In yet another example of the challenges and difficulties involved in using independent contractors, today the Ninth Circuit ruled in Ruiz v. Affinity Logistics that delivery drivers for Affinity are employees rather than independent contractors.
In reaching this decision, the Ninth Circuit reversed the lower court’s ruling which concluded that the drivers were employees. The lower court based its decision on the fact that the drivers (a) established their own individual businesses with their own federal employee identification numbers, (b) could hire helpers or secondary drivers, and (c) signed independent contractor agreements.
But that wasn’t enough for the Ninth Circuit. Relying on the landmark 1989 California Supreme Court case, S.G. Borello & Sons, Inc., the Ninth Circuit concluded that the “right to control work details” is the most important consideration. The Court then cited the list of “secondary factors” that must also be considered, including:
— 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 part of the regular business of the principal; and
— whether or not the parties believe they are creating the relationship of employer-employee.
In weighing all of these factors, the Ninth Circuit ruled that the drivers were employees because Affinity had the “right to control the details of the drivers’ work.” Affinity controlled the drivers rates, schedules, and routes. Affinity decided what days the drivers worked, determined the drivers’ routes, retained discretion for denying the drivers’ request for days off, and could transfer drivers to other locations. Affinity also used a “Procedures Manual” that all drivers were required to follow, including procedures on “wearing uniforms, loading trucks, delivering goods, and reporting to Affinity after deliveries.” Accordingly, the primary factor — the right of control — overwhelmingly dictated that these drivers were employees and not independent contractors.
The Court also concluded that “most” of the secondary factors also weighed in favor of a finding of employee rather than independent contractor. According to the Court, the drivers did not operate a truly independent, separate business. In fact, the drivers were “strongly discouraged” from working for other companies. Moreover, there was little skill required in the driving occupation. Affinity also “supplied the drivers with the major tools of their job” — that is, their trucks and cell phones — by encouraging or requiring that the drivers obtain these through Affinity. Perhaps most importantly, the “regular business” of Affinity was home delivery services, and the drivers were performing those identical services.
You can read the Court’s full opinion here.
So what’s the take-away for California businesses? There are several. First, the question of whether a worker is legitimately an employee or an independent contractor is a fact-specific inquiry. Thus, it is difficult it not impossible to predict in advance whether you “got it right.” Second, remember that different courts and different agencies use different independent contractor tests. This Court used the factors from S.G. Borello & Sons, whereas the IRS uses the “11-factor test” and the California Unemployment Development Department uses the “right of control” test. Different tests rely on different factors, of course, which can then lead to different results, depending on which forum you are in.
Finally, given the above, businesses would be wise to err on the side of caution and not use independent contractors. Remember that California law presumes most workers are employees. The burden will be on you and your business to prove otherwise. And how are you supposed to do that when you don’t even know today what legal test will be used tomorrow to judge what you’ve done? In my view, it’s just too risky for most workers, except in the rarest of cases when (1) the worker meets the overwhelming majority of the independent contractor criteria clearly and unambiguously, and (2) the company has the willingness to defend its decision down the road and to pay any judgment, penalties, and/or fines due from “getting it wrong.”