New Appellate Case Upholds Independent Contractor Status

Appellant Al Varisco sued Gateway Science and Engineering for wrongful termination of employment and similar causes of action. In order to sue under these legal theories, Varisco had to establish that he was an employee, not an independent contractor as Gateway contended.

The trial court agreed with Gateway that Varisco was an independent contractor, and the appellate court affirmed this ruling. In its ruling, the appellate court provided a great analysis for employers who face the issue of whether their independent contractors are properly classified. The court began its analysis with the following:

Control is the principal factor in determining whether an individual worker is an employee or an independent contractor. "An independent contractor is 'one who renders service in the course of an independent employment or occupation, following his employer's desires only in the results of the work, and not the means whereby it is to be accomplished.' [Citations.] On the other hand, the relationship of master and servant or employer and employee exists whenever the employer retains the right to direct how the work shall be done as well as the result to be accomplished. [Citations.] But this rule requires that the right to exercise complete or authoritative control, rather than mere suggestion as to detail, must be shown. [Citations.] Also, the right to control, rather than the amount of control which was exercised, is the determinative factor." (S. A. Gerrard Co. v. Industrial Acc. Com. (1941) 17 Cal.2d 411, 413.)

Thus, the most significant question in the independent contractor/employee determination is "'whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.' [Citation.]" (S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, 350.)

The appellate court continued to explain that there are “secondary indicia” of whether someone is an independent contractor. These factors are:

  1. whether the one performing services is engaged in a distinct occupation or business;
  2. 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;
  3. the skill required in the particular occupation;
  4. whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;
  5. the length of time for which the services are to be performed;
  6. (the method of payment, whether by the time or by the job;
  7. whether or not the work is a part of the regular business of the principal; and
  8. whether or not the parties believe they are creating the relationship of employer-employee. (citing Borello, 48 Cal.3d at p. 351.)

Base on these factors, the appellate court held that Varisco was an independent contractor. He received a 1099 for all his compensation from Gateway. Gateway did not provide any uniform, apparel, equipment, material, or tools to him. Varisco wore his own hardhat and work boots, mandatory apparel on the job site, and he testified that he provided his own equipment. He used his own car for transportation to and from the job site, and was not reimbursed for mileage or gas. Varisco was responsible for his own training, and did not receive any training from Gateway. His work hours were not set by Gateway, he only went to Gateway’s office twice a month to pick up his paychecks. Gateway did not have personnel at the LAUSD job sites. When issues or questions arose at the job site, he addressed them to the LAUSD architect, not Gateway. When asked "did Gateway give you any direction on how to perform your duties?" Varisco answered "no."

Varisco argued that because he was paid on an hourly basis, he should be considered an employee. Not persuaded by this argument, the court stated, “[a]n hourly rate traditionally indicated an employment relationship [citation] but independent contractors are now commonly paid on that basis. [citation].”

Finally, Varisco argued that he had an agreement with Gateway that provided the relationship was “at-will”, which supports his argument that he was an employee, not an independent contractor. The court, again, disagreed:

An independent contractor agreement can properly include an at-will clause giving the parties the right to terminate the agreement. Such a clause does not, in and of itself, change the independent contractor relationship into an employee-employer relationship. If it did, independent contractor arrangements could only be established through agreements which limited the right of a party, or perhaps both parties, to terminate the agreement. This would be absurd, and it is not the law.

Employers with independent contractors should take a look at the case for some guidance about whether their independent contractors are properly classified. The case, Varisco v. Gateway Science & Engin. can be downloaded as a PDF or in Word.
 

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