Karl v. Zimmer Biomet Holdings, Inc.

• Court: District Court, N.D. California
• Decided: July 28, 2020
• Docket: 3:18-cv-04176
• Status: Unknown

Opinion

1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 NORTHERN DISTRICT OF CALIFORNIA 8

10 JAMES KARL, on behalf of himself, and on behalf of a class of those similarly situated, 11 No. C 18-04176 WHA Plaintiffs, 12

v.

13 ORDER CERTIFYING CLASS ZIMMER BIOMET HOLDINGS, INC, a AND APPOINTING CLASS 14 Delaware corporation, ZIMMER US, INC., COUNSEL a Delaware corporation, BIOMET U.S. 15 RECONSTRUCTION, LLC, an Indiana limited liability company, BIOMET 16 BIOLOGICS, LLC, an Indiana limited liability company, and BIOMET, INC., an 17 Indiana corporation, 18 Defendants.

19 20 INTRODUCTION 21 In this employment classification action, plaintiff sales associates seek class certification. 22 Because defendants’ right (or not) of control can be proven by common policy — regardless of 23 whether defendants actually possess or exercise that right — a class is CERTIFIED. 24 STATEMENT 25 Prior orders detail the essence of this case (Dkt. No. 127). In brief, defendant (and parent 26 corporation) Zimmer Biomet Holdings, Inc. and its subsidiaries design, manufacture, and 27 market biopharmaceutical and medical products. Relevant here, subsidiaries Zimmer US, Inc., 1 Biomet U.S. Reconstruction, LLC, and Biomet Biologics (“Zimmer”) sell knee, hip, sports 2 medicine, foot and ankle, extremity, and trauma products to physicians and hospitals. 3 In August 2015, plaintiff James Karl signed a sales associate agreement classifying him as 4 an independent contractor (and not an employee) with Zimmer and began selling orthopedic 5 devices as a member of “Team Golden Gate” in the San Francisco Bay Area. Zimmer paid the 6 team on a commission-only “pooled” arrangement. That is, defendants (1) set a “base rate” 7 commission percentage for each product type sold, (2) pooled each team member’s base rate 8 commissions, and (3) paid each member a predetermined percentage of the pooled 9 commissions, regardless of the amount of commissions that member personally generated. Karl 10 himself was paid through Edge Medical, LLC, an entity he established for tax purposes. 11 On the job, Karl typically spent 60 to 70 percent of his time on “case coverage,” assisting 12 surgeons in the operating room — including setting up Zimmer’s products, informing a surgeon 13 of a product’s safety and efficacy, and fielding questions — and planning for procedures, such 14 as designing modifications for implants. He averaged between ten to twelve hours each 15 workday. 16 In July 2018, Karl filed the instant putative class action alleging primarily his 17 misclassification as an independent contractor instead of an employee of Zimmer. Initially 18 successful in certifying an FLSA collective (Dkt. No. 70), Zimmer’s motion for summary 19 judgment cut down several of Karl’s claims (including those for overtime wages and failure to 20 provide meal and rest periods), an October 31, 2019 order finding him an exempt “outside 21 salesperson” (Dkt. No. 127). Though the Court certified the summary judgment order for 22 interlocutory appeal, our court of appeals declined to intervene (Dkt. No. 131). 23 The case having resumed, Karl seeks, for himself and the putative class, reclassification as 24 employees of Zimmer, itemized wage statements, reimbursement of business expenses, 25 restitution for unpaid wages and benefits, and a finding that their classification as independent 26 contractors was unlawful. Plaintiffs now move for class certification under Federal Rule of 27 Civil Procedure 23. Following an initial proposed class definition reaching to nearly a year 1 before the merger that created the current Zimmer Biomet Holdings and the relevant 2 subsidiaries, Karl has revised his class definition to:

3 Any person who, during the period commencing June 24, 2015 to the present, was hired or otherwise engaged as an independent 4 contractor for the purposes of solicitation or sales of Zimmer Biomet products and/or services in California by Zimmer US, Inc., 5 Biomet U.S. Reconstruction, LLC, and Biomet Biologics, LLC, or any one of them. 6 (Dkt. No. 164). Zimmer naturally opposes certification. This order follows full briefing and a 7 hearing (held telephonically due to COVID-19). 8 ANALYSIS 9 Numerosity of members, commonality of issues, typicality and adequacy of 10 representatives, and one requirement from Rule 23(b) guard the door to class certification. 11 Abdulla v. U.S. Sec. Assocs., Inc., 731 F.3d 952, 956–57 (9th Cir. 2013). Our plaintiffs seek a 12 Rule 23(b)(3) class, so “questions of law or fact common to class members [must] predominate 13 over questions affecting only individual members,” and a class must be the superior method 14 “for fairly and efficiently adjudicating the controversy.” 15 1. COMMONALITY AND PREDOMINANCE. 16 Commonality requires “questions of law or fact common to the class.” Rule 23(a)(2). “A 17 common contention need not be one that will be answered, on the merits, in favor of the class. 18 It only must be of such nature that it is capable of classwide resolution.” Alcantar v. Hobart 19 Servs., 800 F.3d 1047, 1053 (9th Cir. 2015). There need only be “a single significant question 20 of law or fact.” Stockwell v. City & Cty. of San Francisco, 749 F.3d 1107, 1111 (9th Cir. 2014). 21 Superseding commonality, predominance under Rule 23(b)(3) asks whether a putative 22 class is “sufficiently cohesive to warrant adjudication by representation.” Predominant 23 questions makeup “a significant aspect of the case” and clearly justify “handling the dispute on 24 a representative rather than on an individual basis.” “[E]ven if just one common question 25 predominates, the action may be considered proper under Rule 23(b)(3) even though other 26 important matters will have to be tried separately.” In re Hyundai & Kia Fuel Econ. Litig., 926 27 F.3d 539, 557 (9th Cir. 2019) (quotations omitted). 1 “Merits questions may be considered to the extent — but only to the extent — that they 2 are relevant to determining whether” plaintiffs have satisfied the requirements for class 3 certification. Amgen Inc. v. Connecticut Retirement Plans & Trust Funds, 568 U.S. 455, 465– 4 66 (2013). That being said, deciding whether plaintiffs’ claims lend themselves to common 5 proof asks what law governs. So our “assessment of predominance begins, of course, with the 6 elements of the underlying cause of action.” Walker v. Life Ins. Co. of the Southwest, 953 F.3d 7 624, 630 (9th Cir. 2020) (quotation omitted). 8 Two employment-classification standards apply here. Up to January 1, 2020, the common 9 law governed as articulated by the California Supreme Court in Borello & Sons v. Dep’t of 10 Indus. Rel., 48 Cal. 3d 341, 769 P.2d 399 (1989):

11 Under the common law, the principal test of an employment relationship is whether the person to whom service is rendered has 12 the right to control the manner and means of accomplishing the result desired. What matters is whether the hirer retains 13 all necessary control over its operations. The fact that a certain amount of freedom of action is inherent in the nature of the work 14 does not change the character of the employment where the employer has general supervision and control over it. Perhaps the 15 strongest evidence of the right to control is whether the hirer can discharge the worker without cause, because the power of the 16 principal to terminate the services of the agent gives him the means of controlling the agent’s activities. 17 Ayala v. Antelope Valley Newspapers, Inc., 59 Cal. 4th 522, 531, 327 P.3d 165, 171 (2014) 18 (quotations and citations omitted) (emphasis added). Several “secondary indicia” also inform 19 this analysis: 20 Courts may consider (a) whether the one performing services is 21 engaged in a distinct occupation or business; (b) the kind of occupation, with reference to whether, in the locality, the work is 22 usually done under the direction of the principal or by a specialist without supervision; (c) the skill required in the particular 23 occupation; (d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing 24 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 25 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 26 creating the relationship of employer-employee.

27 1 Id. at 532 (quotation omitted). Borello also favorably cited several other indicia, including “(1) 2 the alleged employee’s opportunity for profit or loss depending on his managerial skill; (2) the 3 alleged employee’s investment in equipment or materials required for his task, or his 4 employment of helpers; [and] (3) whether the service rendered requires a special skill.” 48 Cal. 5 3d at 354–55. 6 On January 1, 2020, the California Legislature displaced the common law, codifying the 7 California Supreme Court’s decision in Dynamex Ops. West, Inc. v. Sup. Ct., 4 Cal. 5th 903, 8 416 P.3d 1 (Cal. 2018). Now:

9 [A] person providing labor or services for remuneration shall be considered an employee rather than an independent contractor 10 unless the hiring entity demonstrates that all of the following conditions are satisfied: 11 (A) The person is free from the control and direction of the hiring 12 entity in connection with the performance of the work, both under the contract for the performance of the work and in 13 fact;

14 (B) The person performs work that is outside the usual course of the hiring entity’s business; [and] 15 (C) The person is customarily engaged in an independently 16 established trade, occupation, or business of the same nature as that involved in the work performed. 17 Cal. Labor Code § 2750.3(a)(1) (emphasis added). Zimmer contends an exemption reverts the 18 analysis to the common law, though whether it applies asks a merits question properly left for a 19 later date. See § 2750.3(a)(3), (e). For now, it suffices that these two frameworks comprise the 20 relevant universe of governing law. 21 Despite this kernel of consensus, the parties disagree how the predominance analysis 22 should proceed because, naturally, both continually venture into the merits. Plaintiffs seek to 23 show Zimmer’s control; Zimmer, the lack of it. Fortunately, the California Supreme Court gave 24 a pertinent explanation in Ayala that helps at the class certification stage. Yes — this order 25 hastens to acknowledge — FEDERAL RULE OF CIVIL PROCEDURE 23 governs class certification 26 here, not California’s own procedural rules. See Hanna v. Plumer, 380 U.S. 460, 465 (1965). 27 But, as above, Rule 23(b)(3) asks if common questions drive resolution of the case, a question 1 which necessarily turns to the substance and, thus, California’s determination of what facts 2 matter, how they might be proven, and what conclusions follow. Hyundai, 926 F.3d at 557. 3 In Ayala, the California Supreme Court explained that:

4 [A]t the certification stage, the relevant inquiry is not what degree of control [Zimmer] retained over the manner and means of its 5 [device sales]. It is, instead, a question one step further removed: Is [Zimmer’s] right of control over its [sales associates], whether 6 great or small, sufficiently uniform to permit classwide assessment? That is, is there a common way to show [Zimmer] 7 possessed essentially the same legal right of control with respect to each of its [salespeople]? Alternatively, did its rights vary 8 substantially, such that it might subject some [salespeople] to extensive control [of their conduct], subject to firing at will, while 9 as to others it had few rights and could not have directed their [conduct] even had it wanted, with no common proof able to 10 capture these differences? 11 59 Cal. 4th at 533–34. Ayala then identified three pitfalls facing a trial court presented with a 12 class certification motion in the employer-classification context. 13 First, recalling that worker classification turns on the right to control and not the 14 employer’s exercise of it, Ayala explained that the importance of an employer’s policies lie not 15 in what they say, but whether (and the extent to which) the policies speak uniformly. Plainly, 16 the inquiry begins with the written policies and written employment contracts. And, while 17 Ayala acknowledged that other evidence could certainly contradict the contractual allocation of 18 rights, it cautioned that an employer’s choice “not to wield power does not prove it lacks 19 power.” Id. at 534–36. 20 Second, Ayala reiterated that predominance turns on the susceptibility of the employer’s 21 right of control to common proof, and not on whether the employer actually possesses sufficient 22 control. Id. at 536–538. 23 Third, Ayala rejected the notion that variations in the secondary indicia necessarily defeat 24 predominance. Instead it explained trial courts should evaluate the factors “with an eye to the 25 reality that the considerations in the multi-factor test are not of uniform significance.” Thus, 26 “[t]he proper course, if there are individual variations in parts of the common law test, is to 27 consider whether they are likely to prove material.” Id. at 538–40. 1 Common questions predominate under either classification framework. Despite Zimmer’s 2 protest, plaintiffs’ theory of liability turns on Zimmer’s written policies, common to their 3 workforce. And, regardless of the variation in observance or enforcement, during the class 4 period Zimmer’s written policies have spoken uniformly to the factors driving both frameworks. 5 A. COMMON LAW BORELLO FRAMEWORK. 6 (i) Right of Control. 7 To start, the Borello analysis turns on Zimmer’s control of sales associates. Most 8 important under Ayala, Zimmer retained via common policies the power to terminate sales 9 associates, including the power to terminate them without cause. Id. at 531. The sales associate 10 agreements plainly stated:

11 5. Termination of Agreement.

12 (a) It is agreed and understood that at any time Company can terminate this Agreement, with or without cause, by giving 13 Representative ten (10) days’ written notice of such termination. Further, it is agreed and understood that at any time Representative 14 can terminate this agreement, with or without cause, by giving Company sixty (60) days’ written notice of such termination. 15 (b) Notwithstanding any other provision of this Agreement, 16 Company may immediately terminate this Agreement for any of the following reasons: 17 (i) If Representative fails to operate in accordance with any 18 and all compliance policies, including, but not limited to those set forth in Company’s then-current Code of Business 19 Conduct and Ethics, Fraud and Abuse Policy;

20 (ii) If Representative . . . engages in unethical or illegal business practices or activities . . . 21 (iii) If Representative . . . violates any of the restrictive 22 covenants in this Agreement . . . . 23 (Dkt. No. 53-1, Exs. 25–28 at ¶ 5) (emphasis added). 24 Zimmer’s common policies addressed quite a bit more of its sales associates’ professional 25 conduct. As Zimmer’s own witness testified at deposition, “When we enter into agreements for 26 sales associates to represent and sell our products, we use a standard agreement” which, among 27 many others, limited what products associates could sell, restricted sales practices, limited 1 asked at deposition whether Zimmer believed its sales associates followed the “Duties and 2 Obligations” dictated in the agreement, the representative testified, “Yes, I believe they do, and 3 we expect them to.” Zimmer also published a “compliance manual for distributors and direct 4 reports,” the “U.S. Sales Independent Distributor and Direct Territory Compliance Manual.” 5 And, just as the employer in Borello, Zimmer retained control via common policy of the pricing 6 of the medical devices its associates sold (Dkt. No. 53-1 at 61, 107–10, 125–28, Exs. 25–28 at ¶ 7 2, 6). Whether this constituted “all necessary control” remains to be seen, but it suffices for 8 class certification that plaintiffs’ theory turns on such common proof. See Borello, 48 Cal. 3d at 9 356–57; Ayala, 59 Cal. 4th at 533, 535–37. 10 In opposition, Zimmer rates the standards by which it governed — “to exercise best 11 efforts to aggressively market and sell the Products in the Territory” — as too broad to 12 sufficiently constrain its sales associates. It says that:

13 Sales representatives make their own decisions and use their own judgment about the most effective sales techniques and strategies 14 on a day-by-day basis.

15 . . .

16 [T]he only marketing limitations came from governmental regulatory guidelines prohibiting off-label promotion of FDA- 17 approved products.

18 . . .

19 Sales representatives . . . could use their own personal email addresses for Zimmer Biomet sales-related work [and are] not 20 being required to have or use Zimmer Biomet business cards.

21 . . .

22 [Zimmer] does not track daily activities or sales meetings.

23 . . .

24 [S]ales representatives are not required to submit on-call schedules, meeting schedules, or sales call logs to Defendants. 25 They also have control over their own schedules and decide, for example, whether to work weekends, when to take vacation and 26 personal days, and whether they wanted another sales representative to cover a surgery for them. 27 [And,] sales reps did not need to attend general product sales 1 training. 2 Zimmer also contends that team leads controlled their team composition and that government 3 regulations controlled sales more than its own rules did (Dkt. No. 158 at 10–16). 4 As Ayala cautioned, though, these arguments go to the degree of control Zimmer 5 possessed, i.e., to the merits of whether the sales associates were, in fact, misclassified. These 6 broad conclusions indicate that Zimmer did impose a standard, it just (under Zimmer’s telling, 7 at least) bestowed broad discretion on sales associates. Frankly, “[i]t’s only possible to make 8 statements like this if it’s possible to generalize across members of the putative class, which is 9 precisely the position that [Zimmer] should be contesting for the purposes of opposing class 10 certification in this case.” Norris-Wilson v. Delta-T Grp., Inc., 270 F.R.D. 596, 607–08 (S.D. 11 Cal. 2010) (Judge Larry Alan Burns). Recall that predominance does not tell us who will win 12 this case — it only tells us whether we can fairly determine who will win in (more or less) one 13 representative action. See Alcantar, 800 F.3d at 1053; Hyundai, 926 F.3d at 557. Indeed, as the 14 United States Supreme Court recently explained, where “the concern about the proposed class is 15 not that it exhibits some fatal dissimilarity but, rather, a fatal similarity — [an alleged] failure of 16 proof as to an element of the plaintiffs’ cause of action — courts should engage that question as 17 a matter of summary judgment, not class certification.” Tyson Foods v. Bouaphakeo, 577 U.S. 18 ___, 136 S. Ct. 1036, 1047 (2016). So, the relevant point here remains simply that Zimmer 19 imposed some uniform standard of conduct (however controlling) upon its associates. 20 Zimmer also highlights variations in sales associate conduct that it argues undermine 21 commonality. For example, “[s]ome sales representatives chose to offer discounts to surgeons” 22 even though Zimmer provided the “list of the market prices for the devices.” It also says its 23 “U.S. Sales Independent Distributor and Direct Territory Compliance Manual” didn’t actually 24 govern, because “the evidence shows that sales representatives, including Plaintiff’s own 25 declarants, did not even see, let alone read, the Manual and conceded it had no impact on their 26 daily selling activities.” Even further, Zimmer explains that “sales representatives did not 27 uniformly follow the contract policies,” citing, among others, named-plaintiff Karl’s own 1 (Dkt. No. 158 at 11–16). But recall from Ayala, these arguments go to the exercise of control, 2 not to its existence. “That a hirer chooses not to wield power does not prove it lacks power.” 3 See 59 Cal. 4th at 535. 4 Zimmer replies, citing several decisions, to the effect that “the control that is actually 5 exercised may be informative of the control that may be exercised.” Harris v. Vector Marketing 6 Corp., 753 F. Supp. 2d 996, 1021 (N.D. Cal. 2010) (Judge Edward M. Chen); see Martinez v. 7 Flower Foods, No. C 15-05112 RGK, 2016 WL 10746664 at *11 (C.D. Cal. Feb. 1, 2016) 8 (Judge R. Gary Klausner) (“the variations among drivers manifest a difference in the actual 9 scope of Defendants’ right to control”); see also Rowe v. Ulta Salon, No. C 19-01074 PA, 2019 10 WL 6998780 at *5–6 (C.D. Cal. Aug. 30, 2019) (Judge Percy Anderson); Narayan v. EGL, Inc., 11 285 F.R.D. 473, 479–80 (N.D. Cal. 2012) (Judge Ronald M. Whyte). Though well-reasoned in 12 their own rights, these decisions are easily distinguishable because the court either noted the 13 employer could not fire the workers at all, Rowe, 2019 WL 6998780 at *1, could only fire with 14 cause, Harris, 753 F.Supp.2d at 1020–21, n. 12, or did not mention the right at all, Martinez, 15 2016 WL 10746664 at *11, Narayan, 285 F.R.D. 479–80. Harris admittedly discounted the 16 weight that an employer’s right to terminate workers played in the analysis, relying on Borello. 17 753 F. Supp. 2d at 1020. But of course the employer’s right to terminate played little role in 18 Borello — there the workers could not “be terminated or discharged without cause during the 19 term of the contract or even, according to the testimony, for inadequate performance.” 48 Cal. 20 3d at 364, 368 (Kaufman, J., dissenting), 348–49, 350 (opinion) (noting employer’s “lack of 21 authority to discharge [workers] at will”). 22 This is to say, the above characterization still tells only half the story. Even if Zimmer’s 23 “best efforts” and other standards bestow broad discretion upon sales associates who each 24 interpret the standards differently, Ayala reminds us that everything here occurs in the shadow 25 of Zimmer’s right to terminate plaintiffs without cause. So at the end of the day, perhaps the 26 most powerful common standard remains: Zimmer’s satisfaction with a sales associate. See 59 27 Cal. 4th at 533. (ii) Secondary Indicia. 1 The secondary indicia also largely turn on common evidence, Zimmer’s policies. To start, 2 though, the secondary indicia simply inform the control analysis, they’re not a counting game. 3 So even if evidence regarding one or two factors fails to predominate over individual questions, 4 class certification remains appropriate if common questions predominate over more important 5 factors. Id. at 539; see Alexander v. FedEx Grd. Package Sys., Inc., 765 F.3d 981, 988 (9th Cir. 6 2014). Regardless, where one or more central issues predominate, Rule 23(b)(3) certification 7 remains proper “even though other important matters will have to be tried separately.” Tyson, 8 136 S. Ct. at 1045. 9 First, whether Zimmer’s sales associates performed a distinct occupation or business asks 10 whether sales associates worked for themselves or in fact worked within Zimmer’s business, a 11 decision which turns on the common evidence of Zimmer’s business model and where sales 12 associates fit. See Alexander, 765 F.3d at 993, 995. Zimmer contends that some sales 13 associates hired third parties to assist in their sales, an independent inquiry Zimmer did not 14 track. Whether or not Zimmer actually permitted sales associates to hire their own workers asks 15 a question on the merits. The relevant point here remains that Zimmer’s sales associate 16 agreements spoke to, and provided some common policy regarding, sales associates’ power to 17 hire workers. Moreover, Zimmer’s common agreements addressed associates’ “appointment” 18 and where they fit in the chain of sale, what and whose products were sold, for what price, 19 where associates could sell products, and even whose customers all those doctors were (Dkt. 20 No. 53-1 at 128, Exs. 25–28 at ¶ 1, 2, 5(c)–(d), 6(g)). All of this speaks to where plaintiffs fit 21 within (or without) Zimmer’s business. 22 Second, whether plaintiffs’ work customarily required direct supervision (or not) turns on 23 the common evidence of the typical medical device salesperson’s behavior, Zimmer’s policies, 24 and whether those policies gave Zimmer the right to closely supervise (Dkt. No. 53-1, Exs. 25– 25 28 at ¶ 6(h)). Zimmer’s protest that it has not consistently monitored sales associates goes to its 26 exercise, not its right, of authority. See ibid.; Ayala, 59 Cal. 4th at 535–36. 27 1 Third, the specialized skill required (or not) to effectively perform as a sales associate 2 turns on the common evidence of what typically makes a good medical device sales associate. 3 See Alexander, 765 F.3d at 995. That Zimmer rates different associates as more skilled or less 4 skilled does not undermine the analysis. 5 Fourth, determining who supplied the instrumentalities typically required to perform the 6 job can be shown by simply comparing Zimmer’s standard-issue equipment with the equipment 7 an effective Zimmer sales associate typically required. See Borello, 48 Cal. 3d 355. Zimmer 8 contends it provided iPads to some associates and not to others but does not explain how that 9 difference undermined common supply of instrumentalities. Assuming a change in policy did 10 not account for the difference, and even assuming an iPad rated as reasonably necessary for the 11 job (a showing Zimmer has not made), this evidence weighs lightly in favor of two subclasses: 12 (1) associates who received iPads; and (2) associates who didn’t — hardly an individualized 13 inquiry. 14 Fifth, Zimmer does not contest that the length of sales associates’ service to Zimmer turns 15 on whether the common sales associate agreements continued indefinitely or provided for 16 length terms and renewal. See Alexander, 765 F.3d at 996. 17 Sixth, sales associate compensation and entrepreneurial opportunity turns on common 18 evidence. Zimmer protests that different associates made different amounts or worked for 19 differing compensation, but the present inquiry turns on commonality of control of associates’ 20 pay and opportunity and not the amount of pay or presence of opportunities. See ibid.; Ayala, 21 59 Cal. 4th at 533. For example, the evaluation of entrepreneurial opportunity in Borello asked 22 whether workers had any opportunity at all, as opposed to varying degrees of some opportunity. 23 See 48 Cal. 3d at 357–58. Thus, here, where Zimmer’s common policies do speak to associate 24 compensation, pay, and opportunity, the differences do not undermine predominance of 25 common questions (Dkt. No. 53-1, Exs. 25–28 at ¶ 3). 26 Seventh, whether plaintiffs’ work fit within Zimmer’s principal business model turns on 27 simply on whether Zimmer’s business required medical device sales associates, evidence 1 Last, Zimmer contends that many the sales representatives simply wanted to be 2 contractors. But the sales associates’ varying viewpoints and understandings of their 3 agreements with Zimmer cannot overturn the balance of the remaining factors in deciding 4 whether plaintiffs rated as employees or independent contractors. Public policy displaces the 5 individual agreements. See Borello, 48 Cal. 3d at 358; Alexander, 765 F.3d at 996–97. It 6 remains conceivable that plaintiffs’ classification on the merits will be a close call, one where 7 the parties’ understanding plays a material part. At this stage, however, denial of class 8 certification on such speculative grounds would be unwarranted. 9 B. DYNAMEX’S ABC TEST. 10 Common questions and evidence also predominate under the current Dynamex 11 framework. As above, a Zimmer sales associate enjoys the protections of an employee unless:

12 (A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both 13 under the contract for the performance of the work and in fact; 14 (B) The person performs work that is outside the usual course of 15 the hiring entity’s business; [and]

16 (C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature 17 as that involved in the work performed.

18 Cal. Labor Code § 2750.3(a)(1). Of course, since a worker is an employee unless the employer 19 proves all three conditions, each individual factor may be dispositive in plaintiffs’ favor. Thus, 20 the predominance of common issues in a single factor will support class certification. See 21 Dynamex, 4 Cal. 5th at 966. 22 Just as under the prior regime, common issues predominate both the questions of whether 23 the putative class now operates within Zimmer’s ordinary course of business and whether sales 24 associates operate independent businesses from Zimmer. 25 Also as above, Zimmer’s own policies offer common evidence of the right of control and 26 direction it wields over the putative class. Whether Zimmer relinquishes that control and 27 direction in fact in individual cases may very well turn on individual questions, unsuitable for 1 class treatment. But “because a worker who is subject, either as a matter of contractual right or 2 in actual practice, to the type and degree of control a business typically exercised over 3 employees would be considered an employee,” it remains enough for class treatment here that 4 plaintiffs’ theory turns on Zimmer’s common authority over its work force, whether exercised 5 or not. See id. at 958 (emphasis added). 6 Zimmer, tellingly, does not contest that common questions drive resolution of the 7 Dynamex “ABC Test” here. After all, now that the burden going forward lies with Zimmer to 8 prove plaintiffs do actually work as independent contractors (unless it successfully argues for 9 one of the statutory exemptions), it would be much easier for Zimmer to win that point against 10 the class in a single action than to have to prove it against each of them in multiple actions. 11 Indeed, Zimmer instead appears to concede the analysis should proceed via class treatment, 12 arguing that the exception to the ABC Test for “bona fide business-to-business contracting 13 relationship[s]” applies across the putative class. See § 2750.3(a)(3), (e). Whether the 14 exemption applies, though, remains a merits question for later. 15 C. EXPENSE REIMBURSEMENT CLAIMS. 16 Plaintiffs also seek reimbursement for unpaid business expenses. To start, since 17 reimbursement depends on their misclassification, the predominant common questions above 18 will also drive a large part of the merits of this claim. And, despite Zimmer’s protest, common 19 questions will predominate the merits of this claim too. 20 California Labor Code § 2802 “requires an employer to indemnify its employees for 21 expenses they necessarily incur in the discharge of their duties.” Reasonability of expenses 22 does turn on the circumstances, but whether an expense rates as necessary turns “on the 23 reasonableness of the employee’s choices.” Gattuso v. Harte-Hanks Shoppers, Inc., 42 Cal. 4th 24 554, 568, 169 P.3d 889, 897–98 (2007). The United States Supreme Court has observed that 25 this sort of objective standards lends itself to common resolution. See Amgen, 568 U.S. at 467. 26 Here, sales associates will submit many different expenses from many different circumstances 27 and each and every one will need to be evaluated. But they will be evaluated against an 1 policies would find the expense necessary. This common standard will predominate the 2 inquiry. 3 D. SECTION 17200 CLAIMS. 4 Last, plaintiffs seek two forms of relief under California Business and Professions Code 5 § 17200. 6 First, plaintiffs seek restitution of unpaid expenses and employee benefits as a result of 7 their misclassification. To start, then, the predominant classification questions described above 8 will again drive the basis for this claim as well. Common questions also predominate the 9 remainder of this claim. Due wages “are as much the property of the employee who has given 10 his or her labor to the employer in exchange for that property as is property a person surrenders 11 through an unfair business practice,” so unpaid wages fall within the scope of restitution under 12 § 17200. See Cortez v. Purolator Air Filtration Prods. Co., 23 Cal. 4th 163, 178, 999 P.2d 706, 13 715 (2000). And “‘wages’ include[] not only an employee’s periodic monetary earnings but 14 also other benefits to which the employee is entitled as part of compensation.” Espejo v. The 15 Copley Press, Inc., 13 Cal. App. 5th 329, 367 (2017); Dep’t Indus. Relations v. UI Video Stores, 16 Inc., 55 Cal. App. 4th 1084, 1091 (1997). Assuming plaintiffs succeed on their 17 misclassification claims then, the wages and benefits due them under both Zimmer’s common 18 policies and California labor law will drive resolution of this claim for the class. Zimmer 19 objects that its benefit plans exclude the putative class members, even if they were 20 misclassified, precluding any claim for restitution. This merits argument must wait to be 21 resolved at a later date. 22 Second, plaintiffs challenge whether sales associates, selling medical devices to doctors on 23 commission, can be classified as independent contractors at all under the Medicare Anti- 24 Kickback statute. Whether Zimmer unlawfully classifies sales associates asks a question of 25 law, common to the class. Zimmer’s remaining objections, including that plaintiffs did not 26 properly raise the ground in their complaint, address the merits of the claim and must be left for 27 a later date. 1 In sum, common questions predominate the merits of plaintiffs’ claims. Under plaintiffs’ 2 theory of liability, Zimmer’s common sales associate agreements and policies will decide 3 whether its sales associates may remain independent contracts or must be reclassified as 4 employees. That analysis will serve as the bedrock for two derivative claims, first for unpaid 5 business expenses, and second for restitution of unpaid wages and benefit. Last, the lawfulness 6 of Zimmer’s classification of sales associates as independent contractors under the Medicaid 7 Anti-Kickback statute presents a common question of law. 8 2. TYPICALITY. 9 The claims or defenses of the representative parties must be typical of the claims or 10 defenses of the class. Here, Karl sells medical devices for Zimmer as an independent contractor 11 and, just like the putative class, seeks reclassification as an employee, reimbursement of 12 business expenses, and payment of unpaid wages and benefits. 13 Zimmer says Karl atypically lacks standing to pursue the § 17200 claim for unpaid 14 benefits. See Kwikset v. Sup. Ct., 51 Cal. 4th 310, 322–27, 246 P.3d 877, 885–88 (2011). But 15 this argument largely rests on Zimmer’s contention that its benefits plans exclude sales 16 associates from entitlement even if they are reclassified as common law employees, an 17 argument that targets Karl as much as any putative class member. Rather than rendering him 18 atypical, the common applicability of the defense confirms Karl’s typicality on this front. 19 3. ADEQUACY. 20 An adequate class representative will fairly and adequately protect the interests of the 21 class. Our court of appeals has explained that a representative meets this standard if they (1) 22 have no conflicts of interest with other class members, and (2) will prosecute the action 23 vigorously on behalf of the class. Staton v. Boeing Co., 327 F.3d 938, 957 (9th Cir. 2003). 24 Nothing in the record suggests Karl’s interests deviate from the interests of the other 25 putative class members. Nor does the record suggest any risk that Karl or his counsel would 26 fail to prosecute the action vigorously. 27 Zimmer objects only that conflicts exist within the putative class because some sales 1 leader and a line sale associate, Zimmer provides no basis to break apart the class. Our court of 2 appeals warns against denying class certification on the basis of speculative conflicts — 3 particularly one tangential from the thrust of the suit. See In re Online DVD-Rental Antitrust 4 Litigation, 779 F.3d 934, 942 (9th Cir. 2015). This suit addresses whether sales associates and 5 their team leaders should be treated as employees of Zimmer, not whether sales associates and 6 team leaders should always get along. Karl remains adequate to litigate this suit on behalf of 7 the putative class. 8 4. SUPERIORITY. 9 Even if common questions predominate, a Rule 23(b)(3) class must be the superior 10 method of adjudication, considering (among others):

11 (A) the class members’ interests in individually controlling the prosecution or defense of separate actions; 12 (B) the extent and nature of any litigation concerning the 13 controversy already begun by or against class members;

14 (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and 15 (D) the likely difficulties in managing a class action. 16 No other Zimmer employees have sued for employee misclassification, thus indicating 17 that few, if any, other suits will emerge on an individual basis. The stakes involved (total 18 unreimbursed expenses and healthcare costs) for any single individual might reach one hundred 19 thousand dollars, as one putative class member estimates. But most appear to ballpark their 20 damages nearer to fifty thousand dollars (Dkt. Nos. 142-1, -3, -4, -5, -8, -9, -10). Legal fees in 21 an individual suit would quickly swallow most, if not all, of those potential recoveries. 22 A court within California presents the superior forum for application of California law. 23 And, as for case management, plaintiffs propose a three-part trial plan: (i) trial of Labor Code 24 claims before the jury; (ii) trial of § 17200 and PAGA claims before the Court; and (iii) 25 damages before the Court or a special master. Zimmer does not contest the superiority of a 26 class in these circumstances. 27 5. NUMEROSITY. A class must be so numerous that joinder of all members is impracticable. “The numerosity requirement requires examination of the specific facts of each case and imposes no ° absolute limitations.” Gen. Tel. Co. of the Northwest, Inc. v. EEOC, 446 U.S. 318, 330 (1980). Zimmer does not contest the sufficient numerosity of a 266 member class.

6 6. OBJECTIONS. In its Footnote 19, Zimmer buries an objection to use of improper electronic signatures in ’ declarations under the local rules. Aside from probing putative classmembers’ states of mind ° regarding their expected recovery, the facts driving class certification here are Zimmer’s own ° policies, not plaintiffs’ declarations. The objection is DENIED AS MOOT. CONCLUSION For the foregoing reasons, the following class is CERTIFIED: Any person who, during the period commencing June 24, 2015, to 13 the present, was hired or otherwise engaged as an independent Biomet products and or services in Califomia by Zimmer US, Inc S Biomet U.S. Reconstruction, LLC, and Biomet Biologics, LLC, or 15 any one of them. 16 Lohr Ripamonti & Segarich LLP and Scherer Smith & Kenny, LLP are APPOINTED class 3 17 counsel. By AUGUST 13, 2020 AT NOON, the parties shall jointly submit a proposal for class 18 notification with a plan to distribute class notice, including by first-class mail. In crafting their 19 joint proposal, the parties shall please keep in mind the guidelines for notice to class members 20 given in the NOTICE AND ORDER RE PUTATIVE CLASS ACTIONS AND FACTORS TO BE EVALUATED 21 FOR ANY PROPOSED CLASS SETTLEMENT (Dkt. No. 12). 22 IT IS SO ORDERED. 23 24 Dated: July 28, 2020. 25 26 A = Pee 7 WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 28