (S.D. Cal.

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Aug. 7, 2019) (Judge William Q. Hayes).

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Our court of appeals, however, reversed and remanded for the district court to reconsider.

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It held the defendant had not waived its personal jurisdiction defense because the defense had

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not been available at the motion to dismiss stage. Namely, the absent class members were not

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parties to the action prior to class certification, so the defendant could not have imposed a

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personal jurisdiction defense on them prior to class certification. Moser, 8 F.4th at 877.

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Similarly, our defendant argues our absent class members are not parties to this action

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prior to class certification, so the right to arbitrate against them has not matured.

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Thus, defendant argues it could not have waived its arbitration defense as to absent class

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members prior to class certification.

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But Moser is inapposite. There, the defendant did not have an opportunity to bring a

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personal jurisdiction defense against absent class members until the class certification stage.

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As our court of appeals reasoned, personal jurisdiction inherently “‘entails a court’s power

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over the parties before it,’” and absent class members are not parties to an action prior to class

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certification. Moreover, as to the named plaintiff, “there were no claims the district court
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United States District Court
Northern District of California

1

could have dismissed on personal jurisdiction grounds when it decided [the defendant]’s

2

motion to dismiss because . . . there was specific personal jurisdiction over [the named

3

plaintiff’s] claims against [the defendant].” The defendant, therefore, would not have been

4

expected to raise personal jurisdiction prior to the class certification stage. 8 F.4th at 877–78

5

n. 2 (citation omitted).

6

By contrast, here, we are dealing with arbitration. Defendant could have moved to

7

compel our named plaintiffs to arbitrate. It did not. Defendant then sought system-wide

8

vindication of its practices in court and on the merits. It has, therefore, sought system-wide

9

vindication even though a class has not yet been certified. After a trip to our court of appeals,

10

it now realizes the judicial winds may not be favorable, so defendant seeks to reverse field

11

and arbitrate.

12
13
14
15

Moser did not involve any attempt to have it both ways; to test the waters in court before
playing the arbitration card. That is the critical distinction.
Having found that all the requirements of FRCP 23(a) are met as to all claims, this order
next considers whether the requirements of FRCP 23(b)(3) are met.

16

2.

17

Plaintiffs seek certification under FRCP 23(b)(3), which requires they show:

18

[T]he questions of law or fact common to class members
predominate over any questions affecting only individual
members, and that a class action is superior to other available
methods for fairly and efficiently adjudicating the controversy.

19
20

FEDERAL RULE OF CIVIL PROCEDURE 23(b)(3).

21

“[T]he likely difficulties in managing a class action” are pertinent to this inquiry.

22

FRCP 23(b)(3)(D). “Commonly referred to as ‘manageability,’ this consideration

23

encompasses the whole range of practical problems that may render the class action format

24

inappropriate for a particular suit.” Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 164 (1974)

25

(citation omitted). This order, therefore, “must determine whether the elements necessary to

26

establish liability are susceptible of common proof or, if not, whether there are ways to manage

27

effectively proof of any elements that may require individualized evidence.” This inquiry “can

28
14

1

turn on the precise nature of the element and require resolution of disputed legal or factual

2

issues affecting the merits.” Brinker Rest. Corp. v. Super. Ct., 53 Cal. 4th 1004, 1024 (2012).

3
4

claim under Dynamex. It must then consider the same for the misclassification claim under

5

Borello. Thereafter, it must consider whether FRCP 23(b)(3) is satisfied for the labor claims.

6
7

United States District Court
Northern District of California

This order must first consider whether FRCP 23(b)(3) is satisfied for the misclassification

A.

MISCLASSIFICATION CLAIM.

“To employ . . . has three alternative definitions. It means: (a) to exercise control over

8

the wages, hours or working conditions, or (b) to suffer or permit to work, or (c) to engage,

9

thereby creating a common law employment relationship.” Martinez v. Combs, 49 Cal. 4th 35,

10

64 (2010) (emphasis in original). In Dynamex, the California Supreme Court clarified that the

11

“suffer or permit to work” standard is met when an employer fails to satisfy the requirements

12

of the ABC test. The high court explained:

13
14
15
16
17
18
19
20
21

The ABC test presumptively considers all workers to be
employees, and permits workers to be classified as independent
contractors only if the hiring business demonstrates that the worker
in question satisfies each of three conditions:
(a) that the worker is free from the control and direction of the
hirer 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
that involved in the work performed.

22

4 Cal. 5th at 955–56 (emphasis in original). The ABC test applies only when a California

23

wage order encompasses the relevant labor code claim. Id. at 915–16. Yet the “‘suffer or

24

permit to work standard in California wage orders’ is meant to be ‘exceptionally broad,’” and

25

the wage orders are to be “‘liberally construed in a manner that serves their remedial

26

purposes.’” Vazquez, 986 F.3d at 1122 (citing id. at 952–53).

27

Our court of appeals laid out the considerations for Prong B of the ABC test:

28
15

Analytically, courts have framed the Prong B inquiry in several
ways. They have considered whether the work of the employee is
necessary to or merely incidental to that of the hiring entity,
whether the work of the employee is continuously performed for
the hiring entity, and what business the hiring entity proclaims to
be in.

1
2
3
4

United States District Court
Northern District of California

5

Id. at 1125.
Plaintiffs need only show, “given the factual setting of the case, if . . . plaintiffs’ general

6

allegations are true, common evidence could suffice to make out a prima facie case for the

7

class.” Blades v. Monsanto Co., 400 F.3d 562, 566 (8th Cir. 2005). “Under the [ABC test], if

8

the employer cannot satisfy just one prong of the test, the inquiry into employment status

9

ends.” Thus, if plaintiffs show “that common evidence will resolve Prong [B], they have made

10

a prima facie showing that they can win their case based on evidence common to the class.”

11

Such a finding is sufficient to satisfy predominance as to the misclassification claim, as the

12

Seventh Circuit further explained:

13
14
15
16
17
18
19

[C]ertifying the class for purposes of Prong [B] would
substantially advance the litigation, regardless of whether the
common evidence on Prong [B] turns out in [plaintiffs’] or
[defendant’s] favor. If answered in [plaintiffs’] favor, all of
[defendant’s] couriers would have to be classified as employees,
. . . eliminating the need for any individualized factfinding.
If answered in [defendant’s] favor, [defendant] would not have to
litigate its satisfaction of Prong [B] against every individual
plaintiff, promoting efficiency. . . . . Regardless of which party
wins, the common answer on Prong [B] “represents a significant
aspect of the case and . . . can be resolved for all members of the
class in a single adjudication.”

20

Costello v. BeavEx, Inc., 810 F.3d 1045, 1060 (7th Cir. 2016) (emphasis in original)

21

(citations omitted).

22

Here, common questions predominate under Prong B. Defendant classified all unit

23

franchisees as independent contractors. It provided a standard franchise agreement to master

24

franchisees (Dkt. No. 359-1 at 143; Kissane Dep. 56–59), and master franchisees had a

25

common practice of using that agreement as a template for their agreements with unit

26

franchisees (see Dkt. Nos. 292-11, 292-12, 292-13). Although unit franchisees’ agreements

27

did not always contain every provision of defendant’s template agreement, “[i]n most ways . . .

28
16

1

plaintiffs’ agreements substantially follow[ed] [defendant’s] requirements.” Vazquez,

2

986 F.3d at 1119.

3

The policies within the template agreement were, therefore, applicable to all unit

4

franchisees. Those common policies will help to adjudicate the misclassification question.

5

The term of unit franchisees’ agreements, for example, was ten years (Dkt. No. 359-1 at 147;

6

see Dkt. No. 292-11 § 18). This will help to determine, on a class-wide basis, whether unit

7

franchisees “continuously performed” work for defendant for purposes of Prong B. Vazquez,

8

986 F.3d at 1125.
Moreover, “what business [defendant] proclaim[ed] to be in” for purposes of Prong B is

United States District Court
Northern District of California

9
10

susceptible to common proof, as defendant’s statements on its website and advertisements

11

were equally applicable to all unit franchisees. Ibid.
And, whether unit franchisees’ work was necessary or merely incidental to that of

12
13

defendant is susceptible to common proof. All unit franchisees did the same work on behalf of

14

defendant: they cleaned small businesses. Based on the common nature of unit franchisees’

15

work, this order can determine the “necessary to or merely incidental” inquiry under Prong B

16

for all unit franchisees in one fell swoop. Ibid.

17

Whether Prong A or Prong C is susceptible to common proof does not affect class

18

certification here. As the discussion of the merits below will show, there is no genuine dispute

19

of material fact as to Prong B, and summary judgment in favor of plaintiffs on the

20

misclassification issue is warranted. Thus, irrespective of any decision on Prong A or Prong C,

21

the unit franchisees were employees. Common questions under Prong B will, therefore,

22

predominate. See Costello, 810 F.3d at 1060; James v. Uber Techs., Inc., 338 F.R.D. 123, 139

23

(N.D. Cal. 2021) (Judge Edward M. Chen).3
Even if summary judgment were granted in favor of defendant on Prong B on a class-

24

wide basis, such an outcome would significantly advance the litigation. In that scenario,

25
26
27
28

“[A] district court must formulate some prediction as to how specific issues will play out in
order to determine whether common or individual issues predominate in a given case.”
Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d 288, 298 (1st Cir. 2000) (citing Gen. Tel. Co.
of Sw. v. Falcon, 457 U.S. 147, 160–61 (1982)).
17
3

1

defendant would not have to litigate Prong B as to each individual plaintiff, promoting

2

efficiency. See ibid.

3
4

for Prong B. It would be inefficient to try the misclassification issue on an individual basis for

5

the numerous putative class members here when common questions predominate. See Alan

6

Wright & Arthur R. Miller, 7AA Fed. Prac. & Proc. Civ. § 1778 (3d ed. 2022). Moreover,

7

plaintiffs are correct in pointing out: (1) the chilling effect that fear of employer retaliation

8

will have on unit franchisees deciding whether to file individual lawsuits; and (2) the difficulty

9

for unit franchisees to bring individual claims, given that the vast majority of them are

10
11

United States District Court
Northern District of California

For the same reasons, superiority is required only as to Prong B. And, that too is satisfied

unsophisticated with regard to legal matters.
Defendant argues individualized issues predominate under Prong B, including “plaintiffs’

12

employment of others to perform work for them,” “plaintiffs’ filing of business tax returns,”

13

“plaintiffs’ business dealings with parties other than [defendant],” “whether plaintiffs held

14

themselves out as independent businessmen,” and whether unit franchisees established limited

15

liability companies (Opp. 24–25). That argument is unpersuasive. First, all three

16

considerations under Prong B involve common questions. Second, the focus of Prong B is on

17

defining the hirer’s business and whether that definition encompasses the hirees’ work for the

18

hirer. The issues defendant raises, however, go to determining whether hirees were engaged in

19

independent businesses and worked for themselves rather than for the hirer. Thus, the issues

20

defendant raises are relevant only to Prong C — not Prong B.

21
22
23

Accordingly, plaintiffs have satisfied FRCP 23(b)(3) as to the misclassification claim
under Dynamex. The misclassification claim under Dynamex is CERTIFIED.
*

*

*

24

As mentioned above, a different classification test applies for purposes of labor code

25

claims and issues that fall outside of the California wage orders. Borello outlined that test:

26
27
28

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.
18

1
2
3
4
5
6
7
8
9
10

United States District Court
Northern District of California

11

Thus, we have noted that “strong evidence in support of an
employment relationship is the right to discharge at will, without
cause.” Additional factors have been derived principally from the
Restatement Second of Agency. These include: (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 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 employeremployee. “Generally, . . . the individual factors cannot be applied
mechanically as separate tests; they are intertwined, and their
weight depends often on particular combinations.”
48 Cal. 3d at 350–51 (citations omitted).
Here, plaintiffs have not satisfied FRCP 23(b)(3) as to the misclassification claim under

12

Borello. Foremost, plaintiffs have not even briefed whether predominance is satisfied under

13

Borello. This alone precludes a finding of predominance — but only as to labor code issues

14

that rely on Borello. Haitayan v. 7-Eleven, Inc., 2021 WL 757024, at *5–6 (C.D. Cal.

15

Feb. 8, 2021) (Judge Dale S. Fischer).

16

Moreover, two significant Borello factors would require individualized inquiries.

17

“Whether [unit franchisees] engaged in a distinct occupation or business” cannot be

18

determined without asking unit franchisees individually. 48 Cal. 3d at 351. District courts

19

have found this factor “critical” to the predominance analysis. Bowerman v. Field Asset Servs.,

20

Inc., 2014 WL 4676611, at *12 (N.D. Cal. Sep. 17, 2014) (Judge William H. Orrick) (denying

21

class certification); see James, 338 F.R.D. at 138–39; Narayan v. EGL, Inc., 285 F.R.D. 473,

22

480 (N.D. Cal. 2012) (Judge Ronald M. Whyte). Although unit franchisees’ contracts

23

contained non-compete provisions, “‘the appropriate inquiry . . . is whether the person . . .

24

actually has such an independent business, occupation, or profession, not whether he or she

25

could have one.’” Dynamex, 4 Cal. 5th at 962 n. 30 (emphasis added) (citation omitted).

26

Notably, plaintiff Roman actually engaged in an independent business that cleaned houses

27

(Roman Dep. 160). Thus, this order finds the “distinct occupation or business” factor would

28

add significant individualized inquiries to the classification analysis here under Borello.
19

United States District Court
Northern District of California

1

Similarly, “whether or not the [unit franchisees] believe[d] they [were] creating the

2

relationship of employer-employee” is subject to individualized inquiries. Borello, 48 Cal. 3d

3

at 351. Our court of appeals stated that “a fair characterization may be that plaintiffs

4

understood themselves to be ‘Jan-Pro cleaners’ but did not necessarily think they were

5

contracting with a company called ‘Jan-Pro Franchising International.’” Vazquez, 986 F.3d

6

at 1120. Thus, individual variations in putative class members’ legal sophistication and

7

English-language proficiency would be relevant. See ibid.; Bowerman, 2014 WL 4676611,

8

at *11. Individual variations in what master franchisees told putative class members about

9

defendant’s business would also be relevant. Thus, this order finds that the putative class

10

members’ beliefs regarding their relationships with defendant would also add significant

11

individualized inquiries to the classification analysis here under Borello.

12

Further, “the hirer’s right to fire at will and the basic level of skill called for by the job,

13

are often of inordinate importance.” And, “the ‘ownership of the instrumentalities and tools’

14

of the job, may be of ‘only . . . evidential value,’ relevant to support an inference that the hiree

15

is, or is not, subject to the hirer’s direction and control.” Thus, the two factors that require

16

individualized inquiries weigh heavy here. Ayala v. Antelope Valley Newspapers, Inc.,

17

59 Cal. 4th 522, 539 (2014) (citations omitted).

18
19
20
21

Thus, plaintiffs fail to satisfy predominance for misclassification under Borello.
Certification of the misclassification claim under Borello is DENIED.
B.

LABOR CODE CLAIMS.

Uniform policies and practices of employment misclassification alone are insufficient to

22

establish that common questions predominate as to liability for labor code claims. Sotelo v.

23

MediaNews Grp., Inc., 207 Cal. App. 4th 639, 654–55 (2012). Thus, “[e]ven if ‘common

24

questions predominate the threshold question of employee classification,’ [this order] must still

25

consider whether ‘plaintiffs’ individual claims also pass the predominance test.’” James,

26

338 F.R.D. at 139 (citations omitted). For example, “[a] class . . . may establish liability by

27

proving a uniform policy or practice by the employer that has the effect on the group of

28
20

1

making it likely that group members will work overtime hours without overtime pay” or will

2

receive less than minimum wage per hour of work. Sotelo, 207 Cal. App. 4th at 654.

3
4

Code Sections 1194 and 510. Cal. Indus. Welfare Comm’n, Wage Ord. Nos. MW-2022, 5-

5

2001(3)(A). Dynamex, therefore, provides the applicable test for whether unit franchisees

6

were misclassified for purposes of minimum wage and overtime. 4 Cal. 5th at 913–14.

7

Because this order has found the misclassification question suitable for class treatment under

8

Dynamex, this order may consider whether class treatment of plaintiffs’ minimum wage and

9

overtime claims is appropriate.

10
11

United States District Court
Northern District of California

California wage orders encompass claims for minimum wage and overtime under Labor

12
13
14
15
16

(i)

Minimum Wage.

Labor Code Section 1194 provides:
Notwithstanding any agreement to work for a lesser wage, any
employee receiving less than the legal minimum wage or the legal
overtime compensation applicable to the employee is entitled to
recover in a civil action the unpaid balance of the full amount of
this minimum wage or overtime compensation, including interest
thereon, reasonable attorney’s fees, and costs of suit.
Here, there was no policy regarding minimum wage. Plaintiffs argue the lack of a

17

minimum wage policy alone shows common questions predominate. Not so. The absence of a

18

minimum wage policy is not the same as an existing, unlawful policy. Such an absence could

19

suggest that defendant was unaware of the minimum wage requirement, but it does not

20

evidence an unlawful practice that makes defendant likely to have failed to pay minimum

21

wage. Further, plaintiffs cite Vaquero v. Ashley Furniture Industries, Inc., 824 F.3d 1150

22

(9th Cir. 2016), to support their position. But Vaquero involved an existing, unlawful pay

23

policy: the employer had a policy to not pay employees anything beyond commissions.

24

The policy guaranteed that the employees would not earn wages for work hours that did not

25

culminate in a sale. Vaquero v. Ashley Furniture Indus., Inc., 2013 WL 12172124, at *1

26

(C.D. Cal. June 17, 2013) (Judge Percy Anderson). By contrast, here, defendant did not have a

27

minimum wage policy that made it likely for unit franchisees not to receive minimum wage.

28
21

1

There was no policy at all. Thus, the absence of a minimum wage policy would not be useful

2

to resolve the merits on a class-wide basis.
The only item of common evidence regarding minimum wage comes from deposition

3
4

testimony. Vice President Thompson of defendant stated that defendant provided master

5

franchisees with a suggested range at which to pay unit franchisees. That range was between

6

$16 and $25 per hour. But master franchisees had discretion to choose the pay rates for their

7

unit franchisees (Thompson Dep. 25). Thus, this evidence would raise individualized

8

inquiries, such as (1) whether a given master franchisee paid its unit franchisees at a different

9

rate than other master franchisees paid their unit franchisees, and (2) whether a given master
franchisee varied the rates of pay amongst its own unit franchisees.

10

Although the absence of proper time and pay records does not preclude class

United States District Court
Northern District of California

11
12

certification, the burden is on plaintiffs to show that any individual inquiries would be

13

manageable. Other decisions have relied on expert statistical analyses in place of common

14

evidence to establish liability. See, e.g., Vaquero, 824 F.3d at 1155. Here, by contrast,

15

plaintiffs have not provided any such evidence by which to efficiently determine the rate of

16

pay for unit franchisees on a class-wide basis. Plaintiffs make only a cursory reference to (1)

17

potential testimony by class members, and (2) “pricing agreements” and “bid worksheets”

18

between master franchisee Connor-Nolan and cleaning customers.4 Cursory references will

19

not suffice.
Nevertheless, this order briefly explores the evidence. Each pricing agreement in

20
21

evidence was between Connor-Nolan and one cleaning customer. The pricing agreements

22

provided the monthly cleaning fee that cleaning customers paid to master franchisees,

23

the number of days per week that unit franchisees cleaned the customers’ locations, and,

24

sometimes, a breakdown of the price per type of cleaning (e.g., washing, mopping, sweeping,

25

etc.). From the pricing agreements alone, one could not determine the number of hours a unit

26

franchisee worked or the rate per hour worked (see, e.g., Dkt. No. 247-3 at 34).

27
28

4

Connor-Nolan was one of many master franchisees in California. Connor-Nolan contracted
with plaintiffs Aguilar and Roman, among other unit franchisees.
22

1
2

all deductions for certain months between 2004 and 2008 (Dkt. No. 313-2 at 2–3). But, again,

3

those documents do not provide a means of calculating hours worked.

4

United States District Court
Northern District of California

Additionally, there are documents that state plaintiff Roman’s gross cleaning revenue and

Defendant purportedly implemented a proprietary system for master franchisees to

5

estimate cleaning times and costs. The system, which was based on publicly available

6

standards, estimated cleaning rates (square feet per hour) based on: type of cleaning required;

7

types of equipment and supplies used; and state of the item being cleaned. Based on those

8

standard rates and the square footage of each customer location, it is theoretically possible to

9

estimate the number of hours per day unit franchisees spent cleaning each customer location.

10

From there, one could estimate hourly rates using the monthly cleaning fees and the number of

11

days of service per week.

12

But, as our court of appeals noted, it is unclear whether Connor-Nolan or the many other

13

master franchisees in California used this system to estimate hours. Moreover, using this

14

system would be unmanageable. To check each individual cleaning service against the

15

standard rates would be inefficient at best. The standard category for “hard floor care” alone

16

contains hundreds of possible cleaning rates (Dkt. No. 247-3 at 335–37). Further, the evidence

17

includes several “complaint reports,” indicating that plaintiffs Roman and Aguilar did not

18

complete all services on all occasions, which would reduce the estimated number of hours

19

worked (see, e.g., id. at 87, 167). Moreover, some unit franchisees had third-party individuals

20

help them clean certain locations, which would reduce the estimated time such unit franchisees

21

spent cleaning (see, e.g., Roman Dep. 35). And, given there were potentially thousands of

22

cleaning customers, and each unit franchisee serviced multiple cleaning customers,

23

individualized inquiries would abound.

24

Some of Connor-Nolan’s pricing agreements, but not all, are accompanied by bid

25

worksheets. For pricing agreements not accompanied by bid worksheets, the method outlined

26

above would be the only means of determining hours worked and rates of pay. For pricing

27

agreements that are accompanied by bid worksheets, those bid worksheets showed estimated

28

hours worked and rates of pay. Connor-Nolan, however, consistently used an hourly rate of
23

1

$15 to estimate cleaning costs (see, e.g., Dkt. No. 247-3 at 61–62). This rate exceeds all

2

applicable minimum wage rates throughout the proposed class period. Lab. Code § 1182.12.
In sum, there was no uniform pay policy. It would be unmanageable to determine hours

3
4

worked and rates of pay from the pricing agreements and cleaning standards. The available bid

5

worksheets are all from Connor-Nolan and show a rate of $15 per hour. This order has no

6

information about whether other master franchisees in California used the cleaning standards

7

or bid worksheets. And, plaintiffs have not provided any common evidence of liability.

8

Individualized inquiries predominate.
True, individualized inquiries regarding damages calculations alone do not preclude class

United States District Court
Northern District of California

9
10

certification. Yokoyama v. Midland Nat’l Life Ins. Co., 594 F.3d 1087, 1094 (9th Cir. 2010).

11

But the foregoing analysis goes to whether plaintiffs can prove liability in the first place, i.e.,

12

whether the wages paid to unit franchisees were below minimum wage or whether unit

13

franchisees were paid for all hours of cleaning work.
Travel Time. One issue deriving from the minimum wage claim that deserves separate

14

consideration from the above is travel time. But that issue is also uncertifiable.

15

To be sure, the history of the definition of “hours worked” in the wage orders indicates

16
17

that travel time during work is compensable. In 1943, Wage Order 7NS stated “‘hours

18

employed’ includes all time during which . . . an employee is required or instructed to travel on

19

the employer’s business after the beginning and before the end of her workday.” Frlekin v.

20

Apple Inc., 8 Cal. 5th 1038, 1048 (2020). Construing the wage orders liberally, this order finds

21

that travel time from one cleaning customer to another during the workday is governed by the

22

wage orders and, therefore, Dynamex. See 4 Cal. 5th at 953.5
But predominance as to liability for travel time is not satisfied. It is true that none of the

23
24

pricing agreements account for travel time (see id. at 34–187). And, for unit franchisees to

25

have been able to service multiple customers in a single day, unit franchisees must have taken

26

some time to travel between customers. But, as relevant here, the pricing agreements show

27
28

5

This finding does not cover time unit franchisees spent commuting from their homes before the
workday or to their homes after the workday. Plaintiffs have not shown such time is compensable.
24

United States District Court
Northern District of California

1

only the days of the week and the initial month of service for each customer location.

2

For defendant to be found liable to a given unit franchisee, therefore, one would have to

3

compare all the unit franchisee’s pricing agreements. Defendant would not be liable to the unit

4

franchisee unless and until we locate two pricing agreements with matching weekdays and

5

dates of service.6 This would have to be repeated for every unit franchisee. Moreover, unit

6

franchisees sometimes sent their own workers to clean certain locations (see, e.g., Roman Dep.

7

35), and unit franchisees sometimes altered their schedules with their customers (Roman Dep.

8

144; Vazquez Dep. 94). Those issues could affect the liability determinations and would

9

require that unit franchisees provide information based on their unaided memories.

10

Thus, individualized issues would predominate as to liability for travel time pay.

11

Mandatory Training. There is, however, one issue deriving from the minimum wage

12

claim susceptible to common proof: failure to pay unit franchisees for mandatory training.

13

Defendant’s standard unit-franchisee agreement provided that each unit franchisee must attend

14

an “initial training program” (Dkt. No. 359-1 at 145, see Dkt. No. 292-11 § 5(A)). Plaintiff

15

Vazquez declares he did not receive pay for this mandatory training (Vazquez Decl. ¶ 7).

16

Plaintiff Aguilar testified that he underwent safety training, and there is no evidence that he

17

was paid for that time (Aguilar Dep. 29–30). Whether defendant must pay minimum wage for

18

training time under California law is, therefore, a question common to all unit franchisees.

19

Moreover, based on defendant’s standard times for the training program, testimony of

20

defendant, and testimony of a sample of putative class members, one could determine a

21

common time duration for the training program (Dkt. No. 359-1 at 122). Thereafter, one could

22

pay each class member at the same rate for the time required to complete the training program.

23

Thus, the mandatory training issue is CERTIFIED. Certification of all other issues

24

deriving from the minimum wage claim, including wages for cleaning work and travel time,

25

is DENIED.

26
27
28

6

Establishing the dates of service for a given unit franchisee for a given customer location would
entail comparing the pricing agreement for that customer to other records (if there are any)
showing the unit franchisee’s last date of service for that customer. This poses an additional layer
of individualized inquiry.
25

(ii)

1
2

Plaintiffs’ claim for overtime pay fails the predominance standard. To determine

3

liability, one would have to determine whether the unit franchisees worked in excess of eight

4

hours per day or 40 hours per week. Lab. Code § 510. Plaintiffs do not provide any common

5

evidence making it likely that unit franchisees worked overtime hours. Without common

6

evidence, one would have to use the unmanageable methods described above to determine

7

hours worked. But plaintiffs do not present any means of efficiently and accurately estimating

8

overtime hours given those individualized inquiries. Certification of the overtime claim is

9

DENIED.

10
11

United States District Court
Northern District of California

Overtime.

12
13
14
15
16

(iii)

Expense Reimbursements.

Labor Code Section 2802(a) provides:
An employer shall indemnify his or her employee for all necessary
expenditures or losses incurred by the employee in direct
consequence of the discharge of his or her duties, or of his or her
obedience to the directions of the employer, even though unlawful,
unless the employee, at the time of obeying the directions, believed
them to be unlawful.
The California wage orders encompass two issues that derive from plaintiffs’ expense

17

reimbursement claim. Wage Order 5-2001(9)(A) states that, if wearing uniforms is a condition

18

of employment, an employer must provide uniforms to its employees. The same wage order

19

states an employer must provide to its employees tools and equipment necessary for the

20

performance of their jobs. Thus, certification of those two issues relies on plaintiffs showing

21

predominance of their misclassification claim under Dynamex, which plaintiffs have already

22

done. Thus, plaintiffs need only further show that common questions predominate as to

23

liability for those issues.

24

As to both issues, plaintiffs satisfy predominance. Deposition testimony reveals

25

defendant required all unit franchisees to wear the “Jan-Pro” logo when they worked

26

(Kissane Dep. 173). Cleaning supplies and equipment, moreover, were necessary for all unit

27

franchisees to work. And, defendant had a common practice of failing to replace unit

28

franchisees’ cleaning supplies and uniforms (Kissane Dep. 157).
26

1
2

supplies to each unit franchisee. But that is misleading. Defendant had a common practice not

3

to provide a unit franchisee with those items unless the unit franchisee paid the franchise fee up

4

front and in full (Dkt. No. 359-1 at 148). Thus, defendant cannot avoid liability on a class-

5

wide basis.

6

That practice nevertheless raises an individualized liability issue — whether each unit

7

franchisee paid the franchise fee up front and in full. But by simply looking at each unit

8

franchisee’s initial payment in his or her franchise agreement, one could conclude whether

9

each unit franchisee received an initial set of equipment and uniforms. Thus, one could

10

United States District Court
Northern District of California

Defendant argues, however, that it supplied an initial set of uniforms and cleaning

efficiently determine liability. Individualized issues would not predominate.

11

Defendant next argues that individualized issues would predominate as to damages.

12

Specifically, defendant argues damages calculations would be “excessively difficult” because:

13

(1) unit franchisees may have used their cleaning supplies for work at businesses not affiliated

14

with defendant; (2) customers sometimes provided cleaning supplies to unit franchisees; and

15

(3) unit franchisees may not have records of cleaning supply purchases. Defendant’s argument

16

is unconvincing. Bowerman v. Field Asset Serv., Inc., 39 F.4th 652, 663 (9th Cir. 2022).

17

True, Bowerman reversed class certification where damages calculations were

18

“excessively difficult.” But its discussion of damages calculations was dicta. Bowerman held

19

that class certification was inappropriate because “class members failed to demonstrate . . .

20

liability was subject to common proof” and because “class members [could not] show that the

21

whole class suffered damages traceable to their alleged misclassification.” By contrast, the

22

“excessive difficulty” of calculating damages was neither necessary nor sufficient to reverse on

23

certification. That difficulty was a problem Bowerman only “sought to avoid.” 39 F.4th

24

at 662–663 (emphasis added).

25

The rule in this circuit remains that “damages calculations alone cannot defeat

26

certification.” Yokoyama, 594 F.3d at 1094 (emphasis added). Here, moreover, damages

27

calculations would not be excessively difficult. There is a list of initial equipment that

28

defendant would have given to qualifying unit franchisees, which is common evidence to
27

1

calculate damages (Dkt. No. 359-1 at 169). At least Connor-Nolan kept records showing

2

deductions for cleaning equipment that it sold to unit franchisees, which is another useful tool

3

to estimate damages (Dkt. No. 313-2 at 2). And, any receipts from unit franchisees would also

4

help us estimate damages.

United States District Court
Northern District of California

5

True, Wage Order 5-2001(9)(B) provides an exception: “an employee whose wages are

6

at least two (2) times the minimum wage provided herein may be required to provide and

7

maintain hand tools and equipment customarily required by the trade or craft.” But that

8

exception is inapplicable here. The Industrial Welfare Commission has stated that “[t]his

9

exception is quite narrow and is limited to hand (as opposed to power) tools and personal

10

equipment, such as tool belts or tool boxes, that are needed by the employee to secure those

11

hand tools.” None of the unit franchisees here used hand tools, tool belts, or tool boxes.

12

Thus, the exception does not raise individualized issues here. Indus. Welfare Comm’n,

13

Statement as to the Basis, at 19, https://www.dir.ca.gov/iwc/Statementbasis.pdf.
*

14

*

*

15

The remaining issues that derive from plaintiffs’ expense reimbursement claim —

16

insurance and gas expenses — rely on the Borello misclassification standard because they do

17

not arise under the California wage orders. See Dynamex, 4 Cal. 5th at 915–16 n. 5; Moreno v.

18

JCT Logistics, Inc., 2019 WL 3858999, at *8, *12 (C.D. Cal. May 29, 2019) (Judge Jesus G.

19

Bernal). Because plaintiffs have failed to show predominance for misclassification under

20

Borello, plaintiffs cannot show predominance for any of those issues that rely on Borello.

21

See Haitayan, 2021 WL 757024, at *5–6.

22
23
24

Plaintiffs’ arguments that the remaining expense reimbursement issues rely on the ABC
test are incorrect.
First, plaintiffs assert “the Legislature has now codified the ABC test with respect to the

25

entire labor code . . . and that statute applies retroactively” (Opp. 8). Namely, plaintiffs refer to

26

Labor Code Section 2775, or “AB5,” which codified the ABC test. AB5 extended the reach of

27

the ABC test to the labor code generally and to “violations of [the] code relating to wage

28

orders.” Ibid.; Lab. Code § 2785(a) (emphasis added). Thus, plaintiffs argue that, even if the
28

1

wage orders do not encompass the remaining expense reimbursement issues, those issues still

2

rely on the ABC test because (1) they arise out of the labor code generally or relate to wage

3

orders, and (2) AB5 was retroactive.
But only Dynamex was retroactive. And, Dynamex applied only to wage orders. 4 Cal.

United States District Court
Northern District of California

4
5

5th at 913–14. Thus, to the extent that AB5 covered claims arising out of the labor code

6

generally or relating to wage orders, AB5 was an expansion of Dynamex. That expansion was

7

not retroactive. AB5 applied only to “work performed on or after January 1, 2020.” Lab.

8

Code § 2785(c). Because all three of our plaintiffs terminated their work with defendant by

9

2017, AB5’s expansion of Dynamex does not apply here. Thus, issues not covered under the

10

wage orders, even if they relate to wage orders or arise out of the labor code generally, rely on

11

Borello in this action.
Moreover, whether existing law provides that the ABC test applies to claims relating to

12
13

the wage orders is inconsequential. This order finds that neither Wage Order 9-2001(8) nor

14

Wage Order 5-2001(8) is related to the remaining expense reimbursement issues. Those wage

15

order sections prohibit employers from requiring reimbursement “from an employee;” they do

16

not mandate that employers give reimbursements to employees. (Emphasis added). And,

17

neither section refers to automobile or insurance expenses.
Second, plaintiffs contend Gonzales v. San Gabriel Transit, Inc. is binding here, which

18
19

found that “failure to reimburse expenses . . . in violation of [Labor Code] Section 2802 is

20

encompassed by Wage Order No. 9(8).” 40 Cal. App. 5th 1131, 1157 (2019). But Becerra v.

21

McClatchy Co. disagreed with Gonzales, finding the wage orders do not cover certain issues

22

under Section 2802. 69 Cal. App. 5th 913, 934 (2021). Even the California appellate court

23

that heard Dynamex found the wage orders do not cover gas expenses under Section 2802.

24

4 Cal. 5th at 915–16 n. 5. (The California Supreme Court did not express a view on that issue.)

25

As California appellate courts are split on this issue, this order may follow either route.7

26
27
28

7

Plaintiffs also cite Duffey v. Tender Heart Home Care Agency, LLC, to support their position.
But Duffey did not apply the ABC test to a misclassification claim for purposes of the Domestic
Worker Bill of Rights. It applied Borello. 31 Cal. App. 5th 232, 254 (2019).
29

1
2

reimbursement claim is CERTIFIED. Certification of all other issues deriving from the expense

3

reimbursement claim is DENIED.

4
5

(iv)

Unlawful Deductions.

The California wage orders encompass unlawful deductions for operational expenses

6

under Labor Code Section 221. That section provides “[i]t shall be unlawful for any employer

7

to collect or receive from an employee any part of wages theretofore paid by said employer to

8

said employee.” To that end, Wage Order 5-2001(8) provides:

9
10
11

United States District Court
Northern District of California

As to only the issues of reimbursement for uniforms and cleaning supplies, the expense

12

No employer shall make any deduction from the wage . . . for any
cash shortage, breakage, or loss of equipment, unless it can be
shown that the shortage, breakage, or loss is caused by a dishonest
or willful act, or by the gross negligence of the employee.
Regarding cash shortages, breakage, and loss of equipment under former Wage Order 5-

13

57, the California Supreme Court stated in 1962 that “[i]t does not seem unjust to require the

14

employer to bear such losses as expenses of management.” Moreover, a California court of

15

appeal recently recognized that that Supreme Court decision was “based on the

16

impermissibility of transferring to the employee, by way of wage deductions, the financial

17

burden of business expenses that otherwise would be borne by the employer.” That court of

18

appeal found that certain operational expenses “appear[ed] on their face to be for standard

19

business practices, not chargeable to an employee,” including “promotional mailers and

20

stationery . . . and advertisements.” Kerr’s Catering Serv. v. Dep’t of Indus. Rels., 57 Cal. 2d

21

319, 329 (1962) (emphasis added); Davis v. Farmers Ins. Exch., 245 Cal. App. 4th 1302,

22

1334–35 (2016); see Prachasaisoradej v. Ralphs Grocery Co., 42 Cal. 4th 217, 232 (2007).

23

Here, plaintiffs allege defendant unlawfully deducted a “management fee” and a “sales

24

and marketing fee” from unit franchisees’ pay. As Kerr and Davis demonstrate, former

25

Wage Order 5-57 supported that an employer may not shift operational expenses for managing

26

and advertising its business to its employees. Thus, construing the wage orders “liberally . . .

27

in a manner that serves [their] remedial purposes,” and considering that the suffer or permit to

28

work standard is “exceptionally broad,” this order finds that Wage Order 5-2001(8)
30

1

encompasses Labor Code Section 221 for purposes of the management fee and the sales and

2

marketing fee. Dynamex, 4 Cal. 5th at 952–53.
Thus, certification of the unlawful deduction claim for those issues relies on plaintiffs

3
4

showing predominance of their misclassification claim under Dynamex, which plaintiffs have

5

already done. Plaintiffs need only further show predominance for the management fee and the

6

sales and marketing fee claims. Plaintiffs have done so.
Management Fee. Defendant had a uniform policy of providing a template agreement to

United States District Court
Northern District of California

7
8

all master franchisees, which master franchisees used to create their agreements with unit

9

franchisees. That template agreement provided that the master franchisee would deduct a

10

management fee from its unit franchisee’s pay (Dkt. No. 359-1 at 150). All of plaintiffs’

11

agreements with their master franchisees, moreover, included deductions for management fees

12

(see, e.g., Dkt. No. 292-12 § 7(D)). Plaintiff Roman and Massachusetts-plaintiff Giovani

13

Depianti suffered such deductions (Dkt. No. 313-2 at 2–3, 8). Based on this common evidence

14

and the master franchisees’ records, predominance for liability is satisfied.
As to damages for management fees, defendant had a common policy that master

15
16

franchisees would deduct five percent of each unit franchisee’s gross cleaning revenue per

17

month (Dkt. No. 359-1 at 150). Thus, the total amount owed to the class would be:

18

five percent of the total gross revenue of all master franchisees in California during the class

19

period. (Master franchisees must have records of their gross revenue for purposes of filing

20

taxes and verifying such information with defendant.) One could provide each unit franchisee

21

with exact damages by summing all deductions for management fees based on master

22

franchisee records (see Dkt. No. 313-2 at 2–3, 8).
Sales and Marketing Fee. Similarly, defendant’s template agreement (and all of

23
24

plaintiffs’ agreements) provided that the master franchisee would deduct a sales and marketing

25

fee from the unit franchisee’s pay (Dkt. No. 359-1 at 149; Dkt. No. 292-12 § 7(B)).8 Thus, one

26
27
28

Specifically, master franchisees were to impose a sales and marketing fee for all “additional
customer accounts” that master franchisees provided to unit franchisees. Whether an account was
an additional customer account depended on the amount of gross annual revenue guaranteed to the
unit franchisee. As a master franchisee provided a unit franchisee with more customer accounts,
31
8

1

could determine liability and exact damages based on defendant’s common practices and

2

master franchisees’ records of fee deductions.

3
4

master franchisees were free not to charge management fees and sales and marketing fees.

5

But defendant has not pointed to any evidence that suggests master franchisees did not charge

6

such fees. Moreover, by looking at a sample of franchise agreements for each master

7

franchisee, one can readily determine whether each master franchisee had a policy of deducting

8

such fees. There is, thus, sufficient common evidence to adjudicate liability for unlawful

9

deductions as to (1) management fees and (2) sales and marketing fees on a class-wide basis.

10

United States District Court
Northern District of California

Defendant argues, however, that predominance for liability is not satisfied because

Chargeback Fee. Plaintiffs also request that this order certify the issue of chargeback

11

fees. At the hearing, plaintiffs represented that defendant had a common policy to impose

12

chargeback fees on unit franchisees whenever customers failed to pay for cleaning services.

13

Such a fee might fall under the wage orders as a deduction for a cash shortage. But, regardless,

14

plaintiffs’ post-hearing briefing failed to point to a common policy regarding such a fee

15

(see Dkt. No. 368). Neither does this order find such a provision in any of plaintiffs’

16

individual agreements. And, plaintiffs’ declarations fail to address such a fee. Thus, there is

17

no evidence supporting this theory of chargeback fees.

18

It seems, however, that the chargeback fee to which plaintiffs referred was called a

19

“service fee.” Defendant’s template agreement provided that a master franchisee could assess

20

a service fee of $50 for every hour that the master franchisee spent rectifying a customer

21

complaint (Dkt. No. 359-1 at 150). That comports with a fee in plaintiff Roman’s pay

22

statement, described as: “Service Fee - [Customer Name] . . . Charge Backs . . . $50.00”

23

(Dkt. No. 313-2 at 2). Such a fee, however, does not fall within the wage orders because it

24

does not represent a routine operational expense. As such, it relies on the Borello

25

misclassification standard. Because plaintiffs have failed to show predominance for

26
27
28

the unit franchisee’s expected annual revenue would increase. After the unit franchisee’s expected
annual revenue surpassed the guaranteed annual revenue, any new customer account that the
master franchisee provided was deemed “additional.”
32

1

misclassification under Borello, plaintiffs cannot show predominance for chargebacks

2

(i.e., service fees). See Haitayan, 2021 WL 757024, at *5–6.
*

3

United States District Court
Northern District of California

4

*

*

The remaining issues deriving from plaintiffs’ unlawful deduction claim — franchise

5

fees, royalty fees, and insurance fees — rely on the Borello misclassification standard because

6

they do not arise under the California wage orders. Because plaintiffs have failed to show

7

predominance for misclassification under Borello, plaintiffs cannot show predominance for the

8

remaining unlawful deduction issues. See Haitayan, 2021 WL 757024, at *5–6.

9

As to only the issues of management fees and sales and marketing fees, the unlawful

10

deduction claim is CERTIFIED. Certification of all other issues deriving from the unlawful

11

deduction claim is DENIED.

12
13

(v)

Wage Statements.

Additionally, plaintiffs request damages for defendant’s failure to provide itemized wage

14

statements under Labor Code Section 226. This issue is governed by Wage Order 5-2001(7).

15

But plaintiffs failed to claim such a violation in the operative complaint. As discussed below,

16

this order construes plaintiffs’ actions as a request to amend pursuant to FRCP 15(b), but this

17

order denies that request for undue delay and prejudice to defendant. Thus, the Section 226

18

issue is not certifiable.

19

This order CERTIFIES: (1) plaintiffs’ minimum wage claim, but only as to the issue of

20

mandatory training; (2) plaintiffs’ expense reimbursement claim, but only as to the issues of

21

(a) required uniforms, and (b) necessary cleaning supplies and equipment; and (3) plaintiffs’

22

unlawful deduction claim, but only as to the issues of (a) management fees, and (b) sales and

23

marketing fees. Certification of the overtime claim and other issues deriving from the

24

minimum wage, expense reimbursement, and unlawful deduction claims is DENIED.

25

Certification of a claim for itemized wage statements is DENIED AS MOOT.

26
27
28
33

1
2

SUMMARY JUDGMENT AS TO MISCLASSIFICATION.

As discussed above, Prong B of the ABC test is susceptible to common proof. This order

3

now turns to the merits of Prong B, aided by the guidance of our court of appeals. Thereafter,

4

this order briefly addresses Prong A and Prong C.

5

Summary judgment is proper when the pleadings, discovery, and affidavits show that

6

there is “no genuine dispute as to any material fact and the movant is entitled to judgment as a

7

matter of law.” FRCP 56(a). Material facts are those that “might affect the outcome of the

8

suit” under the governing, substantive law. A factual dispute is genuine “if the evidence is

9

such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v.

10

United States District Court
Northern District of California

3.

Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

11

The record is viewed in the light most favorable to the nonmoving party, and “‘all

12

reasonable inferences that may be drawn from the facts placed before the court must be

13

drawn’” in favor of the nonmoving party. Stegall v. Citadel Broad. Co., 350 F.3d 1061, 1065

14

(9th Cir. 2003) (citations omitted). The judge does not make credibility determinations or

15

weigh the evidence. Anderson, 477 U.S. at 255. A trial court may consider only admissible

16

evidence. FRCP 56(c).

17

Here, both parties have moved for summary judgment. Defendant, however, has the

18

burden of persuasion at trial to satisfy the ABC test. Dynamex, 4 Cal. 5th at 964. A finding

19

against defendant on any prong directs a finding of an employer-employee relationship.

20
21

A.

PRONG B OF THE ABC TEST.

Prong B requires the employer to show “that the worker performs work that is outside the

22

usual course of the hiring entity’s business . . . .” Ibid. Our court of appeals identified three

23

considerations relevant to Prong B: (1) whether the work of the hiree is necessary or merely

24

incidental to that of the hirer; (2) whether the hiree continuously performs work for the hirer;

25

and (3) what business the hirer proclaims to be in. Vazquez, 986 F.3d at 1125.

26

First, this order considers whether the work of unit franchisees was necessary or merely

27

incidental to the work of defendant. Our court of appeals stated that “[i]n some cases, this

28

inquiry can be conducted through a common-sense observation of the nature of the
34

1

businesses.” “In other cases, courts view the ‘necessary’ versus ‘incidental’ distinction in

2

more economic terms.” Where the hirer’s revenue is dependent on the amount of work that the

3

hirees perform, the hirees are deemed necessary to the hirer’s work. Id. at 1125–26.

4
5

defendant’s business. Defendant’s business depended on unit franchisees performing cleaning

6

services. Without a consistent supply of unit franchisees, defendant’s business would have

7

cratered. And, defendant earned four percent of all cleaning revenue that master franchisees

8

collected from unit franchisees (Kissane Dep. 34). Defendant’s revenue, therefore, depended

9

on the amount of work that unit franchisees performed.

10

United States District Court
Northern District of California

Here, as a matter of common sense, unit franchisees remained at all times necessary to

Defendant does not dispute these common-sense conclusions. Rather, defendant states

11

our court of appeals’ decision is “no longer good law.” Defendant construes our court of

12

appeals’ decision to mean that an entity is an employer whenever it derives an economic

13

benefit from its workers (Opp. 20). Defendant’s argument is a stretch. Our court of appeals

14

stated that one consideration in the misclassification analysis is whether a hirer earns revenue

15

based on hirees’ output. Our court of appeals’ decision is still good law.

16

Second, this order considers whether unit franchisees continuously performed work for

17

defendant. Here, unit franchisees did not “perform incidental services for [an] otherwise

18

unrelated business[].” Rather, they performed cleaning services “on a regular or continuous

19

basis, without regard to the substantiality of the activity in relation to [defendant’s] other

20

business activities.” Vazquez, 986 F.3d at 1126. As plaintiffs point out, the template unit

21

franchisee agreement provided for a ten-year term (Dkt. No. 359-1 at 144; see Dkt. No. 292-11

22

§ 18). Unit franchisees continuously — not occasionally — performed cleaning services.

23

And, as shown below, defendant was in the business of cleaning, so unit franchisees’ services

24

were for a related business.

25

Defendant contends that our court of appeals’ approach is “unreasonable at best” because

26

it would not be economically feasible for a franchisor to contract with a franchisee for “‘a term

27

too short for the franchisee to recoup his or her investment’” (Opp. 21) (citation omitted). But

28

our court of appeals’ approach is reasonable because it “helps capture the distinction between
35

1

independent contractor arrangements designed to evade requirements placed on employers and

2

traditional contractors like electricians and plumbers, who perform incidental services for

3

otherwise unrelated businesses.” Vazquez, 986 F.3d at 1126. And, again, whether unit

4

franchisees continuously worked for defendant is but one consideration under Prong B.

United States District Court
Northern District of California

5

Third, this order considers whether defendant held itself out as a cleaning business.

6

Of importance to this inquiry is how defendant described itself in public advertisements and

7

websites. As our court of appeals stated, defendant’s “websites and advertisements . . .

8

promote[d] [defendant] as being in the business of cleaning.” And, defendant’s website

9

described defendant as an “‘environmentally responsible commercial cleaning company’” that

10

provided “‘cleaning services.’” Vazquez, 986 F.3d at 1127. Furthermore, in defendant’s

11

contracts with its master franchisees, defendant described itself as “in the business of operating

12

and franchising comprehensive cleaning and maintenance businesses . . .” (Dkt. No. 292-2 § 1)

13

(emphasis added).

14
15
16
17
18

Moreover, our court of appeals was “skeptical” of defendant’s argument that it was in the
business of franchising rather than cleaning:
“Franchising is not in itself a business, rather a company is in
business of selling goods or services and uses the franchise model
as a means of distributing the goods or services to the final end
user without acquiring significant distribution costs.”

19

Vazquez, 986 F.3d at 1127 (citation omitted). This order also finds defendant’s argument

20

unconvincing. Defendant was plainly in the business of selling cleaning services. To conclude

21

otherwise would ignore the entire foundation of defendant’s business. The prior summary

22

judgment order in this action, which our court of appeals vacated, did not conclude otherwise.

23

Defendant argues that, at the least, the question of whether it satisfies Prong B should be

24

submitted to a jury. It cites numerous pages of its officers’ deposition testimony for the

25

proposition that its usual course of business was supporting master franchisees — not cleaning.

26

True, the testimony shows that defendant’s officers provided training, advice on regulatory

27

compliance, and general business guidance to master franchisees (Dkt. No. 247-4 at 10–164).

28

But, at best, that evidence goes to only the third consideration laid out in Vazquez — what
36

1

business the hirer proclaims to be in. The other two considerations hurt defendant’s case.

2

Moreover, as to the third consideration, defendant did not hold itself out to the public as

3

supporting master franchisees. It held itself out as a cleaning business. Thus, the officers’

4

deposition testimony does not raise a genuine dispute as to Prong B.

United States District Court
Northern District of California

5

Defendant also argues that treating unit franchisees as employees would be inconsistent

6

with California and federal franchise regulations. But the Federal Trade Commission

7

Franchise Rule states that “[a] law is not inconsistent with [the rule] if it affords prospective

8

franchisees equal or greater protection . . . .” 16 C.F.R. § 436.10(b). The ABC test affords

9

franchisees greater protection by broadening the definition of “suffer or permit to work.”

10

Thus, this order finds franchise regulations consistent with finding unit franchisees to be

11

employees under the ABC test. See Goro v. Flowers Food, Inc., 2021 WL 4295294, at *10–11

12

(S.D. Cal. Sep. 21, 2021) (Judge Todd W. Robinson).

13

Finally, defendant argues the ABC test requires that plaintiffs show defendant was the

14

“hiring entity.” But People v. Uber Technologies, Inc., a California appellate decision,

15

expressly rejected this argument. Uber Technologies found the phrase “hiring entity” was

16

“intended to be expansive for reasons specific to California wage and hour laws and the

17

longstanding social safety net objectives of those laws in this state.” And, defendant’s

18

suggestion that this order must decide whether the cleaning customers or defendant was the

19

hiring entity would present an “artificial choice” resting on a “false dichotomy.” It is possible

20

that unit franchisees rendered services to both defendant and the cleaning customers. 56 Cal.

21

App. 5th 266, 287–88 (2020).

22

In sum, on their motion for summary judgment, plaintiffs have met their burden to show

23

an absence of a genuine dispute of material fact as to all three considerations under Prong B.

24

Defendant has failed to raise a genuine dispute of material fact. No reasonable juror could find

25

in favor of defendant on any of the three considerations. Furthermore, on its own motion for

26

summary judgment, defendant has failed to meet its initial burden to show an absence of a

27

genuine dispute of material fact. Because defendant has failed to satisfy Prong B, this order

28

finds unit franchisees were employees of defendant. Summary judgment for plaintiffs on the
37

1

misclassification claim under Dynamex is GRANTED. Defendant’s motion for summary

2

judgment as to misclassification under Dynamex is DENIED.

United States District Court
Northern District of California

3

B.

PRONG A OF THE ABC TEST.

4

Although the above is sufficient to find in favor of plaintiffs on the misclassification

5

claim, this order briefly considers the remaining prongs of the ABC test. Prong A requires the

6

hirer to show “that the worker is free from the control and direction of the hirer in connection

7

with the performance of the work, both under the contract for the performance of the work and

8

in fact.” Dynamex, 4 Cal. 5th at 955. “[A] business need not control the precise manner or

9

details of the work . . . to have maintained the necessary control that an employer ordinarily

10

possesses over its employees.” Id. at 958. That the hirer dictates how the work is to be

11

performed is significant to this inquiry. See id. n. 27.

12

Here, defendant had the contractual “right to establish company policies and/or

13

procedures pertaining to the operation of [master franchisees’] franchised business . . . or the

14

business of any unit franchisee” (Dkt. No. 292-2 § 4.28). Defendant had the contractual right

15

to inspect master and unit franchisees’ premises to ensure quality of service (id. § 4.29).

16

By contract, unit franchisees were subject to a mandatory training program, through which

17

defendant dictated how unit franchisees were to perform cleaning services (Dkt. No. 359-1

18

at 145). And, unit franchisees were subject to a non-compete provision (Dkt. No. 359-1

19

at 157). Thus, unit franchisees were not free from defendant’s control and direction under

20

contract for the performance of the work.

21

“As a practical matter,” however, there may have been “less control at all levels than

22

what is contemplated in the agreements.” Vazquez, 986 F.3d at 1120. Plaintiff Roman

23

engaged in an independent business that cleaned houses, contravening the non-compete

24

provision (Roman Dep. 160). The testimony of defendant’s Vice President supports that

25

“[defendant]’s officials rarely make site visits to its master franchisees.” “They also rarely, if

26

ever, inspect the books and records of their master franchisees” (see Thompson Dep. 39–41).

27

Vazquez, 986 F.3d at 1120. Although defendant provided a proprietary system for master

28

franchisees to use to estimate cleaning hours, defendant counters that master franchisees could
38

1

choose not to use that system (Kissane Dep. 42–43). Further, one master franchisee declared

2

defendant “has declined to get involved” with “compliance matters relating to our business”

3

(Dkt. No. 247-3, Conner Decl. ¶ 5).

4
5

are genuine disputes of material fact regarding control that preclude summary judgment on

6

Prong A. Thus, Prong A is not amenable to summary judgment.

7
8
9
10
11

United States District Court
Northern District of California

As to both defendant and plaintiffs’ motion for summary judgment, this order finds there

12
13
14
15
16
17

C.

PRONG C OF THE ABC TEST.

Prong C requires the hirer to show “that the worker is customarily engaged in an
independently established trade, occupation, or business of the same nature as that involved in
the work performed.” Dynamex, 4 Cal. 5th at 955–56. Furthermore:
Courts in other states that apply the ABC test have held that the
fact that the hiring business permits a worker to engage in similar
activities for other businesses is not sufficient to demonstrate that
the worker is “‘customarily engaged in an independently
established . . . business’” for purposes of [Prong C]. . . .
“[T]he appropriate inquiry under [Prong C] is whether the person
engaged in covered employment actually has such an independent
business, occupation, or profession, not whether he or she could
have one.”
Id. at 962 n. 30 (citations omitted).
Here, at least plaintiff Roman actually engaged in an independent business that cleaned

18

houses (Roman Dep. 160). Plaintiffs’ argument that unit franchisees, such as plaintiff Roman,

19

expanded defendant’s customer base by engaging in independent businesses is invalid. By

20

definition, unit franchisees who engaged in independent businesses did not provide customers

21

to defendant’s separate business. Moreover, this order finds plaintiff Roman’s housekeeping

22

business to be “of the same nature” as defendant’s commercial cleaning business. Both

23

businesses involved janitorial work. Plaintiffs do not cite case law that distinguishes between

24

housekeeping and commercial cleaning. And, that unit franchisees agreed not to compete with

25

defendant is irrelevant under Prong C. Dynamex, 4 Cal. 5th at 962 n. 30. Thus, as to

26

defendant’s motion, there is no genuine dispute of material fact that defendant satisfies

27

Prong C. Thus, Prong C is amenable to summary judgment in favor of defendant.

28
39

1

Of course, this order’s findings regarding Prong A and Prong C do not change that

2

defendant cannot satisfy Prong B. All unit franchisees were employees under Dynamex.

3
4
5
6
7
8

THE BUSINESS-TO-BUSINESS EXCEPTION DOES NOT APPLY.

Defendant argues Borello is the correct test under the business-to-business exception.
Labor Code Section 2776 provides, in part:
Section 2775 and the holding in Dynamex do not apply to a bona
fide business-to-business contracting relationship, as defined
below, under the following conditions:

12

(a) If an individual acting as a sole proprietor, or a business entity
formed as a partnership, limited liability company, limited
liability partnership, or corporation (“business service
provider”) contracts to provide services to another such business
or to a public agency or quasi-public corporation (“contracting
business”), the determination of employee or independent
contractor status of the business services provider shall be
governed by Borello, if the contracting business demonstrates
that all of the following criteria are satisfied: [list of (1)–(12)].

13

Here, defendant asserts that unit franchisees were business service providers who

14

contracted to provide services to master franchisees (contracting businesses). But common

15

evidence shows at least one of the statute’s criteria is unmet. Subsection (a)(10) requires that

16

“[t]he business service provider can negotiate its own rates.” But common evidence shows

17

unit franchisees could not negotiate their own rates. Defendant’s CEO testified that “[e]ach

18

master franchisee determines the pricing [of cleaning contracts] based on local conditions . . .”

19

(Kissane Dep. 39). Defendant’s Vice President confirmed that “the masters . . . [i]t’s their

20

discretion what they input [into defendant’s payment formula]” (Thompson Dep. 25).

21

Because less than all of the statute’s criteria are met, the exception does not apply.

22

Dynamex, not Borello, is the applicable misclassification test here.

9
10
11

United States District Court
Northern District of California

D.

23

E.

THE JOINT EMPLOYER TEST DOES NOT APPLY.

24

Defendant argues the joint employer test applies here instead of the ABC test.

25

Defendant’s argument relies on the following language: “‘Where a party is the agent of

26

misclassification, it may be directly liable under the ABC test, even where it utilizes a proxy to

27

make arrangements with its employees.’” Vazquez, 986 F.3d at 1124 (quoting Depianti v. Jan-

28

Pro Franchising Int’l, Inc., 990 N.E.2d 1054, 1068 n. 17 (Mass. 2013)). Defendant further
40

1

asserts that, in three-tier systems, ordinarily the middle tier is the agent of misclassification.

2

According to defendant, however, there are two exceptions under which the top tier is the

3

agent of misclassification: “first, where the law of corporate disregard is applicable and,

4

second, where an entity has engaged in an ‘end run’ around its wage law obligations.” Jinks v.

5

Credico (USA), LLC, 177 N.E.3d 509, 516 (Mass. 2021). Defendant argues that, because

6

plaintiffs have not met either exception, defendant is not the agent of misclassification.

7

For that reason, defendant states the ABC test cannot apply.

United States District Court
Northern District of California

8

Defendant’s argument fails for a number of reasons. First, our court of appeals

9

instructed this order to apply the ABC test. Vazquez, 986 F.3d at 1122. To ignore a mandate

10

from our court of appeals and to employ a different test would contravene our judicial process.

11

Second, neither our court of appeals nor Dynamex required that the hirer be the “agent of

12

misclassification” before the ABC test can apply.

13

Third, even if there were an “agent of misclassification” standard in California, defendant

14

was, in fact, the agent of misclassification. The Massachusetts Supreme Judicial Court stated

15

that the top tier is the agent of misclassification if it “‘design[s] and implement[s] the

16

contractual framework under which [the bottom-tier] was misclassified as an independent

17

contractor,’ specifically to evade obligations under the wage laws.” This would amount to an

18

“end run” around the top tier’s wage law obligations. Jinks, 177 N.E.3d at 517 (quoting

19

Depianti, 990 N.E.2d at 1068 n. 17).

20

Defendant did just that. Defendant designed and implemented a contractual framework

21

— through its template agreement — that classified unit franchisees as independent

22

contractors. Unlike Jinks, in which the middle-tier classified the plaintiffs as independent

23

contractors “[w]ithout any apparent input from [the top-tier],” here, defendant — the top tier

24

— classified unit franchisees as independent contractors. In fact, master franchisees’

25

agreements with unit franchisees “substantially follow[ed] [defendant]’s requirements” by

26

“describ[ing] the unit franchisee[s] as independent contractor[s] . . . .” Vazquez, 986 F.3d

27

at 1119–20 (emphasis added). Thus, the ABC test would apply even if there were an “agent of

28

misclassification” standard in California.
41

1
2

test, this order next considers whether any of the certified labor code issues are amenable to

3

summary judgment.

4

4.

5

This order has certified the following issues for class treatment: (1) whether defendant is

SUMMARY JUDGMENT AS TO CERTIFIED LABOR CODE ISSUES.

6

liable to unit franchisees for failure to pay for mandatory training; (2) whether defendant is

7

liable to unit franchisees for failure to reimburse them for (a) required uniforms, and

8

(b) necessary cleaning supplies and equipment; and (3) whether defendant unlawfully deducted

9

from unit franchisees’ wages (a) management fees, and (b) sales and marketing fees. These are

10
11

United States District Court
Northern District of California

Having found that unit franchisees were employees of defendant under Dynamex’s ABC

12

discussed in turn.
A.

MANDATORY TRAINING.

Plaintiffs have pointed to no published California decision that explicitly recognizes an

13

employee’s right to minimum wage for mandatory training; this order finds none.

14

But “California courts have long recognized that California’s wage laws are patterned on

15

federal statutes and that authorities construing those federal statutes provide persuasive

16

guidance to state courts.” “A review of our labor statutes reveals a clear legislative intent to

17

protect the minimum wage rights of California employees to a greater extent than federally.”

18

Armenta, 135 Cal. App. 4th at 322, 324.

19

Under the Fair Labor Standards Act, a hirer must meet six elements to show that its

20

trainees do not qualify for minimum wage for mandatory training. One such element is that

21

“[t]he employer that provides the training derives no immediate advantage from the activities

22

of the trainees, and on occasion his operations may actually be impeded.” Harris v. Vector

23

Mktg. Corp., 753 F. Supp. 2d 996, 1006 (N.D. Cal. 2010) (Judge Edward M. Chen);

24

see Walling v. Portland Terminal Co., 330 U.S. 148 (1947). In other words, “where the

25

company is the primary beneficiary of the trainee’s labors, an employment relationship exists,

26

and federal minimum wage and overtime laws apply.” Cal. Prac. Guide Emp. Litig. § 11-B

27

(Mar. 2022) (citing McLaughlin v. Ensley, 877 F.2d 1207, 1209–10 (4th Cir. 1989)).

28
42

1

Here, defendant required master franchisees to train all unit franchisees on proper

2

cleaning methods (Dkt. No. 292-2 § 4.22). Defendant also provided master franchisees with

3

manuals regarding cleaning and safety to provide to unit franchisees (Dkt. Nos. 292-15, 292-

4

16). Master franchisees, in turn, required unit franchisees to attend a training program on

5

proper cleaning methods (Dkt. No. 359-1 at 145). Plaintiff Vazquez declares that he attended

6

such a training program, and defendant did not pay him for training time (Vazquez Decl. ¶ 7).

7

Plaintiff Aguilar also took part in a training (Aguilar Dep. 29–30). Defendant, however, fails

8

to provide evidence disputing the above facts.

United States District Court
Northern District of California

9

Defendant was the primary beneficiary of the mandatory trainings. Defendant reinforced

10

proper cleaning techniques to ensure satisfactory services and to establish goodwill with

11

customers. In other words, defendant’s trainings “buil[t] and ke[pt] customer trust by ensuring

12

consistency and uniformity in the quality of goods and services.” Without such trust,

13

defendant’s business would have faltered for lack of customers. Moreover, defendant included

14

safety protocols in the trainings to decrease its risk for tort liability. And, although defendant

15

counterargues that unit franchisees benefited because defendant gave them “access to resources

16

[they] otherwise would not have [had],” defendant’s argument describes the benefits to unit

17

franchisees of entering into the franchise relationship — not the benefits of the trainings.

18

Thus, defendant’s counterargument is off point. Patterson, 60 Cal. 4th at 490.

19
20
21

Defendant was the primary beneficiary of the trainings. This order finds that defendant is
liable for minimum wage pay to unit franchisees who underwent mandatory training.
Thus, as to plaintiffs’ motion for summary judgment, there is no genuine dispute of

22

material fact, and summary judgment in favor of plaintiffs on the mandatory training issue is

23

GRANTED. Defendant’s motion for summary judgment fails to meet its burden and, as to the

24

mandatory training issue, is DENIED.

25
26

B.

EXPENSE REIMBURSEMENTS.

“[T]he elements of a [Labor Code] Section 2802 claim are: ‘(1) the employee made

27

expenditures or incurred losses; (2) the expenditures or losses were incurred in direct

28

consequence of the employee’s discharge of his or her duties, or obedience to the directions of
43

1

the employer; and (3) the expenditures or losses were necessary.’” USS-Posco Indus. v. Case,

2

244 Cal. App. 4th 197, 205 (2016) (citation omitted).

United States District Court
Northern District of California

3

Deposition testimony reveals defendant required unit franchisees to wear the “Jan-Pro”

4

logo when they worked. Unit franchisees also needed cleaning equipment to work. Each unit

5

franchisee had to pay for an initial set of cleaning supplies and uniforms unless he or she paid

6

all franchise fees up front (Dkt. No. 359-1 at 151). Unit franchisees also had to pay for all

7

replacement cleaning supplies and uniforms themselves (Kissane Dep. 173). Moreover, all

8

three of plaintiffs’ declarations state they “made expenditures” for uniforms and cleaning

9

supplies, and defendant did not reimburse them for such expenses (Vazquez Decl. ¶ 9; Aguilar

10

Decl. ¶ 8; Roman Decl. ¶ 9). In fact, their franchise agreements confirm that fact because none

11

of them paid their franchise fees in full and up front (see, e.g., Dkt. No. 292-11 § 7(A)).

12

Plaintiffs incurred such expenses “in direct consequence of the . . . discharge of [their] duties”

13

to clean businesses. And, such expenses were “necessary” for plaintiffs to secure employment

14

and to clean businesses. USS-Posco, 244 Cal. App. 4th at 205. Defendant does not dispute the

15

above facts. All elements of Labor Code Section 2802 are satisfied.

16

Thus, as to plaintiffs’ motion for summary judgment, there is no genuine dispute of

17

material fact, and summary judgment in favor of plaintiffs for reimbursement for uniforms and

18

cleaning supplies is GRANTED. Defendant’s motion for summary judgment fails to meet its

19

burden and, as to those issues, is DENIED.

20
21

C.

UNLAWFUL DEDUCTIONS.

“Under Labor Code Sections 221 and 224, the employer bears the burden of establishing

22

that . . . deductions are authorized by law.” Employers may not make deductions from wages

23

“‘except in very narrowly defined circumstances provided by statute.’” In fact, “‘[d]ebiting an

24

employee’s earned wages to cover a normal operating expense of the employer is not allowed

25

in California.’” California courts have found deductions to cover advertising and management

26

expenses unlawful. Davis, 245 Cal. App. 4th at 1334, 1336–37 (citations omitted); see Kerr,

27

57 Cal. 2d at 329.

28
44

1

Here, defendant had a uniform policy of providing a template agreement to all master

2

franchisees, which master franchisees used to create their agreements with unit franchisees.

3

That template agreement provided that the master franchisee would deduct a management fee

4

and a sales and marketing fee from its unit franchisees’ pay (Dkt. No. 359-1 at 149–150).

5

All of plaintiffs’ agreements with their master franchisees, moreover, included deductions for

6

management fees and sales and marketing fees (see, e.g., Dkt. No. 292-11 §§ 7(B), 7(D)).

7

And, master franchisees made the deductions directly from unit franchisees’ wages (Dkt. No.

8

313-2 at 2–3, 8). Defendant does not dispute the above facts. Thus, this order finds defendant

9

liable for unlawfully deducting both management fees and sales and marketing fees under

United States District Court
Northern District of California

10

Labor Code Section 221. See Davis, 245 Cal. App. 4th at 1336–37.

11

Defendant argues the fees did not constitute deductions at all. Defendant asserts the

12

franchise agreements defined unit franchisees’ wages as the cleaning costs less the contractual

13

fees. Thus, defendant states the contractual fees were used to calculate final wages, from

14

which it did not thereafter make deductions. But Quillian v. Lion Oil Co. rejected a similar

15

argument regarding a deduction from an employee’s bonus, which the employee expressly

16

agreed to in writing:

17
18
19
20
21
22

Appellant herein describes the subject bonus as a calculated
amount consisting of the computed sales component less the
computed shortage component and argues that no deductions are
made from the final computation. It appears to this court that this
is merely a clever method of circumventing the statutory definition
of wages. . . . Rather than call [the bonus] a commission and then
deduct for shortages, in contravention to Kerr, appellant deducts
shortages from the payment and calls the final result a bonus.
Appellant then self-righteously proclaims that no deductions were
made from the bonus. Unfortunately, the result is the same. The
[employee] carries the burden of losses . . . .

23

Quillian held the bonus scheme contravened public policy. 96 Cal. App. 3d 156, 162–63

24

(1979) (citing Kerr, 57 Cal. 2d 319).

25

Likewise, this order finds defendant’s argument unconvincing. “[Defendant] cannot

26

avoid a finding that its . . . policy is unlawful simply by asserting that the deduction is just a

27

step in its calculation of [wages].” Hudgins v. Neiman Marcus Grp., Inc., 34 Cal. App. 4th

28

1109, 1124 (1995).
45

1
2
3
4
5
6

United States District Court
Northern District of California

7

Defendant also argues the deductions were lawful under Labor Code Section 224.
In relevant part, that section provides:
The provisions of [Labor Code] Section[] 221 . . . shall in no way
make it unlawful for an employer to withhold or divert any portion
of an employee’s wages . . . when a deduction is expressly
authorized in writing by the employee to cover insurance
premiums, hospital or medical dues, or other deductions not
amounting to a rebate or deduction from the standard wage arrived
at . . . pursuant to wage agreement . . . .
True, unit franchisees agreed in writing to the deductions. “That fact, however, is not

8

dispositive: ‘The one tool that is not available to the employer is an employment agreement by

9

which it requires its employees to consent to unlawful deductions from their wages.’”

10

“‘Even if a contract exists, an employer cannot shift the cost of doing business to an

11

employee.’” Davis, 245 Cal. App. 4th at 1332–33 (citations omitted).

12

The management fee and the sales and marketing fee were unlawful. Those fees

13

impermissibly shifted the cost of defendant’s routine operational expenses to unit franchisees.

14

Thus, the fact that unit franchisees consented to those fees is irrelevant. See Davis, 245 Cal.

15

App. 4th at 1333; Quillian, 96 Cal. App. 3d at 163.

16

Finally, defendant argues it is not liable for management fees and sales and marketing

17

fees because it never deducted or received those fees; master franchisees deducted and retained

18

them. It is true that plaintiffs have not provided case law to establish defendant’s liability for

19

fees it did not receive. But defendant implemented the system that resulted in

20

misclassification. Defendant then encouraged master franchisees to make such deductions by

21

giving them a template agreement that included those fees (Dkt. No. 359-1 at 143). In the

22

interest of fairness and justice, defendant must be held liable.

23

In turn, as to plaintiffs’ motion for summary judgment, there is no genuine dispute of

24

material fact, and summary judgment in favor of plaintiffs for management fees and sales and

25

marketing fees is GRANTED. Defendant’s motion for summary judgment fails to meet its

26

burden and, as to those issues, is DENIED.

27
28
46

1
2

PLAINTIFFS’ REQUEST TO AMEND THE PLEADINGS.

Plaintiffs did not claim violations of Labor Code Section 226 in the operative complaint

3

(see Second Amd. Compl.). Nevertheless, plaintiffs move for summary judgment under that

4

section. Thus, this order construes plaintiffs’ motion as a request to amend the pleadings out of

5

time pursuant to FRCP 15(b). Apache Survival Coal. v. U.S., 21 F.3d 895, 910 (9th Cir. 1994).

6

Whether plaintiffs may expand their complaint by adding a claim raised for the first time on

7

summary judgment lies within the district court’s discretion. See Brass v. Cnty. of L.A.,

8

328 F.3d 1192, 1197 (9th Cir. 2003).

9

United States District Court
Northern District of California

5.

“When considering a motion for leave to amend, a district court must consider whether

10

the proposed amendment results from undue delay, is made in bad faith, will cause prejudice to

11

the opposing party, or is a dilatory tactic.” Chodos v. W. Publ’g Co., 292 F.3d 992, 1003

12

(9th Cir. 2002). Although “leave to amend should normally be ‘freely given,’ once a case has

13

progressed to the summary judgment stage ‘the liberal pleading standards are inapplicable.’”

14

Soublet v. Cnty. of Alameda, 2019 WL 12517063, at *8 (N.D. Cal. Dec. 6, 2019) (Judge Jon S.

15

Tigar) (citations omitted). “‘Simply put, summary judgment is not a procedural second chance

16

to flesh out inadequate pleadings.’” Wasco Prods., Inc. v. Southwall Techs., Inc., 435 F.3d

17

989, 992 (9th Cir. 2006) (citation omitted).

18

Here, plaintiffs have had over a decade to amend their complaint to include a claim under

19

Labor Code Section 226. In fact, plaintiffs have amended their complaint twice. But plaintiffs

20

have never claimed a violation of Section 226. Thus, plaintiffs have unduly delayed.

21

Moreover, to allow plaintiffs to amend the complaint now would prejudice defendant.

22

This order has found that defendant waived its right to arbitrate. Defendant’s delay in asserting

23

that right supported our finding. It would be unfair to allow plaintiffs to amend their complaint

24

after delaying for the same duration as defendant did.

25

Although plaintiffs’ conduct does not appear to be dilatory or made in bad faith, it is

26

within this order’s discretion to deny plaintiffs’ request to amend for inexcusable delay.

27

See Brass, 328 F.3d at 1197. As to Labor Code Section 226, both parties’ motions for

28

summary judgment are, therefore, DENIED AS MOOT.
47

CONCLUSION

1
2
3

certification is GRANTED IN PART AND DENIED IN PART. Plaintiffs’ motion for summary

4

judgment is GRANTED IN PART AND DENIED IN PART. Defendant’s motion for summary

5

judgment as to all certified issues is DENIED.

6

United States District Court
Northern District of California

For the foregoing reasons, and to the extent stated herein, plaintiffs’ motion for class

Specifically, this order GRANTS plaintiffs’ motion for class certification as to (1) failure

7

to pay minimum wage for mandatory training, (2) failure to reimburse for expenses incurred

8

for (a) required uniforms and (b) necessary cleaning supplies and equipment, and (3) unlawful

9

deductions of (a) management fees and (b) sales and marketing fees for the following group:

10

all unit franchisees who signed a franchise agreement with a master franchisee in the state of

11

California and who performed cleaning services for defendant from December 12, 2004, to the

12

latest date on which a named plaintiff terminated employment. The limit on the class period is

13

proper because plaintiffs cannot show that their experience was similar to that of persons who

14

worked for defendant after the last of plaintiffs was terminated. This order DENIES class

15

certification as to the remaining labor code claims and issues.

16

This order GRANTS summary judgment in favor of plaintiffs on all certified issues. As to

17

Labor Code Section 226, this order DENIES AS MOOT both parties’ motions for summary

18

judgment. A separate order on the instant briefing shall resolve the parties’ motions for

19

summary judgment as to the uncertified, individual claims and issues that remain.

20

The parties shall please provide a form of class notice for approval. They shall also

21

provide a plan of distribution (which must include first-class mail) and a timetable for

22

distribution of notice and for opt outs. Given the need for these steps, trial and the pretrial

23

conference shall not be held in September. Those events shall be set for early 2023.

24

Counsel shall meet and confer and propose a window of trial dates convenient to both sides.

25
26

IT IS SO ORDERED.
Dated: August 2, 2022.

27
WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

28
48