Karl v. Zimmer Biomet Holdings, Inc.

Background

James Karl filed an employment-classification action on behalf of himself and similarly situated sales associates. In August 2015, Karl signed an agreement classifying him as an independent contractor and began selling Zimmer orthopedic devices as part of a San Francisco Bay Area team. He was paid through Edge Medical, LLC, an entity he established for tax purposes. The opinion states that he typically spent 60 to 70 percent of his time assisting surgeons in operating rooms and planning procedures, and averaged 10 to 12 hours per workday.

Karl sought reclassification as an employee, itemized wage statements, reimbursement of business expenses, restitution for unpaid wages and benefits, and a finding that Zimmer’s independent-contractor classification was unlawful. Earlier orders had granted Zimmer summary judgment on several claims, including overtime and meal- and-rest-period claims, after finding Karl an exempt outside salesperson. This order addressed Karl’s motion for class certification under Federal Rule of Civil Procedure 23.

Certified Class

The court certified this class:

“Any person who, during the period commencing June 24, 2015 to the present, was hired or otherwise engaged as an independent contractor for the purposes of solicitation or sales of Zimmer Biomet products and/or services in California by Zimmer US, Inc., Biomet U.S. Reconstruction, LLC, and Biomet Biologics, LLC, or any one of them.”

The opinion states that Zimmer did not contest that the proposed class had 266 members. The court appointed Lohr Ripamonti & Segarich LLP and Scherer Smith & Kenny, LLP as class counsel and ordered the parties to submit a joint proposal for notifying class members by August 13, 2020, at noon.

Why the Court Certified the Class

For a class seeking damages under Rule 23(b)(3), common questions must be more important than questions affecting only individual members, and a class action must be a fair and efficient way to resolve the dispute.

The court held that common questions predominated under both employment-classification frameworks discussed in the opinion. For work performed before January 1, 2020, California’s common-law test examined the hiring entity’s right to control the manner and means of the work, along with secondary factors. For the later period, the opinion discussed California’s three-part test under which a worker is an employee unless the hiring entity proves that the worker is free from its control, performs work outside the entity’s usual business, and is independently engaged in the same type of business.

The court focused on Zimmer’s common written agreements and policies. Those materials addressed termination, professional conduct, compliance, products, pricing, sales practices, compensation, and other aspects of the sales associates’ work. Zimmer argued that associates exercised different levels of discretion, used different sales practices, followed policies differently, and had different schedules and equipment. The court treated those arguments primarily as disputes about how much control Zimmer actually exercised and whether the workers were employees on the merits—not as reasons preventing classwide evaluation of Zimmer’s common right to control them.

The court also found that common evidence could address the secondary classification factors, including the associates’ place in Zimmer’s business, supervision, skill, equipment, length of service, compensation, entrepreneurial opportunity, and whether their work was part of Zimmer’s regular business. Individual differences could remain for later proceedings, but the court concluded that common questions predominated.

The expense-reimbursement claims also involved common questions because California law requires an employer to reimburse necessary business expenses, and the court concluded that expenses could be evaluated under common standards even though individual expenses would differ. The court likewise found common questions concerning restitution of unpaid wages and benefits under California Business and Professions Code section 17200.

The opinion also identifies a legal question about whether sales associates selling medical devices on commission could be classified as independent contractors under an anti-kickback statute. In one section it calls this the Medicare Anti-Kickback statute, while its conclusion calls it the Medicaid Anti-Kickback statute.

Other Rule 23 Requirements

The court found Karl’s claims typical because he, like the proposed class, sought reclassification, expense reimbursement, and payment of unpaid wages and benefits. It found him adequate because the record showed no conflict between his interests and those of other class members and no reason to doubt that he or his counsel would pursue the case vigorously.

The court found a class action superior to individual lawsuits. It noted that no other Zimmer employees had filed misclassification suits, that individual recoveries might be substantially reduced by litigation expenses, and that California was an appropriate forum for applying California law. Zimmer did not contest superiority in these circumstances.

Disposition

The court CERTIFIED the stated class and APPOINTED the two law firms as class counsel. It also DENIED AS MOOT Zimmer’s objection concerning allegedly improper electronic signatures in declarations. The order did not decide whether the sales associates were ultimately employees or independent contractors; it decided that the claims could proceed as a class action.