The Supremes Sing Out About Control: It is the Primary Test for Deciding Whether a Worker is an Employee or an Independent Contractor

by Ervin Cohen & Jessup LLP
Contact

In December 2008, newspaper carrier Maria Ayala sued Antelope Valley Newspapers on behalf of herself and a putative class of other newspaper carriers. The crux of her allegations in the complaint is that Antelope Valley classified its carriers as independent contractors when, as a matter of law, they are actually employees. Why does this classification matter? Well, according to the complaint, because the carriers were incorrectly classified, they had not been paid overtime, had unlawful wage deductions taken, were not provided breaks, and were not reimbursed for their business expenses incurred on behalf of the company, among other violations. In other words, a very costly mistake.

Many employers unwittingly make the same mistake. Hiding behind a deftly crafted “Independent Contractor Agreement” and some 1099s, employers often convince themselves that they are insulated from the responsibility and potential liability of incorrectly classifying their worker. They believe they have control over their work relationships and over their legal liability. On this false sense of security, however, the California Supreme Court has shed some clarity and light in the recent case of Ayala v. Antelope Valley Newspapers, Inc.

Unless your business is delivering newspapers, the results of the Ayala case are not important. What is important, however, is the analysis that the Court applied. In deciding whether the Ayala class plaintiffs were employees or independent contractors, the Supreme Court applied the “common law” test, although there are other tests for employment that could be applied in some situations.1

Under the common law, the primary test of an employment relationship is whether the person or entity to whom service is rendered has the right to control the manner and means of accomplishing the result desired. To be clear, what matters here is not how much control a hirer exercises, but how much control the hirer retains the right to exercise. In other words, the fact that a certain amount of freedom of action is inherent in the nature of the work does not change the character of the employment where the employer has general supervision and control over it.

“Perhaps the strongest evidence of the right to control,” said the Supreme Court, “is whether the hirer can discharge the worker without cause, because the power of the principal to terminate the services of the agent gives him the means of controlling the agent‘s activities.” Similarly, the worker‘s corresponding right to leave also matters because an employee may quit, but an independent contractor is legally obligated to complete the work in the contract.

In most circumstances, the analysis can be conducted simply by applying the primary test of control. It is a simple test and often all that is necessary to determine employment status. However, although not strictly part of the common law test for employee status, the Supreme Court recognized a host of secondary criteria that may also be evidence of an employment relationship when the primary test is not in itself determinative. These secondary criteria include:

  • whether the one performing services is engaged in a distinct occupation or business;
  • the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
  • the skill required in the particular occupation;
  • whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;
  • the length of time for which the services are to be performed;
  • the method of payment, whether by the time or by the job;
  • whether or not the work is a part of the regular business of the principal; and
  • whether or not the parties believe they are creating the relationship of employer-employee.

Having control is powerful, but it comes with responsibility. Perhaps it is time to audit and correct your worker classifications. Or, perhaps it is time to let go of all the control.

1 For example, according to the California Wage Orders, an employer is any person (e.g., association, organization, partnership, business trust, limited liability company, or corporation) who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person.

For purposes of the EDD, a statutory employee is defined as an employee under a specific statute, such as when an author or artist is commissioned for a specifically ordered work and the written agreement between the parties states that the work is a “work made for hire” and the party ordering the work obtains all rights in the copyright of the work. See http://www.edd.ca.gov/pdf_pub_ctr/de231se.pdf for additional information.

For purposes of establishing the need for Worker’s Compensation coverage, an employee is “any person who renders service for a specified recompense for a specified result, under the control of his principal as to the result of his work only and not as to the means by which such result is accomplished.”

For purposes of taxes and social security, the IRS reviews behavioral, financial and contractual criteria using a 20 factor test to determine whether a worker isan employee or independent contractor. See http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Self-Employed-or-Employee for additional information.

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.

© Ervin Cohen & Jessup LLP | Attorney Advertising

Written by:

Ervin Cohen & Jessup LLP
Contact
more
less

Ervin Cohen & Jessup LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.