California Delivery Drivers Gain Employee Status Despite Independent Contractor Agreements

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On June 16, the U.S. Court of Appeals for the Ninth Circuit ruled that home-delivery drivers who transported furniture and appliances for a leading transportation and logistics company under independent contractor agreements should be treated as the company’s employees under California law. A copy of the decision is available here.

The drivers had filed a class action against the company for various benefits they would have received as employees, including pay for overtime, sick days, vacation, holidays and severance and coverage of workers compensation insurance fees. The company argued that the drivers were not entitled to the benefits because they had signed agreements acknowledging their status as independent contractors and set up their own business names, licenses and commercial checking accounts.

In an earlier stage of the case, the appeals court directed the district court to evaluate the dispute under California law — the state where the drivers lived, worked and signed the independent contractor agreements with the company — rather than the law of Georgia, the state where the company is incorporated and the law chosen in the agreements. The appeals court found that Georgia law is contrary to California’s fundamental policy of presuming that an employer/employee relationship is created when services are provided, and that it is the company’s burden to prove that the presumed employee is an independent contractor. Applying California law, the district court determined that the drivers were independent contractors.

The drivers appealed, and the appeals court reversed the district court’s decision, finding that it should have classified the drivers as employees. The appeals court looked beyond the agreement terminology to the substance of the relationship between the drivers and the company and identified the company’s right to control work details as the determining factor, citing its involvement in —

  • Setting the drivers’ pay rates, schedules and routes;
  • Controlling their equipment and helpers;
  • Regulating their uniforms and appearance;
  • Monitoring of truck loading procedures and delivery progress; and
  • Influencing the drivers’ hiring of helpers.

The appeals court also identified secondary factors to support the determination of employee status, including the company’s role in —

  • Directing the establishment of the drivers’ separate businesses and the use of the drivers’ leased trucks;
  • Closely supervising the drivers’ work;
  • Not requiring the drivers to have substantial skills;
  • Providing the drivers with trucks and cell phones under a lease arrangement;
  • Paying essentially a regular rate of pay, based on a consistent number of daily deliveries and rate of pay for each delivery;
  • Relying on the drivers’ services as a core part of the company’s regular business; and
  • Setting no end date for the drivers’ service relationship.

This decision is an example of developing challenges to the independent contractor business model. Companies should be aware that independent contractor status is heavily dependent on the facts of the relationship. Courts may look past “independent contractor” terminology in an agreement if further scrutiny reveals an employment relationship.

[View source.]


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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