Employer Wins Class Action Trial on Independent Contractor Status of Messengers -- Cristler v. Express Messenger Service, Inc.

In late 2002 Express Messenger required its drivers to sign contracts designating them to be independent contractors rather than employees.   The drivers sued.  Their lawsuit claimed that they remained "employees" under California law and that the change in their status therefore denied them overtime, expense reimbursement and other benefits required by law.

The trial court certified the lawsuit as a class action and (somewhat unusually for a class action), the case was tried to a jury verdict.  And the the jury decided that the class members were legitimately classified as independent contrators.  The employee class appealed but the verdict was upheld.

The case is instructive for several reasons.  First, it demonstrates that the correct classification of large groups of employees can be manageably tried to a jury -- and that the outcome may well be favorable to the employer.  Second, the appellate decision contains one of the best short summaries of California law on independent contractor status that I have seen.  Here is that summary:

Employers have varying responsibilities with respect to persons performing services on their behalf. These responsibilities depend, in part, on whether those persons are classified as employees or independent contractors under the Labor Code. (See, e.g., §§ 2802 [indemnification for work-related expenses], 3700 [workers' compensation coverage], 510, 515, 1194 [overtime compensation]; Unemp. Ins.Code, §§ 13020, 13021 [income tax withholding].) The Labor Code defines “ ‘[e]mployee[s]’ “ to include virtually all persons “in the service of an employer under any ... contract of hire” (§ 3351), but specifically excludes “independent contractors” (§ 3357). An independent contractor is defined as “any person who renders service for a specified recompense for a specified result, under the control of his principal as to the result of his work only and not as to the means by which such result is accomplished.” (§ 3353.)

Due to the numerous variables that can inform the employee/independent contractor distinction, our Supreme Court has supplemented these statutory definitions with a host of classification factors. In doing so, the court has consistently emphasized, in keeping with the statutory definition, that “the most important factor is the right to control the manner and means of accomplishing the result desired.”( Empire Star Mines Co. v. Cal. Emp. Com. (1946) 28 Cal.2d 33, 43-44, 168 P.2d 686(Empire Star Mines ). The court has also stated that “[s]trong evidence in support of an employment relationship is the right to discharge at will, without cause,” and that “[o]ther factors to be taken into consideration are (a) whether or not 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 workman 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 a part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee.”(Ibid., citing Rest.2d Agency, § 220.)

Labor Secretary In Trouble?

The Washington Post reported today that the nomination of President Obama’s Labor Secretary, Hilda Solis, may be in trouble. Apparently, Solis’ nomination was to be considered at a Senate hearing today, however, the hearing was canceled once a report surfaced that Solis’ husband recently paid $6,400 to settle tax liens against his business. (The Post reports that some of those liens had been outstanding for as long as 16 years.)

Solis nomination was already delayed by “questions over her role on the board of the pro-labor organization American Rights at Work.” That organization received at least $411,000 for “political activities” from various union organizations in 2007 not counting the approximately $700,000 ARAW also received in generic contributions from unions that year. Several Senators questioned Solis on her role with ARAW as it appears that she was the treasurer of that organization from 2004 to 2007 and some of those funds were likely spent for lobbying Congress during her tenure.

Stay tuned . . .