Trial Court Incorrectly Ruled Cab Driver Was Independent Contractor

By Joanne Deschenaux October 12, 2017

A California trial court applied the wrong legal standards and therefore erred in concluding that a cab driver was an independent contractor rather than an employee, the California Court of Appeal held.

The trial court had ruled in favor of the cab company in the cab driver's lawsuit alleging state wage and hour law violations, but the appeals court sent the case back to the lower court for a new trial.

[SHRM members-only HR Q&A: How do I know if an individual is considered an employee or independent contractor in California?]

DeSoto Cab Co. has a fleet of about 230 taxicabs in San Francisco. Darnice Linton drove its taxicabs from September 2008 to August 2012. Before his start date, Linton signed a 15-page taxicab lease agreement that DeSoto drafted. The content on the form is preprinted, and Linton did not negotiate any of its terms.

To begin a shift, taxi drivers check in with the cashier and are assigned a cab. At the end of a shift, drivers return the cab and pay the cashier a "gate fee" for leasing the vehicle. Drivers keep the fares and tips that passengers pay them, and they are not required to account to DeSoto for their fares. DeSoto's only income under the agreement is the gate fee.

When Linton was working, DeSoto's dispatch would relay requests from customers and radio the customers' locations. Linton and other drivers could then respond with their locations. Dispatch would assign the closest driver to pick up the customer. Linton was free to reject or accept dispatch calls.

DeSoto does not control how many passengers drivers pick up during their shifts. It does not require drivers to check in during their shifts or to report when they take breaks. However, DeSoto's cabs have GPS tracking, as well as audio and video recording devices that are mounted on the windshields and that record video inside and outside of the cab.

After Linton was involved in an accident in October 2011, DeSoto's general manager sent him a letter warning that if he had another accident, DeSoto would cancel his lease agreement. DeSoto canceled his lease agreement on Aug. 18, 2012, shortly after he was accused of using a passenger's credit card information to make repeated charges on her account.

On Aug. 5, 2013, Linton filed a claim with the state Labor Commissioner's office claiming that he'd been misclassified as an independent contractor instead of as an employee and that he was therefore owed more than $80,000 in wages and overtime. On June 2, 2014, the Labor Commissioner found that Linton was an employee and ordered DeSoto to pay Linton wages, interest and waiting time penalties, as well as $50,180 worth of gate fees that Linton paid from August 2010 to August 2012.

DeSoto appealed the Labor Commissioner's decision to the trial court, which reversed the judgment in favor of Linton. Linton appealed, and the appellate court reversed, sending the case back to the lower court for a new trial.

Relevant Factors

The appellate court first noted that the seminal case regarding the difference between employment and independent contractor relationships in California is S.G. Borello & Sons Inc. v. Department of Industrial Relations (1989) (48 Cal.3d 341).

The Borello court acknowledged that how much control a hirer has over the service a worker provides is an important question in deciding whether a worker is an employee or an independent contractor. But it's not the only relevant question, the court held. Courts should not apply the control test "rigidly" or "in isolation," the Borello court noted.

The Borello court endorsed secondary factors that should be considered in addition to the issue of control. These include:

  • Whether the person performing services is engaged in a distinct occupation or business.
  • The skill required in the particular occupation.
  • Whether the company or the worker supplies the tools and the place of work for the person doing the work.
  • The length of time for which the services are performed.
  • The method of payment, whether by the time or by the job.
  • Whether the work is a part of the regular business of the company.
  • Whether the parties believe they are in an employer-employee relationship.

Additionally, the Borello court said, these "individual factors cannot be applied mechanically as separate tests; they are intertwined and their weight depends often on particular combinations."

Here, the appellate court said, the trial court failed to properly apply the Borello analysis in finding that Linton provided services as an independent contractor, relying instead entirely on the "right to control" test.

And even when applying the "right to control" test, the trial court erred, the appellate court noted. Although Linton "could do much on his own, including deciding which passengers to pick up and how much actual work time he engaged in during his shifts," this "is not the end of the discussion."

The key issue, the court said, is how much control the employer has the right to exercise in the work relationship, and the trial court in this case did not address this key distinction.

Significantly, the appellate court said, evidence suggests that DeSoto retained ultimate control, namely, the right to terminate Linton's employment at will. Linton was terminated based on an allegation that, it appears, was never fully investigated. Nor was he allowed to contest the allegations against him before he was fired. This factor alone presents strong evidence of an employment relationship, the court concluded.

Linton v. DeSoto Cab Co. Inc., Calif. Ct. App., No. A146162 (Oct. 5, 2017).

Professional Pointer: In deciding whether a worker is an employee or an independent contractor, many factors are relevant and no one factor is controlling by itself.

Joanne Deschenaux, J.D., is a freelance writer based in Annapolis, Md.


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