Authored by Kara Goodwin
Last week, a federal district court decertified a Rule 23 class of more than 1,000 insurance agents who claimed that Bankers Life and Casualty Co. misclassified them as independent contractors, and, as a result, they were entitled $16.9 million in overtime damages under the Washington Minimum Wage Act. In decertifying the class, the court held that “[d]etermining whether class members are employees or contractors under the economic-dependence test” — the same “economic reality” factors typically applied under the Fair Labor Standards Act — “would require an individualized inquiry into each agent’s experience,” meaning “individualized fact questions predominate over common ones” and “[c]lass treatment would be unmanageable.”
Although the procedural history of David et al. v. Bankers Life & Casualty Co. is unique —initially brought in state court; removed under CAFA; remanded where the amount in controversy was not established; state-wide class of 1,000 agents certified, after which plaintiffs asserted a claim for damages exceeding $16.9 million; removed again under CAFA; defendant moved to decertify class — the underlying class certification issues are familiar: whether the common evidence presented provides for a class-wide answer to resolve the misclassification issue “in one stroke” and whether common questions predominate.
Plaintiffs offered the standard form contract that all agents were required to sign and 21 declarations to show that agents operated under a “common regime of control,” which, they argued, supported class certification. Bankers, in turn, relied on declarations from 50 current agents and several managers to demonstrate that many agents had very different experiences from those described by the plaintiffs. Bankers also explained why its declarants had such different experiences from plaintiffs’ declarants, including that the more successful and established agents enjoy greater independence, and that the named plaintiffs and certain declarants enjoyed less independence because of the management style of a particular former supervisor, a style not shared by other supervisors.
As a preliminary matter, the court rejected the plaintiffs’ argument that the defendant’s so-called “happy camper” declarations should be discounted because the declarants were current employees presumably testifying in a light favoring their employer to avoid professional reprisal. Instead, the court relied heavily on the varied experiences described in the declarations, especially as to each agent’s ability to regulate his own hours, to conclude that there was no commonality and that determining whether class members were employees or contractors would require a “mini-trial” on each agent’s experience — i.e., “common issues cannot predominate.”
Also significant was the court’s rejection of the standard form contract as “common evidence,” stating that such evidence is insufficient to support class certification “in light of agents’ varied experiences.” The court also rejected the argument that class certification was appropriate because, even if at differing levels, Bakers had some level of control over all of the agents, concluding that such control “does not strongly suggest that all agents are employees” because any company using a contractor will have “some control over his performance by nature of its power to fire him.”
This case is a powerful testimonial for the use of targeted declarations to highlight differences among class members. The decision undoubtedly will help many employers build their strategy and defenses to class and collective certification.