In a recent California case, the issue was raised as to whether or not the parties were employees or independent contractors. The question of whether or not an individual is an employee or independent contractor comes up frequently and the principles for making such determination are worth discussion.

Two individual plaintiffs filed a lawsuit against the Rideshare Port Management LLC, seeking to recover for various alleged violations of the wage and hour laws. The defendants filed a motion for summary judgment to dismiss the actions, which was granted by the trial court, which ruled that the plaintiffs were not employees that would be entitled to the protection of the wage and hour laws, but independent contractors. The plaintiffs appealed.

The plaintiffs were van drivers or “operators” whose work ordinarily consisted of transporting passengers to and from their residences and various airports or cruise ship terminals.

The defendants contracted with the Airport Transportation Associates (ATA) to receive “transportation services.” The defendants’ contract provided, “It is mutually understood and agreed that ATA is performing as an independent contractor. Defendants shall neither have nor exercise any control or direction over the methods by which ATA, or personnel under its control, shall perform their work and functions. The sole responsibility of ATA shall be to assure that the services covered by this agreement shall be performed and rendered in a competent, efficient and satisfactory manner and in compliance with all laws, rules and regulations.” ATA provided its operators with any procedures and processes they would need in order to work under the defendants’ trade name and to comply with specific airport regulations.

The defendants’ dispatch system took reservations from passengers and offered those passengers to drivers (operators) as fares. The defendants informed each operator, which included Plaintiffs, by telephone or BlackBerry of the passenger’s location and requested pick-up time. Operators decided when to leave for the pick-up, the route to take to and from pick-ups, and whether to return to the airport lot for another fare. Operators were not required to communicate these plans to the defendants. Operators were not assigned to or restricted to any geographical area and did not need the defendants’ approval for routes. Operators could decline to accept the fare that dispatch offered. In addition, operators would go to the airport and drive “loops” around the terminals to pick up unscheduled passengers who wanted rides, but had not made prior reservations.

The operators were paid by the fare. They collected money from passengers and submitted reconciliation statements to defendants’ accounting service that would deduct expenses, such as insurance premiums and phone charges. Also, the defendants did not set a weekly or monthly schedule for operators. Operators had no specific time to start or end work; they determined for themselves when they wanted to work.

The defendant’s concession agreement with the city required that its drivers’ attire conform to a “color scheme” in order not to “confuse” the public. A description of which scheme was on file with the city. Further they required neatly groomed hair and conservative clothes. The defendants held permits from the Public Utilities Commission to operate as a charter-party carrier. They could provide services to other companies or the fares they cultivated on their own. The plaintiffs recorded all of their fares on “day sheets” and kept the cash or credit card payments they received from customers. The plaintiffs received 1099 forms from the defendants.

The plaintiffs understood that they could decide how often and how many hours they wanted to work and when.

The trial court granted the defendants’ motion for summary judgment and dismissed the matter. The plaintiffs appealed.

On appeal, the court, in discussing the case, stated, “The person rendering service for another, other than as an independent contractor, is presumed to be an employee.”

The determination of employee or independent contractor status is one of fact. In citing various California cases, the court pointed out that the principal test of an employment relationship is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired. “The existence of such right of control, and not the extent of its exercise, gives rise to the employer-employee relationship,” the court stated.

California Labor Code §3353 reads, “‘Independent contractor’ means any person who renders service for a specified recompense for a specified result, under the control of its principal as to the result of his work only and not as to the means by which such result is accomplished.” The court pointed out that there are numerous secondary factors derived largely from the Restatement Second of Agency, (1) whether or not the worker is engaged in a distinct occupation or an independently established business; (2) whether the worker or the principal supplies the tools or instrumentalities used in the work, other than tools and instrumentalities customarily supplied by employees; (3) the method of payment, whether by time or by the job; (4) whether the work is part of the regular business of the principal; (5) whether the worker has a substantial investment in the business other than personal services; (6) whether the worker hires employees to assist him.

The court pointed out that generally, the individual factors cannot be applied mechanically as separate tests; they are intertwined and their weight depends often on particular combinations.

In discussing the matter, the court indicated that the defendants carried the burden to show, as a matter of law, that the plaintiffs were independent contractors, not employees. This conclusion is demonstrated by the primary test of an employment relationship, mainly “whether the ‘person to whom services is rendered has the right to control the manner and means of accomplishing the result desired.’”

In citing various cases, the court pointed out that under this rule, the right to exercise complete authoritative control must be shown rather than merely suggested, and stated, “A worker is an independent contractor when he or she follows the employer’s desires only in the result of the work and not the means by which it is achieved. The owner may retain the broad general power of supervision and control as to the results of the work so as to ensure satisfactory performance of the independent contract . . . including the right to inspect, the right to make suggestions or recommendations as to details of the work, the right to prescribe alterations or deviations in the work without changing the relationship from that of owner and independent contractor.”

The court pointed out that the undisputed facts demonstrated that the plaintiffs were independent contractors.

The plaintiffs argued that many of the dispatches such as “curb coordinators, running loops, the color scheme and identification requirements for operators’ vans and uniforms, and limitations on access to LAX, were evidence of defendants’ control over the details of plaintiffs’ work, but the court disagreed, stating that a putative employer did not exercise any degree of control merely by imposing requirements mandated by government regulations.

The plaintiffs proffered a number of other arguments, all of which were denied by the court which sustained the ruling of the lower court granting the motion for summary judgment.

READERS ASK

Q: In most alarm company contracts there is a phrase relating to the customer “testing” their monthly system. Is this to be understood as an obligation or requirement of the homeowner that, if not done, could give the installing/monitoring company an “out” if the customer finds out they’ve been paying monthly monitoring fees when the system has not been “connected” to the monitoring station?

A: The requirement that the system be tested is inserted in the contract to make certain that the system is properly operational. If, in fact, the subscriber does not test the system and if, in fact, the system is not operational, it may excuse the alarm company from performance, unless the company should have known that the system was nonoperational. The fact that the subscriber does not test the system and in fact the system was not operational, should not give the subscriber the opportunity to rescind the contract. It should be pointed out, however, that if the alarm company had known or should have known that the system was nonoperational, then, of course, the responsibility would be on the alarm company to either repair the system or at least notify the subscriber that the system was nonoperational.

 To ask Les Gold a question, e-mail sdm@bnpmedia.com.