3:17-cv-02580
S.D. Cal.Sep 21, 2021Background
- Flowers Foods (FF) operates a national Direct-Store-Delivery (DSD) system in which independent "Distributors" buy distribution rights under long-term Distributor Agreements (DAs) to deliver FF products to retailers; the DSD segment accounted for ~85% of FY2017 sales.
- DAs label Distributors "independent contractors," allocate territories and product ordering, allow Distributors discretion over many daily operational choices, and provide remedies (including breach letters) for failure to meet "Good Industry Practice."
- FF’s corporate materials and accounting treat Distributors as part of its distribution network; for many transaction types FF recognizes revenue and treats Distributors as agents/consignees for reporting purposes.
- Plaintiffs (including Tony Russell) sued in California state court asserting wage-and-hour claims alleging misclassification as independent contractors; defendants removed and asserted 32 affirmative defenses, including (1) no employer relationship and (32) F4A preemption of the ABC test.
- Mr. Russell moved for partial summary judgment dismissing Defendants’ 1st and 32nd affirmative defenses; the Court applied the California ABC test (Dynamex) and granted summary judgment for Mr. Russell as to both defenses, and denied without prejudice a motion to seal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Which test applies to employment-status claims (ABC test vs. Borello)? | Russell: ABC test applies to all wage-order-related claims (including expense reimbursement and waiting-time penalties) because Dynamex/Vazquez governs retroactively. | Flowers: Some claims (reimbursement, waiting-time) governed by Borello; AB5/§2775 not retroactive. | Court: ABC test applies to Russell’s claims because §2775 is declaratory and the reimbursement and waiting-time claims relate to IWC wage orders. |
| Whether the F4A preempts the ABC test (Defendants’ 32nd affirmative defense) | Russell: F4A does not preempt ABC; Ninth Circuit authority rejects preemption. | Flowers: F4A preempts Prong B for motor carriers; at least triable issues exist based on prior district rulings. | Court: Followed Ninth Circuit in California Trucking Ass’n v. Bonta — F4A does not preempt the ABC test; dismissed 32nd defense. |
| Whether federal law (FTC Franchise Rule / Lanham Act) preempts ABC for franchisees | Russell: No clear congressional intent to preempt state labor laws; franchise rules govern disclosure/marks, not wages. | Flowers: FTC Rule and Lanham Act require franchisor control over operations/marks, conflicting with ABC’s control inquiry. | Court: No actual conflict shown and no clear manifest purpose to preempt; ABC test not preempted by FTC Rule or Lanham Act. |
| Whether Flowers is an "employer" under ABC Prong B (work within usual course of business) | Russell: Distributors perform work in Flowers’ usual business (sales, delivery, merchandising) so Prong B fails for Flowers. | Flowers: Distributors are in transportation/delivery business distinct from Flowers’ baking business; factual disputes preclude summary adjudication. | Court: Undisputed evidence shows DSD/distributors are core to Flowers’ business (85% revenue, contracts with retailers, FF sometimes operates territories); Prong B not satisfied — dismissed 1st affirmative defense. |
Key Cases Cited
- Dynamex Operations West v. Superior Court, 4 Cal.5th 903 (Cal. 2018) (established the ABC test for worker classification)
- S. G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal.3d 341 (Cal. 1989) (articulated the traditional multifactor employee/independent-contractor test)
- Vazquez v. Jan-Pro Franchising Int’l, Inc., 986 F.3d 1106 (9th Cir. 2021) (applied Dynamex principles in the franchise/hiring-entity context)
- California Trucking Ass’n v. Bonta, 996 F.3d 644 (9th Cir. 2021) (held F4A does not preempt the California ABC test)