The California Court of Appeal for the Second Appellate District (Division Three) recently issued its ruling in Beaumont-Jacques v. Farmers Group, Inc., et al., affirming the trial court’s determination on summary judgment that Appellant Erin Beaumont-Jacques, a former District Manager for five affiliated insurers (“Farmers”) was an independent contractor, not an employee.  The case has been certified for publication.

The authors of this article represented Farmers in this case both at the trial court and the appellate level.

Underlying Facts

Appellant was a District Manager, which, as the Court explained, meant that she “recruited and recommended persons to become agents solely for [Farmers]; if the latter accepted such a person, Beaumont-Jacques trained and motivated that agent to market only [Farmers’] insurance products.”  Appellant was prohibited from representing any other insurers in this capacity.  The District Manager Appointment Agreement (“DMAA”) specifically provided that she was to be an independent contractor.[1]  It also provided either party the right to terminate the agreement for any reason on sufficient notice.  She terminated her own relationship with Farmers in 2009.

In 2010, Beaumont-Jacques filed a lawsuit, claiming that she had been misclassified as an independent contractor, asserting various causes of action based on her purported employee status.  After discovery, Farmers moved for summary judgment.  Judge Barbara Scheper granted Farmers’ motion in its entirety, finding Beaumont-Jacques to be an independent contractor, not an employee.

The Second Appellate District affirmed.

Farmers Did Not Have Sufficient Control Over The Manner And Means Of Accomplishing Results To Render Appellant An Employee

As the Court of Appeal explained, “[t]he pivotal inquiry looks at the ‘control of details’ — i.e., whether the principal has ‘”’the right to control the manner and means of accomplishing the result desired. . . .”’” (Citations omitted.)  Further, the Court explained, “the owner may retain a broad general power of supervision and control as to the results of the work so as to insure satisfactory performance of the independent contract—including the right to inspect [citation], the right to make suggestions or recommendations as to details of the work [citation], the right to prescribe alterations or deviations in the work [citation]—without changing the relationship from that of owner and independent contractor . . . .”

Based on this standard, Appellant was an independent contractor.  In so ruling, the Court focused on two cases — Mission Ins. Co. v. Workers’ Comp. Appeals Bd., 123 Cal.App.3d 211 (1981) and Millsap v. Federal Express Corp., 227 Cal.App.3d 425 (1991):

Mission is a case with striking similarities to this lawsuit. There, the subcontract between the principal (Morse) and Blankenhorn and Blankenhorn’s business entity, EDC, provided that: EDC was an independent contractor; EDC had the sole right to hire and fire its employees; and, EDC directed and supervised those employees. (Mission, supra, 123 Cal.App.3d at pp. 214–215.) Blankenhorn, whose tax returns stated he was self-employed, did not work specific hours, used his own vehicle and paid his own expenses; on the other hand, he attended lectures and classes at Morse, and wore a shirt with a Morse insignia. (Id. at pp. 216–217.)

The Mission Court had determined that Blankenhorn was an independent contractor, notwithstanding the fact that the principal “had the power to affect [Blankenhorn’s] conduct.”  However, the Mission Court had concluded, “the fact that Morse prescribed standards of performance and that [Blankenhorn] on occasion attended lectures or classes concerning proper methods of installation and service was not evidence that Morse controlled the manner in which the desired result was to be achieved.” Id. (quoted in Beaumont-Jacques; emphasis in Beaumont-Jacques opinion).  As the Beaumont-Jacques Court explained, Mission rejected the idea that the written agreement, designating Blankenhorn as an independent contractor was “a subterfuge by Morse to avoid the employer-employee relationship,” noting indeed that “expressly stating that the relationship created is that of independent contractor should not be lightly disregarded when both parties have performed under the contract . . . .”

Going on to Millsap, the Beaumont-Jacques Court summarized that case as follows: “Pence delivered packages for North County Express (NCE). During one such delivery, she struck Millsap’s automobile; she sued Pence and NCE. The court ruled, as matter of law, that NCE was not liable for Pence’s negligence because, at the time of the accident, he was acting as its independent contractor.”  That is, NCE lacked sufficient control to convert the relationship into employer/employee:

The court observed that Pence understood he was an independent contractor. He used his own car, purchasing its gas, repairs and liability insurance. He received no standard employee benefits, with no taxes withheld from his paychecks. While Pence was provided with instructions and manuals, that made no substantive difference.

Further, the level of control NCE exercised was consistent with the rule in California that “[e]ven one who is interested primarily in the result to be accomplished by certain work is ordinarily permitted to retain some interest in the manner in which the work is done . . . .”

As the Beaumont-Jacques Court concluded, the similarities to Mission and Millsap were striking:

Undisputed evidence establishes, similar to decisions such as Mission and Millsap, that Appellant exercised meaningful discretion by, for instance: recruiting agents for and, when selected, training and motivating those agents to sell [Farmers’] products; determining her own day-to-day hours, including her vacations; on most days, fixing the time for her arrival and departure at her office and elsewhere, including lunch and breaks; preparing reports for and attending meetings . . . ; hiring and supervising her staff, i.e., those who worked at her office, while remitting payroll taxes for them as employees; performing other administrative tasks, including resolving problems; paying for her costs such as marketing, office lease, telephone service and office supplies; deducting those costs as a business expense in her personal tax returns; and, identifying herself as self-employed in those returns. Lastly, the DMAA specifically provided there was no employer/employee relationship.

The Court rejected Appellant’s that Farmers’ “‘right to control the means and manner’ of her efforts is captured in the DMAA’s command that she must conform to their ‘normal business practice’ and ‘goals and objectives.’”  The Court was unimpressed by Appellant’s purported evidence that Farmers had requested business plans from district managers, arranged meetings that district managers were expected to attend, or established performance standards.  As the Court concluded, this does not establish that Farmers “controlled to any meaningful degree the means by which Appellant performed and accomplished her duties as a district manager.”

Finally, the Court explained that Farmers’ right to terminate the DMAA did not indicate the existence of an employee relationship. Quoting Varisco v. Gateway Science & Engineering, Inc., 166 Cal. App. 4th 1099, 1103 (2008), the Court explained that “the right to terminate their arrangement was a mutual one. We think these circumstances show an association, rather than the relation of employer and employee.”