But The Contract Clearly Says They Are Independent Contractors! The Court May Not Agree 

Contractor's agreement

From Mondaq, Alicia R. Kennon discusses a recent case in which the contract said the workers were independent contractors but the court was still going to determine if they were properly classified as independent contractors instead of employees. Alicia writes:

In a case brought by newspaper carriers against the Sacramento Bee, the court ruled that they were not automatically classified as independent contractors, even though their contract clearly stated such and the agreement met many, if not all of the criteria required to establish independent contractor status.

Why This Case is Important

Human resource professionals and others should take note of the fact that a contract that clearly labels a worker as an independent contractor and meets the criteria under the California Code still may not hold up in court under certain circumstances. It is important to establish the amount of direction and control your business will exert over the independent contractor in the agreement.

Factors in Borello Case Apply in this Case. The ABC Test Does Not

The trial court relied on the California Code of Regulations section 4304-6. Based on this, it determined that the carriers were properly classified as independent contractors. The Court of Appeals, however, disagreed and found that the proper authority was the test presented in the Borello case.

In the Borello case, the “control of details” test is the primary method used to determine the nature of the employment relationship between the parties. Under this test the court examines “whether the person to whom the service is rendered has the right to control the manner and means of accomplishing the desired result.” In addition to this primary hurdle, the court must also look to several secondary factors. These factors make the following inquiries:

  • Does the employer have the right to discharge the worker at will and without cause?
  • Is the worker performing the services of a distinct occupation or business?
  • Is the work completed under the direction of the employer or by a specialist without supervision?
  • What type of skill is required to complete the work?
  • Does the employer provide the instrumentalities, tools, and place of work for the worker?
  • Under what length of time were services rendered?
  • What was the method of payment?
  • Was the work part of the regular business of the employer?
  • Did the parties believe they were creating an employer-employee relationship?

Since the Borello decision, the California Supreme Court decided the case of Dynamex Operations v. Superior Court (2018) 4 Cal.5th 903, which is considered the leading authority by most courts in California when classifying employees versus independent contractors. In Dynamex, the court established the following test (otherwise known as the ABC Test) to determine a workers’ status. The employer must show the following to prove that a worker IS an independent contractor:

  • The worker is free from the control and direction of the hiring entity in connection with the performance of the work,
  • The worker performs work that is outside the usual course of the employer’s business; and
  • The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

Since Dynamex, the courts have been reluctant to extend this test to any type of case outside the realm of wage and hour litigation. Here, the carriers are not pursuing a wage and hour claim per se, but are pursuing claims based on Labor Code 2802, involving the reimbursement of mileage. The court concluded that the carriers’ claims were not sufficiently based upon a wage order to distinguish between employees and independent contractors in the method akin to the statute or Dynamex. The trial court also erred in placing the burden of proof on the carriers to prove that they were employees, rather than on the newspapers to prove that they were not. The court remanded to the trial court to determine, consistent with Borello, whether the carriers were employees or independent contractors.

Source: But The Contract Clearly Says They Are Independent Contractors! The Court May Not Agree – Employment and HR – United States

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