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Thursday, July 15, 2010

Ninth Circuit Reverses Order Finding Drivers Independent Contractors

In Narayan v. EGL, Inc., --- F.3d ----, 2010 WL 2735708 (9th Cir., July 13, 2010), the plaintiffs were California residents
who were engaged to provide freight pick-up and delivery services for EGL in California. All three Drivers signed agreements with EGL for “Leased Equipment and Independent Contractor Services” (the “Agreements”). The Agreements provided that the “intention of the parties is to ... create a vendor/vendee relationship between Contractor and [EGL],” and acknowledged that “[n]either Contractor nor any of its employees or agents shall be considered to be employees of” EGL. The terms of the Agreements provide, inter alia, that the Drivers “shall exercise independent discretion and judgment to determine the method, manner and means of performance of its contractual obligations,” although EGL retained the right to “issue reasonable and lawful instructions regarding the results to be accomplished.”
The plaintiffs filed suit in California, alleging California Labor Code violations. EGL removed to District Court and moved for summary judgment, arguing that Texas law applied, as stated in the Agreements, and that the plaintiffs were independent contractors, not employees. The District Court granted the motion, holding that Texas law applied, that the Agreement controlled, and that the same result would apply under California law.

The Court of Appeals reversed. First, the Court held that California law applied to the action: "the claims arose under the Labor Code, a California regulatory scheme, and consequently, California law should apply to define the boundaries of liability under that scheme." Slip op. at 3.

The Court then reviewed the burden of proof on the employee v. independent contractor issue:
[O]nce a plaintiff comes forward with evidence that he provided services for an employer, the employee has established a prima facie case that the relationship was one of employer/employee... Once the employee establishes a prima facie case, the burden shifts to the employer, which may prove, if it can, that the presumed employee was an independent contractor.
Slip op. at 4. The Court held that the plaintiffs had established a prima facie case that they were employees, and that the defendants had not met their burden on summary judgment of establishing, by uncontroverted evidence, "that a jury would be compelled to find that it had established by a preponderance of the evidence that the Drivers were independent contractors" under S.G. Borello & Sons, Inc. v. Dep't of Indus. Relations (1989) 48 Cal.3d 341. Ibid. Reviewing the facts of the case and the Borello factors, the Court held that "under California's multi-faceted test of employment, there existed at the very least sufficient indicia of an employment relationship between the plaintiff Drivers and EGL such that a reasonable jury could find the existence of such a relationship." Slip op. at 9.

1 comment:

  1. Nice post. This is an important case addressing a common defense raised by employers: i.e., "contracting around" employee status. I write about this case, too, in my humble new wage & hour blog: .


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