Recently, the United States Court of Appeals for the Ninth Circuit, applying California law, concluded that delivery drivers who signed agreements stating they were independent contractors and not employees would still be classified as employees because the employer possessed the right to control work details. (Ruiz v. Affinity Logistics Corp.,— F.3d —-, C.A.9 (Cal.), June 16, 2014).
A delivery driver ("Driver") sued Affinity Logistics Corporation (“Affinity”), a company contracting to provide delivery services for Sears, for wrongfully classifying him and all others similarly-situated as independent contractors rather than employees, and as a result, for failing to pay sick leave, vacation, holiday, and severance wages.
Prior to working for Affinity, the Driver worked for the company previously contracting to provide delivery services for Sears – the Penske Logistics Corporation (“Penske”). In 2003, Affinity Logistics took over Penske’s contract.
At the time Affinity took over the contract, a manager informed the Driver and other drivers they had to become independent contractors if they wished to be hired by Affinity. To accomplish this, Affinity required the drivers to obtain a fictitious business name, a business license, and a commercial checking account. Additionally, Affinity required the drivers to sign Independent Truckman’s Agreements and Equipment Lease Agreements. Both documents contained clauses explicitly stating that the parties were entering an independent contractor relationship.
Notwithstanding these clauses, Affinity maintained control over many of the drivers’ work details. For example, Affinity established the drivers’ rates of payment, routes, and schedules. If drivers wanted time off, they had to request it three to four weeks in advance and approval was not guaranteed. Affinity also distributed a procedures manual to the drivers, and the drivers were required to follow it. Pursuant to these procedures, drivers were required to load, deliver and install their goods and deal with customers in a particular manner. They were also required to check in with Affinity after each delivery.
Drivers were “encouraged, if not required” to lease their trucks from Affinity. Affinity required them to paint their trucks white and to display a Sears logo, and prohibited them from affixing any additional signs. Affinity required drivers to use a specific type of cell phone, and it supplied those phones to the drivers. The costs for both the trucks and the phones were deducted by Affinity from the drivers’ paychecks.
Affinity drivers were required to report to meetings each morning they worked. They were also required to abide by Affinity’s standards on grooming and were instructed to possess certain tools and materials. Affinity supervisors often followed drivers to ensure they were wearing the proper uniform and abiding by the proper delivery techniques. At the end of the workday, drivers regularly returned to park their trucks at Affinity’s warehouse. Affinity “strongly discouraged” the drivers from taking their trucks home.
Applying California law, the United States Court of Appeals for the Ninth Circuit reversed the district court’s holding that the relationship between the drivers and Affinity was an independent contractor relationship. Citing S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 (“Borello”), the Court noted that the most significant consideration in determining whether the drivers were independent contractors was whether Affinity retained the right to control the drivers’ work details. It also acknowledged the additional, yet less significant, factors set forth by Borello as relevant to the determination of whether a worker is an employee or an independent contractor. Quoting Borello, it noted those factors as including: “(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 part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee.”
Applying the test from Borello, the Court concluded that by regulating the drivers' rates of payment, routes, schedules, trucks, equipment, appearance, decision to hire helpers, choice of helpers, and right to deal with customers, Affinity absolutely retained the right to control the drivers’ work details. The Court also found that most of the additional, secondary factors pointed to the conclusion that the drivers were independent contractors. For example, it noted that the drivers’ only business was with Affinity. Affinity filled out all the paperwork for the drivers to obtain their own business license leaving space only for their signatures, the drivers’ work was completed under Affinity’s supervision and was not specialized or substantially skilled, Affinity owned the trucks and necessary tools for the drivers to accomplish their deliveries and leased them to the drivers only to accomplish their work with the company, and the drivers were employed on an at-will basis and paid a regular rate of pay by the hour to perform Affinity’s regular business of delivering furniture to homes.
The Court did not agree with the district court’s assessment that the drivers’ ability to hire helpers and secondary drivers suggested an independent contractor relationship. It found that the district court “overlooked the fact that often the reason drivers hired helpers was that they were
required to do so by Affinity.” The Court also was not persuaded by the clauses in the parties’ signed contracts purporting to establish their relationship as an independent contractor relationship. The Court adopted the view from Estrada v. FedEx Ground Package System, Inc. (2007) 154 Cal.App.4th 1, that the label placed on a work relationship is not dispositive where the parties’ actual conduct suggests a relationship of employer-employee rather than independent contractor. On this basis, the Court concluded that the drivers were employees of Affinity and remanded the case to the district court.
If you have any questions concerning this Legal Alert, please contact the following from our office, or the attorney with whom you normally consult.