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Carriers who delivered The San Diego-Union Tribune (UT) newspaper were employees of the company, not independent contractors, as the newspaper claimed, the California Court of Appeal ruled. The workers were therefore entitled to reimbursement for business expenses, but the trial court erred in calculating the amount to be rewarded, the court held. The court sent the case back to the trial court for a recalculation of the amount the workers should receive.
The newspaper was sued by its home delivery carriers in January 2009. The lawsuit raised several causes of action under the California Labor Code including: failure to pay minimum wage and overtime wages; failure to provide meal breaks and rest periods; and failure to reimburse for reasonable business expenses.
Most of the claims were stricken before trial on procedural grounds, but, in May 2013, the reimbursement claim went forward as a class action. The class consisted of everyone who had signed home delivery contracts with the newspaper from 2005 on.
At trial, the UT claimed that the plaintiffs were independent contractors and so not entitled to reimbursement of expenses. The court rejected this claim, ruling that the workers were employees. The court awarded the plaintiffs restitution in excess of $3 million, including: almost $2.3 million for mileage reimbursement; more than $600,000 for poly bags and rubber bands; more than $100,000 for insurance and bond premiums; and more than $100,000 for warehouse rent.
The newspaper appealed.
Relationship of Carriers to Newspaper
The carriers each signed a contract with the UT entitled "Independent Contractor Distribution Agreement Home Delivery." The contract provided that the carrier owned and operated an independent business enterprise and was not an employee, and that the carrier and the UT "fully and freely" intended to create an independent contractor relationship under the contract.
The contract required the carrier to deliver each newspaper "in a clean, dry, undamaged and readable condition at a time and location" that met the subscriber's reasonable requests and expectations. The carrier agreed to complete deliveries by 5:30 a.m. on weekdays and 6:30 a.m. on Saturdays, Sundays and holidays. The carrier could not directly or indirectly engage in the delivery, sale or distribution of any other daily or Sunday newspaper in the San Diego area without the UT's written consent.
The UT paid carriers based on how many newspapers they delivered. The contract required the carriers to obtain accident insurance to cover injury to the carrier or his or her substitutes or helpers, and bonding in the amount of $1,200 through a bonding company acceptable to the UT. The minimum bonding for each route was $600.
Carriers picked up the newspapers they were to deliver each morning at one of the UT's regional distribution centers. The carriers arrived at the distribution centers between 2 a.m. and 4 a.m. and spent about 45 minutes to an hour assembling their newspapers and preparing them for delivery. The contract required the carriers to assemble their papers at the distribution centers.
Employee vs. Independent Contractor
Under California law, 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 court said. But courts have long recognized that while the right to control work details is the most important consideration, additional factors are also relevant. These include:
The trial court properly weighed all of these factors, the appeals court said, and affirmed the decision that the workers were employees of the UT. The lower court found that although the contract provided that the carriers were independent contractors, it was a contract of adhesion that the carriers entered into "on a take-it-or-leave it basis." Both the provisions of the contract itself and the day-to-day operations of the business supported the conclusion that the UT retained the right to control the carrier's manner and means of delivery, the appellate court said.
[SHRM members-only HR Q&A: How do I know if an individual is considered an employee or independent contractor in California?]
In addition, the appellate court found that secondary factors also supported the conclusion that the carriers were employees:
However, the appellate court went on to conclude that although the carriers were employees and were therefore entitled to reimbursement for business expenses, the trial court erred in calculating the amount owed. The court agreed with the UT that the trial court improperly awarded amounts already paid to carriers. The court ruled that the award should be reduced by the amount of "any documented and readily identifiable payments, credits or reversals that the class members received in the subject expense categories" and sent the case back to the trial court so it could make those adjustments.
Espejo v. The Copley Press Inc., Cal. Ct. App., No. D065397 (July 7, 2017).
Professional Pointer: To determine whether a worker is an employee or an independent contractor, the nature of the relationship must be closely examined. Many factors are relevant and no one factor is controlling by itself.
Joanne Deschenaux, J.D., is a freelance writer in Annapolis, Md.
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