On January 31, 2011, in Arzate v. Bridge Terminal Transport, Inc., the California Court of Appeal overturned a summary judgment ruling on independent contractor status, reasoning that no one factor is dispositive in determining a worker’s status as an independent contractor or an employee.
The defendant, Bridge Terminal Transport, Inc., (“Bridge Terminal”) arranges for the transportation of cargo to its customers’ facilities in leased vehicles driven by their respective owners. The plaintiffs sued on behalf of a class of truck owners/drivers who leased their vehicles to Bridge Terminal, and claimed failure to pay minimum wages, failure to pay wages due upon discharge, failure to provide itemized wage statements, and unfair business practices.
The relationship between Bridge Terminal and the plaintiffs was governed by a collective bargaining agreement (“CBA”). The CBA identified the plaintiff truck owners/drivers as “employee owner/operators,” and stated that such individuals worked “exclusively for their employer.” Additionally, Bridge Terminal entered into leases with each plaintiff for the use of his or her truck. The leases were for a term of 30 days, to be automatically renewed unless cancelled by either party on one day’s notice. The lease agreements specified that Bridge Terminal would maintain the “exclusive possession, control and use of” the leased trucks and that Bridge Terminal was responsible for the operation of the vehicles for the duration of the lease.
The plaintiffs received compensation from Bridge Terminal for leasing their vehicles, in addition to compensation based on the number of loads they transported, and the distance they traveled. However, the plaintiffs also received hourly compensation for waiting time, meetings, and other specified activities. The company also offered subsidized health care benefits. The plaintiffs paid all expenses required to maintain and operate their vehicles. Bridge Terminal issued separate checks to the plaintiffs for lease payments and for “payroll,” and deducted taxes from the “payroll” check. Plaintiffs received a W-2 statement from Bridge Terminal with respect to the amounts earned for their services, and a 1099 form for the payments on the lease of their vehicles.
Bridge Terminal had minimal oversight of the plaintiffs’ duties. While company dispatchers communicated work orders to the plaintiffs, the plaintiffs themselves determined whether to accept a dispatch, which routes to drive, when and where to take meal and rest breaks, and what attire to wear. Bridge Terminal did not instruct them on how to transport cargo, but did require that all work be performed in compliance with applicable laws and regulations, and within the requirements of the customer. Per the CBA, the plaintiffs were required to inform the company of any delays, and to report to the job site at a predetermined time. In addition, the CBA also governed Bridge Terminal’s procedures for discharging or suspending the plaintiffs.
Bridge Terminal moved for summary judgment on the ground that, as a matter of law, the plaintiffs were independent contractors rather than employees of Bridge Terminal. The trial court’s primary consideration in differentiating between independent contractor status and employee status was “whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.” Accordingly, Bridge Terminal argued that it did not control the “manner and means” by which the plaintiffs transported cargo, given that the plaintiffs drove their own trucks, paid their own expenses, and decided when to take their breaks. The trial court granted Bridge Terminal’s motion, and entered judgment in its favor.
Courts will consider the totality of the evidence in determining whether an individual is an independent contractor or an employee.
The Court of Appeal reversed the trial court’s judgment. While stating that the “manner and means” test remains the most significant consideration in determining independent contractor status, the appellate court reasoned that the trial court erred in failing to consider competing evidence regarding the plaintiffs’ status.
Specifically, the appellate court noted the following independent contractor status considerations: (1) whether either party has the right to discharge the relationship at will; (2) whether the worker is engaged in a distinct occupation or business; (3) whether the work in question is typically performed under the direction of the principal; (4) the skill required by the occupation; (5) whether the principal or the worker supplies the instrumentalities of the job; (6) the length of the parties’ relationship; (7) the method of payment; and (8) whether or not the parties believe they are creating an employer-employee relationship.
Based on the totality of the evidence, and in light of the factors noted above, the Court of Appeal determined that the plaintiffs could have been employees of Bridge Terminal. In particular, the court cited the provision of the CBA that referred to the owner-operators of trucks as “employees,” as well as the facts that Bridge Terminal issued W-2s, withheld taxes, and offered health benefits, as evidence supporting a conclusion that the plaintiffs were employees. Further, the court identified the plaintiffs’ receipt of hourly compensation for waiting time and other duties, and the fact that Bridge Terminal could terminate the lease agreements on 24 hours’ notice as other factors indicating an employment relationship. Finally, the court determined that the plaintiffs’ work was part of Bridge Terminal’s regular business, further suggesting an employer-employee relationship. Consequently, the Court of Appeal held that the trial court erred in ruling, as a matter of law, that the plaintiffs were independent contractors.
What Arzate Means For Employers
Arzate demonstrates that no one factor is dispositive in determining a worker’s status as an independent contractor or an employee. Therefore, this case cautions employers to closely consider all aspects of a position before classifying workers as independent contractors, including, but not limited to, applicable contracts, methods of compensation, and the right to discharge the relationship at will, as well as whether the employer controls the workers’ manner and means of performance.