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An employee by any other name – Ninth Circuit nixes another “independent contractor” scheme

June 17, 2014

From the “if it walks like a duck and quacks like a duck” desk: The Ninth Circuit recently put another nail in the coffin — and probably a substantial dent in the coffers — of another employer who attempted to classify workers as “independent contractors.” It’s a good object lesson about how overly-aggressive classification of workers as something other than employees is risky business on the left coast.

The case is Ruiz v. Affinity Logistics Corp. For years, Fernando Ruiz was an employee of Penske Logistics Corporation, a company that delivered furniture for Sears. In November 2003, Sears notified Penske drivers that Affinity Logistics Corporation would take over the contract. However, the drivers would not be employees of Affinity, but would rather be “independent contractors,” who needed a fictitious business name, a business license, and a commercial checking account. Affinity both told the drivers how to complete the necessary forms, and actually completed the forms for some (including Ruiz). Each employee also had to sign an “Independent Truckman’s Agreement” (we’ll cover the unnecessary use of gender specific terms in another post) confirming the “independent contractor” relationship.

Affinity then issued each of its “independent contractors” a Procedures Manual that meticulously controlled virtually every aspect of the truckers’ work, including procedures drivers were required to follow regarding loading trucks, delivering goods, installing goods, interacting with customers, reporting to Affinity after deliveries, and addressing returns and refused merchandise, damaged goods, and checking in with Affinity after deliveries. Affinity’s control extended to the drivers’ clothing, the number of daily pickups and deliveries, the time and place each trucker had to report on a daily basis, minuter details about the colors of the trucks and the equipment to be carried, and  virtually all aspects of the truckers’ working day. The court went on for pages on the extensive control Affinity exercised over its “independent contractors.”

Maybe you can see where this is going.

The Ninth Circuit held that this kind of control was a bit beyond that exercised in a legitimate independent contractor relationship. And, as a result, the court held — reversing the trial court — that the relationship was one of employer and employee, with all of the baggage that comes along with it.

Following California state law, the Ninth Circuit first noted that “the right to control work details is the most important or most significant consideration” in finding an employment relationship. If the hiring party has the right to control the manner and means of accomplishing the result of the work, you’d better believe the hired party is an employee. In addition, the Ninth Circuit also examined other “secondary” factors showing and employment relationship:

(a) whether the one performing services is engaged in a distinct occupation or business; (b) 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; (c) the skill required in the particular occupation; (d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work; (e) the length of time for which the services are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee.

Each of the factors, in the court’s opinion, led to the conclusion that these guys (hey, I didn’t start it) were employees, not independent contractors. As a result, the cost of all the meal and rest breaks, daily overtime, and other employee benefits for which the golden state is so rightly famous will be swiftly fleeing from Affinity’s financial institutions. Don’t forget the four-year lookback period for wage and hour violations in California. Or, for that matter, the taxes and penalties (did you have workers comp insurance?) the state’s going to come looking for. Did someone say attorneys’ fees?

We’ve talked about this stuff before, people. If you think you can save a buck by calling the people who are doing the bread-and-butter work of your business “independent contractors,” you’re just putting (ridiculously expensive) lipstick on a pig. (One too many animal cliches, I know — it’s a disease.)

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