In Ruiz v. Affinity Logistics Corp., ("Ruiz II"), the Ninth Circuit determined that a class of delivery drivers had been improperly classified as independent contractors. The decision reversed the lower court's finding of employee status following a bench trial.
The Defendant had required that its drivers form their own companies and execute contracts designating their relationship as independent contractors. Nevertheless, the company still controlled every aspect of the drivers' operation from their rates and routes to the "color of their socks." Based on this extensive record of control the Ninth Circuit had no trouble concluding that they were not bona fide contractors. But the court's analysis did address several points that may be of interest in other, closer, fact patterns.
First, the Court emphasized that anytime personal services are provided an employment relationship is presumed. Thus, while not using the precise terminology, a claim of an independent contractor relationship is effectively an affirmative defense.
Second, the Court rejected the argument that the drivers' ability to hire their own "helpers" took them outside of an employment relationship. In particular, this fact did not support contractor status as "the drivers did not have an unrestricted right to choose these persons which is an important right that would normally inure to a self-employed contractor."
A service provider can legitimately be an independent contractor if he has real autonomy and the opportunity to make a profit by exercising his own business judgment and discretion. But Ruiz II illustrates that courts will generally reject any arrangement that functions merely as de facto employment dressed up with the appearance of independence.