Ninth Circuit Shows No Affinity for Independent Contractor Status in Delivery Drivers

by BakerHostetler
Contact

Delivering another blow to the independent contractor model, the Ninth Circuit Court of Appeals held this week that furniture delivery drivers for Affinity Logistics were employees under California law, not independent contractors.

In Ruiz v. Affinity Logistics Corporation, the Court of Appeals rejected the district court’s conclusion that Affinity’s drivers were independent contractors, a decision the district court had reached based on the fact that the drivers had established their own businesses, obtained their own Employee Identification Numbers, signed independent contractor agreements, and could hire helpers or secondary drivers. The Ninth Circuit instead ruled that other factors were more important to the analysis and that California law required the conclusion that they were employees of Affinity.

The case is now being sent back to the district court with instructions to enter judgment in favor of the drivers, who claimed that Affinity failed to pay them sick leave, vacation, holiday, and severance wages, and improperly charged them for their own workers compensation coverage.

The decision shows the lengths to which courts will go to invalidate independent contractor agreements, including rejecting the parties’ contractual agreement to apply Georgia law, which would have weighed more heavily in favor of independent contractor status.

Background

In 2003, Affinity Logistics entered into a contract with Sears to deliver furniture and appliances. Affinity took over the contract formerly held by Penske, and Sears told the former Penske drivers that they should apply for work with Affinity. Affinity welcomed the drivers, but told them they would have to work as independent contractors, create a business name, obtain a business license, and open a commercial checking account.  The drivers also had to enter into independent contractor agreements, which included language acknowledging that each driver “is an independent contractor of Affinity in all manners and respects.” In the contracts, the drivers and Affinity agreed that Georgia law would apply to any disputes, since Georgia is where Affinity was headquartered.

Ruiz worked for Affinity from 2003 to 2004.  He sued Affinity after the relationship was severed, claiming that he – and other similarly situated drivers – had been misclassified and should have received various benefits to which employees were entitled. After a bench trial in 2009, the district court upheld the choice of law provision, upheld the agreement, and ruled in favor of Affinity, finding that the drivers were independent contractors under Georgia law.

The First Appeal

Ruiz appealed.  In a February 2012 decision, the Ninth Circuit reversed the district court and ruled that the parties’ choice of law provision should be disregarded. The Court of Appeals ruled that Georgia law was too favorable to the company and therefore was “contrary to a fundamental policy of California.” California’s policy, the Ninth Circuit ruled, is to presume that whenever services are offered, an employment relationship exists, and the company then has the burden to present evidence to overcome that presumption. Georgia law, in contrast, starts by presuming that when a contract designates a relationship as an independent contractor relationship, that designation should be respected, and the worker then has the burden to prove he was really an employee. The Ninth Circuit sent the case back to the district court with instructions to analyze Ruiz’s status under California law.

In August 2012, the district court re-analyzed the evidence under California law but reached the same conclusion – the drivers were independent contractors.

The Second Appeal

Ruiz appealed again. On June 16, 2014, the Ninth Circuit reversed again. But this time, the Ninth Circuit did not merely overrule the district court as to which law to apply; this time the Ninth Circuit told the district court how to analyze the facts and what conclusion had to be reached.

The Court of Appeals ruled that under California law, the most important factor in the analysis is the company’s right to control work details. The Court concluded that Affinity controlled enough details of the drivers’ work that they were employees, not contractors. For example, the company played a significant role in setting rates of pay, work schedules, routes, attire, and loading procedures.

The Court of Appeals also considered eight secondary factors, ruling that these too weighed in favor of employment status. The Court noted that the drivers’ work was supervised, that the drivers’ own businesses were created only because Affinity required it, that the drivers’ work did not involve substantial skill, that the trucks were provided by Affinity (even though the drivers had to pay for them), that Affinity determined the pay, and that the drivers’ services went to the core of Affinity’s business. The Court recognized that the parties believed their relationship to be that of an independent contractor, but the Court deemed the contract terms to be irrelevant. The Court also observed that the contract could be terminated at will but deemed that factor to be neutral.  In all, the right to control test weighed heavily, in the Ninth Circuit’s opinion, in favor of employment status, and six of the eight secondary factors weighed in that direction as well.

The Delivery Driver as Contractor Model is Under Heavy Siege

Affinity is hardly the first delivery company to consider its drivers independent contractors, and they now join the ranks of many others who have seen this model sacked by the courts.

In March, a federal judge in Maine approved a $5.8 million settlement in favor of FedEx delivery drivers who claimed they had been misclassified.

In April, the New York Commercial Goods Transportation Industry Fair Play Act took effect, creating new, tougher standards for determining independent contractor status for drivers transporting goods in trucks weighing more than 10,000 pounds.

State and federal governments, as well as plaintiffs’ lawyers, continue to challenge independent contractor classifications aggressively.

Takeaways

  • Whether someone is an employee or independent contractor is determined primarily by the facts of the relationship. If the contract is not consistent with the facts, Courts will often ignore the contract.
  • Delivery companies who classify their drivers as independent contractors should expect continued challenges to that classification.
  • Different courts may review the same facts but reach opposite conclusions. This discrepancy highlights the importance of steering as many facts as possible toward the desired result. Relationships can usually be restructured so the facts weigh more heavily in the direction of 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.

© BakerHostetler | Attorney Advertising

Written by:

BakerHostetler
Contact
more
less

BakerHostetler 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.
Custom Email Digest
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.