A newspaper misclassified its newspaper carriers as independent contractors, the Superior Court for the County of Sacramento has ruled following a trial in a class action for employees’ unpaid mileage expenses under Section 2802 of the California Labor Code. Sawin v. The McClatchy Co., No. 34-2009-00033950 (Cal. Super. Ct. Sept. 22, 2014). Although the newspaper carriers signed agreements stating they were independent contractors, set their own schedules and routes, and could hire their own workers, the Court found the newspaper exercised such significant control over the newspaper carriers’ performance of their duties that it “belie[d] the contrary pronouncement in the form contracts….”

Background

Lorianne Sawin and others worked as newspaper carriers for The McClatchy Company, d/b/a The Sacramento Bee (the “Bee”). The carriers signed agreements with the Bee that stated they were independent contractors. The Bee could terminate the agreement upon 30 days’ notice or at any time for a material breach. The carriers also had the right to terminate the agreement. 

The carriers could pick up the papers at any time at the Bee’s warehouses and set their own schedules, as long as the papers were delivered by a particular time. They could hire their own helpers and substitutes, purchase their own supplies, and wear their own clothes. The carriers provided their own vehicles and insurance. No specialized education, tools, or equipment were required to perform the job.

However, the Bee owned the delivery routes and the customer lists. It trained the carriers on the performance of their duties. If the Bee received complaints regarding a newspaper delivery, it would deduct penalties from the carriers’ compensation. The Bee also deducted insurance premiums from the carriers’ compensation and audited the carriers’ job performance. Many of the carriers worked for the Bee for years, signing renewable one-year contracts each year.

Applicable Law

Under California law, whether a worker is an employee or independent contractor depends upon whether the hiring entity retains “the right to control” the manner and means of the workers’ performance of their duties. Ayala v. Antelope Valley Newspapers, Inc., 59 Cal. 4th 522, 533 (Cal. 2014). In making this determination, the California Supreme Court instructed that courts may consider: 

• whether the work is part of the hiring entity’s regular business; 

• the degree of skill required for the work; 

• whether the worker provides his or her own tools and equipment; 

• whether the worker maintains his or her own business; 

• the length of time of the job; 

• the method of payment; and 

• whether the parties believed that they were creating an employment relationship.

Analysis

Applying the test set forth in Ayala, the trial court ruled the Bee misclassified the carriers as independent contractors when they, in fact, were employees. Significantly, the court found that newspaper delivery was integral to the Bee’s business. The carriers picked up the papers at the Bee’s warehouses and delivered them to the Bee’s customers. Customers contacted the Bee with any complaints regarding delivery service, and the Bee tracked those complaints. The Bee trained the carriers regarding their duties and audited the carriers’ performance.

The court also noted the carriers were not highly skilled and did not supply any special equipment, other than their personal vehicles, to perform the job. The carriers did not hold themselves out as operating independent delivery services, with the Bee as one of their customers. Rather, they often worked for the Bee for many years delivering newspapers. This was inconsistent with their status as independent contractors, who typically are hired for discreet periods of time to perform a specific task, the court pointed out.

Although the agreements stated the carriers were independent contractors, they could not negotiate the terms of their agreements, and the Bee could terminate the agreements at any time. The court also pointed out the Bee deducted customer complaint penalties and insurance premiums from the carriers’ payments. “In short, the parties’ conduct here belies the contrary pronouncement in the form contracts of an independent contractor relationship,” the court stated. Accordingly, the court concluded the carriers were not independent contractors, but instead were the Bee’s employees, and thus entitled to mileage reimbursement and attorneys’ fees.

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Misclassification of workers as independent contractors may have costly consequences. In addition to reimbursement of unpaid mileage, as in this case, employers could be liable for unpaid minimum wages and overtime, taxes, penalties, Social Security, Medicare and unemployment and workers’ compensation insurance premiums, and other employee benefits, such as health insurance, retirement benefits, bonuses, or paid time off. California employers using independent contractors should audit those relationships periodically to ensure they can defend the classification as appropriate under federal and state law.