In June, 2014, the US Court of Appeals for the 9th Circuit concluded that drivers hired by a logistics company to make home deliveries and conduct installations of merchandise purchased from Sears were common law employees who had been misclassified an independent contractors---even though they were all separate business entities! The drivers sued Affinity Logistics in a class action, seeking sick leave, vacation pay, and severance wages as well as recoupment of workers’ compensation insurance premiums deducted from their remuneration.
The governing law in California deems the right to control work details to be among the most significant considerations. The 9th Circuit concluded that Affinity controlled:
• Pay rates
• Days off
• Equipment including trucks, tools and cell phones
• Uniforms and
• Personal appearance • While closing monitoring their actions and requiring them to adhere to a procedures manual.
Significantly, the court found that drivers had set up businesses at Affinity’s insistence and that Affinity even prepared the paperwork for them, concluding that they were in independent businesses “in name only”. Drivers leased their vehicles from Affinity and the company permitted other drivers to use those vehicles on days off without compensation to the lessee. They owned none of their own equipment and performed services integral to Affinity’s business. Many had ongoing, years’ long relationships with Affinity as well. Could a different result be achieved? Notwithstanding ongoing efforts of states to define these relationships as covered employment, particularly in the trucking industry, employers can take steps to better structure situations to their favor. One step that I have taken on behalf of clients is to create a guide for independent contractors which differs markedly from their employee handbooks, in an effort to demonstrate arms length business-to-business structures.