1 Filed 5/1/14 Castro v. Creative Design Interiors CA3 NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Sacramento)

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JOSE RAMON CASTRO et al., Plaintiffs and Appellants,

v. CREATIVE DESIGN INTERIORS, INC., Defendant and Respondent. C070938 (Super. Ct. No. 34200900063544UOEGDS)

Plaintiffs Jose Ramon Castro, Aquili no Espinoza, Arturo Lopez and Miguel Vargas (the putative class representatives) were employed by defendant Creative Design Interiors, Inc. (CDI) to install and supervise the installation of tile, primarily in residential properties. The putative class representatives filed a class action complaint against CDI for various wage and hour vi olations. The trial court denied their motion for class certification, concluding that the class was no t sufficiently ascertainable and that common questions of fact or law did not predominate.2 The putative class represen tatives now contend the tria l court erred in denying class certification because (A) the class could be ascertained through CDI payroll records, and (B) common issues of fact a nd law predominate if damage questions are viewed in their proper context. We conclude the trial court did not abuse its discretion in denying class certification. Substantial evidence establis hed significant evidentia ry challenges which would have made it difficult to ascertain the identity of class members. In addition, the trial court’s conclusion that individual ques tions predominated over common questions did not improperly conflate li ability and damage issues. Th e trial court applied proper criteria and legal assumptions in ruling th at class certification would not provide substantial benefits to the litigan ts and the court in this case. We will affirm the order denying class certification. BACKGROUND CDI’s customers are primarily builder s of new housing developments. CDI installs residential flooring made of stone , tile, vinyl, wood and carpet, all of which it references as tile. The putative class representa tives sought to define the class in this case as tile workers, the workers wh o demolish, finish, set, replace, install or repair those flooring materials. Installation was accomplished u nder the direction of crew leaders who reported to area managers. Each of the four putative class representatives was a tile worker and former CDI crew leader. Each of them reported to the sa me area manager in Stockton. Crew leaders relied on area managers for instruction on timekeeping, time reporting and paycheck distribution. Crew leaders recruited, hire d and supervised the work of their crew members; they assured that timecards were completed and they submitted and distributed paychecks. CDI issued hourly paychecks to all tile workers, and crew leaders set the3 hourly pay rate for their crew members. All payroll reco rds were mainta ined in the Sacramento office. CDI bid for flooring jobs based on an estim ate of the combined cost of materials and labor. Crew leaders who kept a project’s total cost below the bid amount kept the remainder as a completion bonus. A crew l eader had the discretion to keep the entire bonus or distribute it in whole or in part to crew members. Some crew leaders falsified payroll records and timesheets, personally ca shed paychecks made out to crew members or themselves and paid workers in cash according to a daily rate or a percentage of the total received. In addition, some crew lead ers used aliases so they could submit multiple timesheets, cash the resulting paychecks and pay undocumented workers. The complaint alleged that CDI told tile workers they would be paid on a piece rate basis, but then on threat of withholding wages and te rminating employment, coerced the workers to complete sham timesheets. The complain t further alleged that workers were not paid for all the hour s they worked, were not always given meal or rest breaks and, if they failed to meet deadlines, were subject to having money deducted from their wages. The complaint also alleged numer ous other violations of labor law. The putative class representa tives testified that timeshe ets routinely reported eight hours of work five days a week, even though the workers sometimes worked six or seven days a week, 12 or 14 hours a day, and that, contrary to Ca lifornia law, the timesheets did not record start and stop times. Crew leaders testified that they were not reimbursed for mileage or the use of personal vehicles even though CDI had a po licy requiring class members to use their personal vehicles to travel be tween job sites and pi ck up materials. CDI admitted that crew leaders were not reimbursed for travel. CDI also admitted that workers had to pay for hand tools and power tools out of their own pockets, and if they used a CDI supplier account, the cost of tools woul d be deducted from their payche cks. CDI required regular4 daily cell phone communication with crew lead ers, but did not reimburse for personal cell phone costs. The complaint asserted eight causes of action. 1 The putative class representatives moved for class certification on all but one. The class was described in the motion as “[a]ll nonexempt employees of [CDI] who worked on-site installing, repairing, or helping to install or repair wood, vinyl, carpet , tile and/or stone, or who performed preinstallation or post-installation work related to the installation or repair of wood, vinyl, carpet, tile and/or stone, on behalf of CDI at any time from November 2, 2005 to the present.” The putative class re presentatives estimated that the class would include more than 275 people; CDI estimated that it may include as many as 450. After hearing evidence, the trial court denied class cer tification because the class would be difficult to ascertain and because common issues of la w and fact did not predominate. It concluded a class action “would not create efficiencies for the parties or the Court.” Regarding ascertainment of the class, th e trial court cited evidence presented by CDI that two of the named plaintiffs work ed under multiple names, engaged multiple persons to work under a single name and that one of them even worked and was paid under the name of a person who never appeared at a CDI jobsite. The trial court also cited evidence that, as crew l eaders, the named plaintiffs routinely hired workers “off the books,” so there could be “a significant num ber of persons” who could qualify as class

1 The complaint alleged (1) failure to pay wages (Lab. Code, § 200) ; (2) failure to pay overtime compensation (Lab. Code, §§ 510, 1194, 1198); (3) unauthorized repayment of wages to employer (Lab. Code, § 221); (4) failu re to provide meal and rest breaks (Lab. Code, §§ 226.7, 512, subd. (a)); (5) waiting time penalties for nonpayment of wages (Lab. Code, § 203); (6) failure to reimburse expenditures (Lab. Code, § 2802); (7) failure to provide accurate wage statements (Lab. C ode, § 226); and (8) unfa ir business practices (Bus. & Prof. Code, § 17200). Class certification was sought on all but the fourth cause of action.5 members but not be identified in any empl oyment records. On the issue of common questions, the trial court found a predominance of individual issues. It ruled that even if the alleged wrongful conduct was proven, de termining whether an individual employee suffered harm from the conduc t would require a “worker- by-worker and job-by-job” analysis. Additional factual details are in cluded in the discussion below. STANDARD OF REVIEW Class actions are authorized “when the question is one of a common or general interest, of many persons, or when the par ties are numerous, and it is impracticable to bring them all before the court . . . .” (C ode Civ. Proc., § 382) Parties seeking class certification must establish bo th an ascertainable class and a well-defined community of interest among class members. ( Lockheed Martin Corp. v. Superior Court (2003) 29 Cal.4th 1096, 1104.) The “co mmunity of interest” elemen t includes three factors: “ ‘(1) predominant common questions of law or fact; (2) class represen tatives with claims or defenses typical of the class; and (3 ) class representatives who can adequately represent the class.’ [Citation.]” ( Ibid .) The certification question is procedural, meaning that instead of looking to whether th e claims are legally or factually meritorious, the inquiry must focus on “w hether . . . maintenance of a class action would be advantageous to the judicial pr ocess and to the litigants.” ( Collins v. Rocha (1972) 7 Cal.3d. 232, 238.) We review an order denying class certif ication for abuse of discretion. ( Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326.) We will not disturb the trial court’s ruling unless it used improper crite ria or made erroneous legal assumptions. ( Id . at p. 327.) If a class certification motion re quires the evaluation of disputed facts, we review the trial court’s factual determinations under the substantial evidence standard. ( Id . at p. 328.)6 DISCUSSION The putative class representatives cont end the trial court erred in denying class certification because (A) the class could be as certained through CDI payroll records, and (B) common issues of fact and law predominat e if damage questions are viewed in their proper context. A We first examine the contentions relating to the ascertainment of class members. The putative class representatives contend that, as a matter of law, the burden of keeping accurate time and pay records belongs with employers, so to the extent potential class members were misidentified in CDI personnel re cords, the problem must be attributed to CDI. CDI contends that the crew leaders, including the putative class representatives, were responsible for hiring, firing and subm itting payroll data for their crews and their falsification of records was not revealed un til depositions were taken in preparation for the class certification motion. The putativ e class representatives concede there is no evidence “that CDI knew of, cont rolled, or suffered or permitted to work any individual not formally on its payroll.” CDI argues that, given the falsified records, there are no objective means to determine whether individuals who are not accu rately identified in CDI personnel records are employees -- and class members -- withou t conducting a fact-intensive “ ‘control test’ ” for each of them. The fact that crew leaders hired undo cumented workers and paid them cash from paychecks made out to the leaders created an ascertainment problem. The putative class representatives respond that on ly those identified in the official CDI payroll records are intended to be class members, and the cl ass definition excludes anyone for whom no records exist. They argue it should not matter what crew leaders did with paychecks once they were cashed, and individuals hired “under the table” should be of no concern to the class because they could not be CDI employees if they were not on the CDI payroll. The7 proposed class was defined, however, as those who “worked on-site in stalling, repairing, or helping . . .” and it did not exclude indi viduals who met that definition but were not issued CDI paychecks. The definition make s no distinction between workers identified by payroll records and other workers. To notify only those individuals named in the payroll records necessarily would have deprived unidentified or misidentified wo rkers of notice. The trial court could not presume that those individuals were employed by the crew leaders instead of by CDI. As a matter of law, payroll records are not suffi cient to conclusively determine the existence of an employer-employee relationship. ( Futrell v. Payday California, Inc. (2010) 190 Cal.App.4th 1419, 1435.) Rather, an individualized a pplication of the multifaceted common law employment test is requi red when there is ambiguity. ( Id . at p. 1434.) Ignoring workers not identified in payroll records wo uld not have made the class appropriately ascertainable nor did the putative class repres entatives proffer any other way to get around the problems created by the inaccurate payroll records. Moreover, two of the putativ e class representatives worked under different names. One of them under three names, none of them his own, and the other worked under seven names. They also shared an alias at times while working on separate crews. The same two individuals testified that they prepared and submitted all timesheets for their crews, using borrowed social security numbers that did not match actual worker names, then cashed paychecks for the group and paid the wo rkers in cash using a daily rate that bore no relationship to the timesheets or paychecks. CDI acknowledges its legal obligation to maintain accurate time and pa y records but denies that it knew about or sanctioned these practices. “A class representative ha s the burden to define an ascertainable class.” ( Sevidal v. Target Corp. (2010) 189 Cal.App.4th 905, 918.) Class members are “ascertainable” if they can be readily identified without unreasonable expense or time by reference to official or business records. ( Id. at p. 919.) The standard does not8 distinguish among the types of records fro m which class members may be “readily identified” and it allows for no apportionment of blame when records are inadequate. In this case, the putative class re presentatives said the tangle of names and social security numbers ultimately was the fault of CDI. That may be true, but the trial court found that CDI’s payroll records were unreliable for th e purpose of ascertaining class members, and that also appears to be true. For an asce rtainment analysis, we see no logical difference among records that do not exist and records that are unreliable, whether because of negligence, malfeasance or other cause. The issue for class certification is how difficult it would be to ascertain the identity of class members from the records. “Ascertainability is required in order to gi ve notice to putative class members as to whom the judgment in the action will be res judicata.” ( Hicks v. Kaufman & Broad Home Corp . (2001) 89 Cal.App.4th 908, 914.) This is not a case where the uncertainty lies in identifying which empl oyees worked overtime or which worked on relevant projects -- it is a case where the uncertainty lies in identifying individua ls to notify in the first place. (Compare Bufil v. Dollar Financial Group, Inc . (2008) 162 Cal.App.4th 1193, 1208 [class ascertainabl e from payroll records although some may not have worked overtime] and Aguiar v. Cintas Corp. No. 2 (2006) 144 Cal.App.4th 121, 136 [class ascertainable from payroll record s although some were not assigned to relevant projects] with Sotelo v. Medianews Group, Inc . (2012) 207 Cal.App.4th 639, 648 [class not ascertainable because there were no business records to identify class members].) Because half of the putative class repr esentatives admitted using false identities for themselves and their crew members, the trial court reasonably concluded that the task of identifying class members from CDI’s bus iness records would not be easy. The putative class representatives cite the burden-shifting rule in Hernandez v. Mendoza (1988) 199 Cal.App.3d 721, but that case is inapposite. Hernandez involved an employee who demonstrated that he had perf ormed unpaid work; he was not required to prove exactly how much unpaid work because the employer fa iled to maintain accurate9 payroll records. ( Id . at p. 727.) Hernandez involved the calculation of damages, not the ascertainment of class members. Quantifying damages is not a relevant concern in the evaluation of class certification. ( Hicks v. Kaufman & Broad Home Corp ., supra, 89 Cal.App.4th at 914.) Moreover, the problem of damages is ma nageable in a class action, but class ascertainment “ ‘goes to the heart’ ” of class certification. ( Global Minerals & Metals Corp. v. Superior Court (2003) 113 Cal.App.4th 836, 858 .) The critical issue is whether class members are “ ‘ “presen tly ascertainable” ’ ” so that adequate notice can be provided to those who would be bound by the cla ss litigation. ( Ibid .) Substantial evidence suppo rts the trial court’s determination, and the trial court did not abuse its discretion when it dete rmined the class wa s not sufficiently ascertainable.
B We next turn to the commonality issues. A class action meets the “community of interest” test when the plain tiffs prove that common questions of law or fact predominate over individual ones and also that the claims of the class representatives are typical of the class and they can adequately represent the class. ( Lockheed Martin Corp. v. Superior Court, supra, 29 Cal.App.4th at p. 1104.) The tria l court found no comm unity of interest primarily because common issues did not predominate. A lthough the trial court called adequacy of representation “n ot determinative,” it also expressed concern that the putative class representatives, who had collect ed and cashed paychecks and redistributed the cash based on their own assessments, may have interests antagonistic to those class members who were underpai d by the practice. The putative class represen tatives argued in the trial court that common questions predominated because certain CDI policies were unlawful. They claimed CDI failed to record when a worker started and stopped work or took meal and rest breaks; did not pay for time spent loading, unloading, waiting, or traveling between jobs; and forced workers10 to pay for their own tools. But the complain t focused on allegations that workers were routinely underpaid due to CDI’s practice of paying on a piece-ra te per-job basis and falsifying time records. The motion for class certification allege d a common scheme of using job bids to set pay parameters without respect to actual hours worked. CDI denied that this was a sanctioned or common practice. The trial c ourt observed that the crew leaders had apparently run amok; CDI agreed, claiming it had appropriate policies and procedures in place and had no idea the crew lead ers were not following them. The trial court concluded that even if a ll the claims of unlawful labor practices in the complaint were accepted as true, there still would need to be proo f that any particular worker was underpaid as a re sult. The trial court cited Frieman v. San Rafael Rock Quarry, Inc. (2004) 116 Cal.App.4th 29, 40, for the proposition that class certification is improper when variations in proof of ha rm require individualized evidence. The putative class represen tatives contend the trial court improperly conflated liability and damages. They are correct that if liability can be established by common facts, individual proof of damages does not prevent class certification. ( Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1022.) But a class action is rarely appropriate where, after class judgm ent, class members “would be required to individually prove not only damages but also liability.” ( City of San Jose v. Superior
Court (1974) 12 Cal.3d 447, 463.) The putative class represen tatives argue liability can be shown with timesheets that do not include worker st art and stop times. They sa y CDI’s timesheets uniformly failed to include such informa tion, a fact that establishes classwide liability. (Cal. Code Regs., tit. 8, § 11160, subd. 6(A)(1); see I ndustrial Welfare Com. wage order No. 16- 2001, § 6(A)(1).) We disagree. The timesheets proffered as evidence included spaces for start and stop times, spaces that were left blank. The putative class representatives admitted completing and submitting the timesheet s for their crews. The trial court did11 not find evidence of a uniform CDI policy unlawfully prohibiting the use of start and stop times; rather, it found eviden ce that the crew leaders ha d been running amok. In addition, the putative class representativ es claim class certification was justified because CDI had policies that it would not pay for travel time, waiting time, and time spent loading and unloading. But the cited evidence only shows that CDI initiated a formal policy in 2009 applying a lower rate of pay for such time, and the deposed company representative was not sure what the policy had been before 2009. In any event, resolving these issues woul d not have markedly narrowed the issues for trial. (See Sav-On Drug Stores, Inc. v. Superior Court, supra, 34 Cal.4th at 339 [commonality standard requires comparison of i ssues that may be jointly tried with those that must be separately adjudicated].) The crux of the complaint was the alleged practice of disregarding wage and hour rules to pa y workers on a piece-rate basis and its alleged result of widespread underpayment. CDI clai med to be unaware of the practice and there was no evidence that it was followed by an yone other than the putative class representatives. Determining underpayment due to a piece -rate scheme would involve determining which workers submitted timesheets for them selves and which ha d timesheets submitted for them by others, which in turn would in volve the identification problems discussed in part A, ante . Assuming the individual workers could be identified, there would remain a necessary evaluation of whether the submitted timesheets reflected actual hours worked and, if not, whether, for each pay period, the workers were nonetheless compensated by the crew leader (according to a daily or perc entage rate) less than if the timesheets had been accurate. As the trial c ourt concluded, this would require an indi vidualized factual inquiry on a “worker-by-worker and job-by-j ob basis.” These circumstances did not improperly conflate liability and damages and were properly considered by the trial court as factors weighing agains t class certification. ( Dunbar v. Albertson’s, Inc. (2006) 141 Cal.App.4th 1422, 1427-1428 [courts deny certification when wrongfulness cannot12 be determined without referen ce to individuals].) Because of the potential for injustice, trial courts must carefully weigh benefits and burdens and grant class certification “ ‘ “only where substantial benefits accrue both to litigants and the courts.” ’ ” ( Linder v. Thrifty Oil Co . (2000) 23 Cal.4th 429, 435.) Finally, although the trial court did not fi nd it determinative, substantial evidence supports the concern that the putative class representatives may have been unable to adequately represent the class members who were underpaid because the crew leaders cashed their paychecks and redistributed th e payments. The potential for conflict is significant given CDI’s insistence that this crew leader conduct was unauthorized. On this record, the trial court did not abuse its discretion in denying class certification. DISPOSITION The order denying class certification is affirmed.

MAUR O , J.

We concur:

BLEASE , Acting P. J.

HOCH , J.