Litigation, Independent Contractor
Status and Employment Law Update
Presented by:
Mark Hunt
King k Ballow
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© 2014 King & Ballow
Litigation Update
Espejo v. The Copley Press
Espejo v. The Copley Press
• This lawsuit was filed on January 29, 2009 by a group of
newspaper carriers for the San Diego Union Tribune
claiming they were misclassified as independent
contractors.
• A class of carriers was certified on September 21, 2011
and the parties engaged in discovery regarding the issues
in the case for nearly 2 years.
• The case was tried from May 29, 2013 until June 18, 2013.
Espejo v. The Copley Press
• The court rendered its decision on December 20, 2013 finding that the
class of 1,235 carriers that delivered between January 29, 2005 and July 1,
2007 were employees of the Union Tribune and not independent
contractors.
• The court awarded $4,953,795 to the class of carriers as compensation for
their unreimbursed expenses.
• On January 21, 2014 the court awarded attorneys’ fees of $6,160,416 to
the attorneys for the carriers, of which $1,250,000 would be paid out of the
award to the class of carriers and the balance would be paid by the Union
Tribune.
• The parties are continuing to file motions and argue issues in the lower
court and an appeal of the decision has been filed.
Ayala v. Antelope Valley Newspapers, Inc.
The Antelope Valley
Newspapers Case
• This case was filed in Los Angeles County in 2008 seeking
certification of a class of home delivery carriers for the AVP.
• The court denied certification based on the numerous variations
in how the carriers performed their jobs.
• The carriers appealed this decision to a Court of Appeals in
California.
The Antelope Valley
Newspapers Case
• A Mixed Result – the Court of Appeals reversed part of the lower court’s decision and
affirmed part of that decision.
• The Court found that the virtually identical contracts signed by carriers and uniform work
policies constituted common evidence on the independent contractor issue.
• Sent case back to lower court for certification on five of the carriers’ claims because of
common proof on those claims.
• Upheld denial of class certification on the following three claims because individualized
testimony would be required: overtime; meal break; and rest break claims.
• On January 30, 2013, the California Supreme Court granted a request to review the
decision.
•Oral argument was conducted before the California Supreme Court on April 3, 2014 and
the case has been submitted for a decision.
Sotelo v. Media News Group
Sotelo v. Media News Group
• This lawsuit was filed in 2006 and the plaintiffs sought
certification of a class comprised of all distributors and carriers
at all MNG properties in California.
• The court denied class certification based in part on
differences in contracts and business operations at the various
MNG properties.
• The plaintiffs appealed this decision to a Court of Appeals in
California – not the same Court of Appeals as in the AVP case.
Sotelo v. Media News Group
•
The Court of Appeals affirmed lower court’s denial of class certification for
newspaper distributors and carriers.
• The Court found the proposed class did not meet the “ascertainability”
requirement for class certification.
• Proposed class of 5,000 distributors and unknown number of newspaper
carriers performing services under distributors was not easily ascertainable.
• The Court also found that common questions of law and fact did not
predominate over individualized questions.
• Individualized testimony would be required on: overtime, meal break and rest
break claims; fraud and concealment claims; and the independent contractor vs.
employee issue.
• California Supreme Court has denied a request to review the decision.
Becerra v. McClatchy Company
• Trial set for November 3, 2014
Dalton v. Lee Publications, Inc.
• Trial set for August 11, 2014
Sawin v. McClatchy Company
• Trial date currently being set
Independent
Contractor Status
Update
What is an Employee?
An employee is subject to the will and control of the
employer not only as to what shall be accomplished but
also how it shall be accomplished.
What is an Independent Contractor?
One who…
is engaged to perform services in accordance with his own
methods of operating.
remains free from the control and direction of the hiring party
with respect to everything except the ultimate result sought to
be achieved.
“Employee” vs. “Independent Contractor”
Courts and legislatures have not settled upon
universally applicable standard for
ascertaining status
Certain tests must be satisfied
Basic Test
Right-To-Control Test
Because newspaper carriers tend to work
unsupervised and away from company facilities, it’s
possible to design a distribution system that satisfies
the tests for independent contractor status.
Right-To-Control Test
• The extent of control which, by the agreement, the company may
exercise over the details of the work.
• Whether or not the one employed is engaged in a distinct
occupation or business.
• The kind of occupation, with reference to whether, in the locality,
the work is usually done under the direction of the employer or by
a specialist without supervision.
Right-To-Control Test
• The skill required in the particular occupation.
• Whether the employer or the workman supplies the
instrumentalities, tools and the place of work for the
person doing the work.
• The length of time for which the person is employed.
• The method of payment, whether by the time or by the job.
Right-To-Control Test
• Whether or not the work is a part of the regular business of
the employer
• Whether or not the parties believe they are creating the
relation of master and servant
Preventive Measures
Have a Written Contract
Which Contains:
Statement of Intention to Create an Independent
Contractor Relationship
• Contract Should Expressly State that Carrier and
Company Intend to Create an Independent Contractor
Relationship
Description of Who Controls What
• Carrier Controls Methods and Means of Performance
• Company Controls Only Result to be Achieved
Description of Method of Payment
• Payment by the Job Performed (e.g., per piece,
buy/sell)
• Not by Time Worked (e.g., per hour, monthly salary)
Direct Seller Exemption
• Component of the Small Business Job Protection Act (1996)
Specifically includes persons who are “engaged in the trade or
business of the delivering or distribution of newspapers or shopping
news (including any services directly related to such trade or business)”
• Requirements
– 1) substantially all of the worker’s remuneration for the performance
of such services must be directly related to sales or output, rather
than the time or hours worked
– 2) services must be performed pursuant to a written contract that
states the carrier will not be treated as an employee for federal tax
purposes
Statement of Termination Rights of Parties
• Don’t Use “At-Will” Employee Termination with Independent
Contractors
• Most Defensible is Contract for a Term (e.g., 1 year)- with
Termination During 1 year Term Only for Breach
• If Using “Without Cause” Termination Provision- Provide
Carrier with Advance Written Notice Period for Termination
(e.g., 30 days notice)
Statement of Who Pays for What
• Carrier Should Provide and Pay for All Tools and
Equipment
• If Company Provides Materials, Tools or Equipment to
Carrier- Carrier Should be Charged for Same
• Carrier Should Pay all Expenses Related to PerformanceCompany Should not Reimburse Carrier for Expenses
Statement that Carrier’s Personal
Services are not Required
• Provide that Carrier May Use Substitutes or Helpers
• Carrier Should Select, Control and Pay Substitutes or
Helpers
• Company Should not Have Veto Power over Substitutes or
Helpers Used by Carrier
Miscellaneous Provisions
• Provision that Carrier will not Receive Benefits Provided by
Company to its Employees
• Statement Allowing Carrier to Provide Similar Services to
Other Companies
Miscellaneous Provisions
• Include Language in Contract Needed to Qualify for any
“Industry Specific Exemptions”
Live by the Written Contract
Live by the Written Contract
• Managers Must Know Proper Treatment to Maintain
Independent Contractor Relationship- Can “Make or Break”
Independent Contractor Status
• Avoid or Reduce Use of Written Materials with Carrier’s Apart
from Written Contract – Other Materials may Contradict Written
Contract- Every E-mail, Memo or Note from a Manager is an
Opportunity for Control
• Avoid Using Human Resources Department with Independent
Contractors (e.g., Don’t Use an “Employment Application”, with
Independent Contractors- No W-2/ W-4, Instead Use W-9/1099)
Live by the Written Contract
• Language Matters with Independent Contractors (e.g.,
Employees are “Hired” and “Fired”; Independent
Contractors are “Contracted” and “Terminated”)
Responding to Carrier Needs
Without Compromising Independent
Contractor Status
• New Carrier Orientation
• Writing E-mails or Memos to Carriers
• Carrier Meetings
• Bonuses and Carrier Recognition
• Fluctuating Gasoline Prices
• Covering Routes in Emergencies
• Carrier/Subscriber Contact
New Carrier Orientation
New Carrier Orientation
• Terminology
• Outgoing Contractor Whenever Possible
• If the DM has to do it, you are vulnerable, so emphasize
carrier choice.
Writing E-mails or Memos to Carriers
Memo
Writing E-mails or Memos to Carriers
• The source of the most damage to a newspaper’s IC
argument.
• Avoid orders and instructions unless it’s a direct
reference to the written contract.
• Suggestions are OK, but use clear suggestion
language.
• When you have to correct unacceptable performance,
tie it back to the contract.
Carrier Meetings
Carrier Meetings
• Voluntary and informational
• Benefits of having one or two who will not attend
Bonuses and Carrier Recognition
Bonuses and Carrier Recognition
• Can be OK, but there are pitfalls to avoid
• Carrier recognition should avoid tying the carrier too closely
to the newspaper
Fluctuating Gas Prices
Fluctuating Gas Prices
• A legitimate concern that comes and goes
• Use a contract addendum to adjust compensation on a
temporary basis
Covering Routes in Emergencies
Covering Routes in Emergencies
• OK if it’s a real emergency, but the carrier must still be
charged
• If it’s ongoing, it’s going to come back to haunt you
• The DM should never allow self to be viewed by the
carrier as a potential substitute
Carrier/Subscriber Contact
Carrier/Subscriber Contact
• As a general rule, don’t restrict unless customers
are complaining about it
• OK for subscribers to have a communication option,
if the carrier wants to provide one.
Manage With a Soft Touch
• Administer the contract-not your personal preferences
• Be a resource-not a boss
Employment Law
Update
Title VII Update- Employer Vicarious Liability
• Vance v. Ball State decided by United States Supreme Court
June 24, 2013
• When is an Employer responsible for the discriminatory
actions of a “supervisor”?
• Title VII imposes liability in two instances;
1. If the employee is a supervisor;
2. If the employer is made aware of an offending worker’s
conduct and fails to take action to remedy the behavior.
Supreme Court Held
• A “supervisor” is one with the power to make tangible
employment decisions or take action against the victim.
• An employer may be vicariously liable for a supervisor's
unlawful harassment only when the employer has empowered
that individual to take tangible employment action against the
victim.
• Meaning the offending individual has the ability to effect a
significant change in employment status, such as hiring, firing,
failing to promote, reassignment with significantly different
responsibilities, or a decision causing a significant change in
benefits.
National Labor Relations Act Update
• The National Labor Relations Board (NLRB) is currently
considering whether employees have a federal right to use
their employer’s e-mail systems for Section 7 purposes
such as:
–
–
–
–
for union organizing
to discuss wages
to discuss discipline and
to discuss other protected activity
• This decision will impact all employers whether their
workers are unionized or not
National Labor Relations Act Update
• Since the Register Guard decision in 2011 employers have been able to enforce
electronic use policies prohibiting employees from this type of use of the
employer’s systems
• The NLRB has now invited briefs in the case of Purple Communications, Inc. to
determine if it should overrule the 2011 Register Guard decision.
• The briefs are to address the following questions:
1. Should the NLRB reconsider its conclusion in Register Guard that employees
do not have a statutory right to use their employer’s e-mail system (or other
electronic communications systems) for Section 7 purposes?
2. If the NLRB overrules Register Guard, what standard(s) of employee access
to the employer’s electronic communications systems should be
established? What restrictions, if any, may an employer place on such
access, and what factors are relevant to such restrictions?
National Labor Relations Act Update
3. In deciding the above questions, to what extent and how should the
impact on the employer of employees’ use of an employer’s electronic
communications technology affect the issue?
4. Do employee personal electronic devices (e.g., phones, tablets), social
media accounts, and/or personal email accounts affect the proper balance
to be struck between employers’ rights and employees’ Section 7 rights to
communicate about work related matters? If so, how?
5. Identify any other technological issues concerning e-mail or other
electronic communications systems that the NLRB should consider in
answering the foregoing questions, including any relevant changes that
may have occurred in electronic communications technology since
Register Guard was decided. How should these affect the NLRB’s
decision?
Questions
and
Answers