Why it matters

Conditional certification was granted to a class of workers who handed out samples and performed demonstrations at Costco stores after a California federal court judge was satisfied the plaintiffs presented sufficient evidence of their misclassification as independent contractors—for now. The plaintiffs charged Costco and the companies it contracted with for sample sharing and in-store demonstrations of violating both state and federal law by treating them as independent contractors, paying them based solely on the number of products they sold. The court granted conditional certification, defining the class as all workers employed by the third-party companies to work at Costco warehouse locations across the country over the last three years. The plaintiffs presented “evidence that Costco, acting through [the third parties], retained the right to exert discipline over [the plaintiffs] to ensure that they did not perform in an ‘un-Costco way,’” the court wrote. However, the court cautioned the plaintiffs about the need to “marshal significant evidence to overcome the showing defendants offered in opposition to this motion at a future juncture,” indicating that although the “low threshold” for certification was satisfied, the plaintiffs face an uphill challenge.

Detailed discussion

Leona Marino filed a wage and hour complaint seeking minimum wage, overtime, meal and rest break penalties, late payment penalties, and reimbursement of expenses, arguing that she—along with similarly situated employees—was misclassified as an independent contractor and should have been treated as an employee.

Marino worked as an in-store demonstrator (ISD) who performed demonstrations in Costco warehouse stores to encourage sales of CACafe’s coconut-infused coffees and teas. She alleged that the roughly 113 ISDs hired by CACafe between 2013 and 2016 were paid solely based on the number of jars of CACafe product sold in Costco’s stores on the days they performed product demonstrations.

To support her allegations, Marino explained that ISD duties did not vary depending on the location or time period and did not require any special skills. The ISDs were required to report before opening time to the store to which they were assigned; purchase coffee and supplies and set up a display in the area of the store assigned by Costco; take a picture of their demonstration area and send it to CACafe; submit to daily, in-person inspections by an event manager as well as maintain a “temperature log” throughout the day; make and provide samples of the coffee for shoppers; clean up the area and take down the display only after the store closed; and submit a “closing checklist” to Club Demonstration Services, Inc.

In addition, Costco dictated the conditions of the in-store demonstrations, the plaintiff alleged, which were in turn enforced by CACafe. For example, the ISDs were required to maintain a “uniform look” and prohibited from performing demonstrations in an “un-Costco way.”

Marino moved for conditional certification of a collective, opt-in action under the Fair Labor Standards Act (FLSA). Finding that the plaintiff satisfied the low burden for conditional certification under the statute, U.S. District Court Judge Yvonne Gonzalez Rogers granted the motion.

The definition of an “employee” for purposes of the FLSA has been interpreted broadly to effectuate the remedial purposes of the statute, the court noted, with factors such as the degree to which the alleged employer has a right to control the manner in which the work is to be performed, the degree of permanence of the working relationship, whether the service rendered requires no special skills, and the alleged employee’s opportunity for profit or loss dependent upon their own skill.

“Marino offers evidence from members of the proposed collective action, as well as evidence about defendants’ own policies and practices, to support the argument that ISDs were subject to uniform conditions of work and daily supervision,” Judge Rogers wrote. “Based on the evidence presented by Marino, conditional certification is appropriate since it meets the ‘modest factual showing’ threshold for initial certification under the FLSA and service of a notice of the opportunity to opt in to the action.”

The defendants countered that conditional certification should be denied because the plaintiff had yet to establish their relationship as joint employers. Again emphasizing the “low threshold” of evidence required at the early stage of litigation, the court found Marino’s showing was sufficient.

“Regardless of the ultimate merits of the action, the evidence submitted is sufficient to indicate that the members of the proposed collective action are similarly situated with respect to the alleged joint employer factors concerning the power to control the conditions of employment through the [policies] and [checklists],” the court said.

Conditional certification was granted to a class of “All persons who work or worked as CACafe in-store demonstrators in Costco warehouse store locations within the United States at any time within the last three years.”

Judge Rogers did warn Marino that she would need “to marshal significant evidence to overcome the showing defendants offered in opposition to this motion at a future junction,” reiterating the low threshold for conditional certification.

To read the order in Marino v. CACafe, Inc., click here.