California Truckers Win Battle in Bid for Overtime Pay

Several California truckers filed a suit to recover overtime pay and expenses.  But the trucking company argued that the truckers had signed a form contract designating themselves as independent contractors.  Independent contractors are not entitled to overtime pay. 

The truckers lost at first and appealed their case.  The Court of Appeal handed the drivers a victory by holding that the form contract did not matter.  The case is Narayan v. EGL, Inc. and the Labor & Employment Blog has a nice post on the case. 

Genuine independent contractors are not entitled to overtime pay so the key question was whether the drivers were employees or independent contractors.  This is where the form contract came into play.   When the drivers were hired, they each signed a contract that said they were independent contractors and that the laws of Texas would apply to any dispute.   So EGL said that the drivers already agreed that they were not employees and told the California court that the laws of Texas should apply.   

But the California appellate court held that the form contract did not govern these issues.  First, the court held that the laws of California would apply because the drivers worked in California and their claim for benefits did not arise under the contract. 

Second, the court held that the truck drivers were  not necessarily independent contractors just because the form contract said so.  The California Labor Code has a test to determine if a worker is an employee or an independent contractor. The court held that the acknowledgment in the form contract of independent contractor status is "simply not significant under California's test of employment."  Therefore the California test must be applied to determine the drivers status. 

This is a win for employee rights because this decision shows that an employee cannot be forced to waive certain rights in a form contract.  Importantly, employees should not assume that they are independent contractors just because a contract says so.  These employement contracts do not determine an employees real status.  Instead, the California Labor Code governs. 

New Employee Rights Law Pending in Congress

A new employee rights law was recently submitted to Congress by Senator Sherrod Brown from Ohio.  The Employee Misclassification Prevention Act is intended to protect workers who are misclassified as independent contractors.   It is estimated that tens of thousands of employers routinely misclassify their employees as independent contractors.  

Employees who are misclassified as independent contractors lose critical workplace protections and employee benefits such as overtime pay, minumum wage, unemployment insurance, health and saftey protections and workers compensation.  

The EMPA would reduce the number of misclassification violations by:

•    Ensuring that employers keep records that reflect the accurate status of each worker as an employee or non-employee and clarifying that employers violate the Fair Labor Standards Act when they misclassify workers.
•    Increasing penalties on employers who misclassify their employees and are found to have violated employees' overtime or minimum wage rights.
•    Requiring employers to notify workers of their classification as an employee or non-employee
•    Creating an "employee rights web site" to inform workers about their federal and state wage and hour rights.
•    Providing protections to workers who are discriminated against because they have sought to be accurately classified.

For more information on the EMPA, please the post by the Overtime Advisor

The Difference Between Independent Contractors and Employees

Companies try to reduce overhead by hiring independent contractors instead of employees. We get a lot of calls from people who want to know what the difference is between these two labels and how impacts them.

First, the independent contractor label is usually good for the company and bad for the person. The company saves money because Independent contractors are not entitled to receive any benefits such as health insurance or overtime pay. This is a huge savings for companies.

I write this post so people who are working as independent contractors can tell if they are being illegally deprived of benefits and legal protection.  The key factor is whether the employer has control or the right to control the worker both as to the work done and the manner and means in which it is performed. Courts typically consider these factors in determining whether a worker is an employee or independent contractor:

1. Whether the worker is engaged in an occupation or business distinct from that of the employer;
2. Whether or not the work is a part of the regular business of the employer;
3. Whether the employer or the worker supplies the instrumentalities, tools, and the place for the person doing the work;
4. The alleged worker's investment in the equipment or materials required by his or her task or his or her employment of helpers;
5. Whether the service rendered requires a special skill;
6. 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;
7. The worker's opportunity for profit or loss depending on his or her managerial skill;
8. The length of time for which the services are to be performed;
9. The degree of permanence of the working relationship;
10. The method of payment, whether by time or by the job; and
11. Whether or not the parties believe they are creating an employer-employee relationship may have some bearing on the question, but is not determinative since this is a question of law based on objective tests.

Even where there is an absence of control over work details, an employer-employee relationship will be found if (1) the employer retains pervasive control over the operation as a whole, (2) the worker's duties are an integral part of the operation, and (3) the nature of the work makes detailed control unnecessary. (Yellow Cab Cooperative v. Workers Compensation Appeals Board (1991) 226 Cal.App.3d 1288)

Other points to remember in determining whether a worker is an employee or independent contractor are that the existence of a written agreement purporting to establish an independent contractor relationship is not determinative (Borello, Id.at 349), and the fact that a worker is issued a 1099 form rather than a W-2 form is also not determinative with respect to independent contractor status. (Toyota Motor Sales v. Superior Court (1990) 220 Cal.App.3d 864, 877).