California Labor and Employment Defense Blog

At-Will Termination May Be Fatal to Independent Contractor Status -- Monarrez v. Automobile Club of Southern California

In Monarrez v. Automobile Club of Southern California a motorist was struck by a car while his disabled vehicle was being hooked up by a tow truck operator who had been dispatched by the defendant.  This raised the question of whether the tow truck operator was an employee for whom the dispatching company was legally responsible, or an independent contractor.  

In conducting this analysis the Court hit all the usual points.  Noting for example that "The label placed by the parties on their relationship is not dispositive" and that the essence of the test is "whether the principal has the right to control the manner and means by which the worker accomplishes the work."  

But most interesting was the degree to which the court stressed the company's right to terminate the relationship at-will as a nearly outcome-determinative indication of "control." 

The right to terminate employment at any time strongly tends to show the subserviency of the employee, since it is incompatible with the full control of the work usually enjoyed by an independent contractor. Perhaps no single circumstance is more conclusive to show the relationship of an employee than the right of the employer to end the service whenever he sees fit to do so.

Other courts have tended to treat the right to terminate at-will as a mere "secondary" factor apart from the central control issue.  But if the trend is to treat an at-will termination provision as dispositive (or nearly so) it will go a long way toward creating a bright-line rule which can be evaluated on the face of the parties' contract.   

Monarrez involved tort liability to an injured third party.  But the greatest exposure for many employers will arise from Labor Code section 226.8 which imposes a penalty of up to $25,000 for each misclassified contractor (not to mention the separate obligations to reimburse the expenses and pay overtime wages to misclassified employees).   

    

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