Be Careful With Independent Contractors in California: They Could Be Employees!

Many California employers blithely consider certain workers to be independent contractors – exempt from withholding, overtime, meal and rest break rules, and a host of other restrictions and requirements.

But be careful.  Simply labeling a person as an “independent contractor” will not work.  The person must really be an independent contractor, and California has a detailed test to decide the issue.

The principal factor is whether the employing person or entity has the “right to control the manner and means of accomplishing the result desired.”  That is, does the employing person or firm have the right to control the work?

Additional factors include: 

(a) whether 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 worker 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.

(See S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations, 48 Cal.3d 341, 351 (1989.)

In one recent case, the court applied these factors and reversed a summary judgment in favor of the employer, holding that “the label placed by the parties on their relations s is not dispositive, and subterfuges are not countenanced.”

The case is Arzate v. Bridge Terminal Transport.  The dispute centered on truck drivers who were used to transport cargo between ports and terminals and customers’ other facilities.  Bridge Terminal Transport was the employing entity. It did not own any trucks of its own, but instead hired Arzate and others to do this work.  The company even signed a collective bargaining agreement with the drivers, issued W-2 forms, and withheld taxes. But the company nevertheless argued that because it did not control the drivers’ work, they were independent contractors.  The trial court agreed with that conclusion, but the judgment was reversed on appeal.

The court of appeal concluded that there were disputed factual issues and the ultimate issue should be resolved at trial. The lesson here is that mere labels will not control and the court will often be called upon to engage in a detailed factual inquiry to resolve the issue of independent contractor v. employee status.

For your convenience, a complete copy of the court’s opinion in the Arzate case is attached.

At Slote & Links, we regularly advise employers, unions, and individual employees about issues that arise in the workplace. Feel free to give us a call if you have questions or issues in this area.

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