Independent Contractor Versus Employee Debate Continues


Recently, a California federal district court, in Taylor v. Shippers Transport Express, Inc., found that a class of current and former truck drivers had been misclassified as independent contractors and not employees by Shippers Transport Express, Inc. (STE). In granting the drivers’ motion for partial summary judgment, the court found that, notwithstanding that the drivers and STE’s agreement contemplated that the drivers were independent contractors, the drivers were STE employees premised, in part, on its findings that STE not only retained the right to exercise control over the manner and means of the truckers’ accomplishing the desired results, but it also exercised this control. The order was issued in Taylor v. Shippers Transport Express, Inc., CV 13-02092 BRO (PLAx) (C.D. Cal. September 30, 2014).

Plaintiffs represent a class of truck drivers operating out of STE’s yards in Carson and Oakland, California; Plaintiffs’ agreements with STE confirmed that they were independent contractors. STE is a trucking and logistics company that provides land transportation services for ocean containers to and from international ports in Los Angeles and Oakland, California; STE’s logistical operations, including scheduling the pick-up and delivery of containers, are performed by regular employees. Plaintiffs filed suit against STE, alleging employment-related claims, and later amended the complaint to add SSA Marine, Inc. (SSA). The amended complaint alleges seven causes of action under California law; six of the causes of action are premised on alleged violations of California’s Labor Code. On April 28, 2014, Plaintiffs filed a motion for partial summary judgment raising the sole issue that STE cannot, as a matter of law, satisfy its burden of establishing that the class members are independent contractors, as STE alleges in its second affirmative defense. Defendants opposed the motion and also filed a motion for summary judgment. The Court heard oral argument on both motions on September 29, 2014, and the Court issued its ruling on September 30, 2014, granting Plaintiffs’ motion for partial summary judgment and denying the Defendants’ motion for summary judgment.

In its order, the Court noted at the outset that, while typically determining whether an individual should be considered an employee and not an independent contractor is involves a factual inquiry that should not be determined on summary judgment, the Plaintiffs had established a prima facie case of employment and that they were employees under the common law analysis set forth in S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341 (Cal. 1989). The Court first focused its analysis on the amount of control that STE retained the right to exercise over the drivers. Relying on the express language in the Plaintiffs’ agreements with STE, the Court found that “STE retains the right under these provisions to terminate a Driver immediately if he or she breaches any provisions of the transportation agreement.” It further found that there was no limitation on STE’s right not to renew the Drivers’ contracts; instead, STE could decide not to renew the contract for any reason or for no reason at all. It ultimately found “that this power evidences a right to control that is ‘a substantial indicator of an at-will employment relationship.'” In addition, [a]fter considering the undisputed facts in the record, the Court determine[d] that the degree of control exercised by STE over the Drivers demonstrates that it has ‘retained all necessary control over the drivers’ work.'”

Applying the secondary Borello factors, the Court found the facts “militate in favor of finding an employment relationship to exist between STE and the Drivers;” the Borello factors, as applied in Air Couriers International v. Employment Development Department, 150 Cal. App. 4th 923 (Cal. Ct. App. 2007), include “some drivers had worked for the courier company for a number of years, which was ‘another factor inconsistent with independent contractor status’; the drivers were performing an integral and entirely essential aspect of the courier company’s business; the drivers were required to use the company’s forms in order to be paid; the drivers were paid on a regular schedule; the courier company sent the drivers to each delivery, provided deadlines, and required them to notify the dispatchers when the delivery was completed; the courier company provided placards for the drivers’ vehicles; the drivers delivered to the courier company’s customers, rather than to their own customers; and the courier company set the rates that were charged to the customers, billed the customers, and collected the payment.”

It also found that, in light of light of Dilts v. Penske Logistics, LLC, 12-55705, 2014 WL 4401243 (9th Cir. Sept. 8, 2014), Plaintiffs’ claims alleged in their first amended complaint are not sufficiently “related to” prices, routes, or services to be preempted by the Federal Aviation Authorization Administration Act, denying Defendants’ motion for summary judgment on this basis. This order follows the California Supreme Court’s recent order in The People ex rel. Kamala D. Harris v. Pac Anchor Transportation, Inc., Case No. S194388 (July 28, 2014), affirming that California’s unfair competition law, Cal. Bus. and Prof. Code §§ 17200 et seq., is not preempted by federal law, which appears to follow the Dilts decision; Supreme Court remanded the matter to the trial court to address the merits.

Additional Resource: U.S. Department of Labor, $10.2M awarded to fund worker misclassification detection, enforcement activities in 19 state unemployment insurance programs (Sep. 15, 2014); Employees and Independent Contractors and Day Laborers … Oh My!; Kansas Department of Labor, Independent Contractor or Employee Fact Sheet (Jun. 2012)