Court of Appeal Affirms Summary Judgment in Favor of Farmers Insurance on Independent Contract Issue

by Sheppard Mullin Richter & Hampton LLP
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On July 11, 2013, the Second Appellate District in Beaumont-Jacques v. Farmers Group Inc. concluded as a matter of law that a worker’s ability to exercise meaningful discretion in her job-related efforts rendered her an independent contractor, regardless of Farmers’ input regarding the “quality and direction of her efforts.”  The court held that Farmers did not exercise the “control of the details” of the appellant worker’s efforts necessary to create an employer/ employee relationship.  As discussed below, the court held that the key consideration was the right to control the manner and means of how the worker performed her duties.  The court further held that summary judgment was proper notwithstanding that some of the minor elements of the independent contractor test arguably supported an employer/employee relationship.

Basic Facts

Appellant Erin Beaumont-Jacques was a district manager for five affiliated insurers, and trained agents to market those insurers’ products.  Appellant could represent the five insurers and Farmers, Group, Inc. (collectively, “Farmers”) only.  The District Manager Appointment Agreement (“DMAA”) between the parties governed the terms of their relationship.  Appellant voluntarily terminated her relationship with Farmers in 2009, pursuant to the DMAA.  Thereafter, she filed suit against Farmers alleging breach of contract, breach of implied covenant, sex discrimination, and violation of Business and Professions Code section 17200.  Farmers then filed a motion for summary judgment, which the trial court granted.  Appellant appealed the trial court’s decision, arguing inter alia that whether she was an employee of Farmers was a question of fact.

The Court’s Analysis

The court disagreed with Appellant.  In assessing her arguments, the court stated that “the existence of an employment relationship… can be decided by the court as a matter of law if the evidence supports only one reasonable conclusion.”  Summary judgment would be proper if the relevant factors, weighed and considered as a whole, established that Appellant was an Independent Contractor – even if one or two factors weighed against such a determination.  The “pivotal inquiry,” as established by several decades-old cases the court cited, was whether Farmers had “the right to control the manner and means of accomplishing the result desired.”  So long as Appellant exercised discretion in the manner and means of fulfilling her duties, Farmers could retain “broad general power of supervision and control as to the results of the work … without changing the relationship from that of owner and independent contractor.”

In applying the “manner and means” test, the court compared the parties’ relationship to those in two similar cases where Independent Contractor relationships were found, Mission Ins. Co v. Workers’ Comp. Appeals Bd. and  Millsap v. Federal Express Corp.  Both cases involved a principal that established work quality standards but did not control the “manner in which the desired result was to be achieved.”  Further, both cases involved an express agreement between the parties that the relationship would be that of an Independent Contractor, which the court stated “should not be lightly disregarded when both parties have performed under the contract.”  The court held that, just as in Mission and Millsap, Appellant exercised meaningful discretion over manner and means by, for instance, recruiting agents, setting her own hours and vacations, hiring and supervising staff, and paying for her own marketing and office costs.  Moreover, the DMAA expressly provided that there was no employer/employee relationship.  Appellant herself testified in deposition that she understood she was an Independent Contractor when she signed the DMAA.

The court rejected Appellant’s argument that Farmers controlled the manner and means of her efforts simply because Farmers required her to conform to Farmers’ “normal business practice,” “goals and objectives,” and “performance standards.”  None of these documents stated anything about the manner in which Farmers expected Appellant to comply with standards.  Rather, the documents were “classic example[s] of setting of results while leaving the means to the Appellant.”  Farmers exercised no control over the time when, the place where, or the manner in which Appellant was to operate in carrying out the objectives of the DMAA, provided only that they conform to “normal business practice” and applicable law.   Nor was the court persuaded by Appellant’s contention that Farmers’ right to discharge her created an employer/employee relationship.  Appellant voluntarily resigned, confirming a mutual right to terminate the relationship, which demonstrated an “association, rather than the relation of employer and employee.”

Reviewing the above factors that had been established in decades-old case law, the court affirmed the trial court’s granting of summary judgment in favor of Farmers.  Finding that Appellant was an Independent Contractor, the court stated that, as a matter of law, none of Appellant’s causes of action were viable because she was not an employee of Farmers.

Why the Decision is Meaningful

The case cites to various decisions that are all more than 20 years old to support the conclusion, but it does seem to provide some helpful support if you are ever arguing for summary judgment in an independent contractor misclassification case. Furthermore, the case reiterated an important point that even where a few of the many factors that are considered in determining independent contractor status point toward an employment relationship, the defendant can still win summary judgment if the court concludes, after considering all the factors, that no reasonable jury weighing the evidence could conclude that the totality of the factors supports employee status. As such, this would seem to be a key case to cite in any summary judgment motion over independent contractor status.

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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