Last month, a federal appellate court ruled in Fernando Ruiz v. Affinity Logistics Corporation that a California trucking company misclassified its drivers as independent contractors to avoid providing them with paid sick leave and other employee benefits.

Whether a company classifies a worker as an “independent contractor” or an “employee” can have a big impact on the worker’s total compensation and benefits. Employers sometimes misclassify workers as independent contractors to avoid paying them overtime and providing them with employee benefits, such as health insurance, paid time off, and pension benefits. The court’s decision in Ruiz v. Affinity demonstrates that just because a company classifies a worker as an “independent contractor” does not mean, in the eyes of the law, that the worker actually is an independent contractor who can be denied overtime and benefits.

Sears Delivery Drivers Originally Classified As Employees, Re-Hired as Independent Contractors

The plaintiff in the lawsuit, Fernando Ruiz, originally drove a delivery truck for Penske Logistics Corporation, a furniture delivery company that had a contract with Sears. Penske had classified Mr. Ruiz and the other drivers as employees and provided then with paid sick leave, vacation, and holiday wages.

Sears terminated its contract with Penske in November 2003 and told the drivers that Affinity Logistics would take over Penske’s contract to deliver furniture for the retailer. An Affinity manager subsequently told Mr. Ruiz and the other drivers that if they wanted to work for Affinity, they had to agree to work as independent contractors. Affinity allegedly required each driver to sign an “Independent Truckman’s Agreement” and “Equipment Lease Agreement.” Both of these contracts contained clauses stating that Affinity would treat the drivers as independent contractors.

The Independent Truckman’s Agreement allegedly set forth the drivers’ rate of pay, which was a flat “per stop” rate of $23. According to the lawsuit, Affinity encouraged drivers to lease their trucks from Affinity and the company automatically deducted $350 per week from a driver’s paycheck to pay for the leased truck. Affinity allegedly did not provide the drivers with any of the employee benefits that it offered to its workers that it classified as employees.

If Your Employer Controls Most Details of Your Work, You Are Probably Not an Independent Contractor and Should Receive Employee Benefits

The clause in the agreement stating that the drivers would be considered independent contractors notwithstanding, the court ruled that the drivers were, in fact, employees under California labor law. In so ruling, the court stated that the most important factor in determining if a worker is an employee or an independent contractor is whether the company controls the person’s “work details.” The court found that Affinity exercised such a high level of control and supervision over the drivers that they should have been classified as employees. For example, Affinity controlled the drivers’ schedules, routes, and “per stop” pay rates, and required the drivers to attend a meeting each morning. Furthermore, Affinity prohibited the drivers from negotiating for higher “per stop” rates, as independent contractors are commonly allowed to do. Affinity also required the drivers to wear uniforms and abide by strict grooming requirements.

In finding that the drivers should be classified as employees, the court ruled that “the undisputed facts indicate that Affinity had the right to control the details of the drivers’ work, and the application of the secondary factors weigh in favor of a finding that the drivers were employees.”

Secondary Factors Courts Consider to Determine If a Worker is an Employee or an Independent Contractor

In addition to the level of control an employer exercises over its workers, the court applied the following secondary factors to determine that the drivers should be classified as employees:

• Whether the workers are engaged in a distinct occupation or business
• The type of occupation and whether the work is usually done under the direction of the company or by a specialist without supervision
• The skill required by the particular occupation
• Whether the company or the worker supplies the tools, instruments, and the place of work
• The length of time for which the services are to be performed
• The method of payment: whether by time or by job
• Whether the work is part of the regular business of the company
• Whether the company and the worker believed they are creating an employer- employee relationship

In concluding its analysis, the court noted that, “the label that the parties place on their employment relationship is not dispositive and will be ignored if their actual conduct establishes a different relationship.”