Independent Contractor or Employee?

According to the California Court of Appeal in Linton v. DeSoto Cab Co. Inc., Calif. Ct. App., No. A146162 (Oct. 5, 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 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.

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

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.