Because employers reap substantial savings when independent contractors can satisfy the needs of a business in place of employees, there is a financial incentive to misclassify employees as independent contractors. Decisional authority agrees that, due to the “infinite variety of service arrangements,” it is difficult to formulate a single test or standard that can determine whether an individual should be classified as an employee or an independent contractor. (S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, 350 [256 Cal.Rptr. 543].)
In Borello, the California Supreme Court collected its decisions on the determination of an employment relationship. Borello held that “ ‘[t]he principal test of an employment relationship is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired....’ ” (Borello, at p. 350.) Borello then discussed “secondary” indicia of the nature of the service relationship. First, Borello said that “ ‘[s]trong evidence in support of an employment relationship is the right to discharge at will, without cause.’ ” (Ibid.) Borello then summarized other “secondary” indicia of employment status:
Additional factors have been derived principally from the Restatement Second of Agency. These include (a) whether the one performing services is engaged in a distinct occupation or business; (b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; (c) the skill required in the particular occupation; (d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work; (e) the length of time for which the services are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is a part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee.
(Borello, at p. 351.) Since Borello, defendants have chafed at reliance upon Borello outside of the worker’s compensation context. Those challenges have uniformly been rejected:
Sonic claims this deference [to the policies underlying the worker’s compensation law] allowed the Borello court to set a “far more liberal legal standard than existing under common law principles” when determining whether workers are employees or independent contractors. Not so. Borello set forth exactly the same secondary factors to be considered in addition to the issue of control that were enumerated in both Empire Star and Tieberg. The court explicitly declined to adopt “ detailed new standards for examination of the issue,” but stated that these factors “may often overlap those pertinent under the common law” and that “ [e]ach service arrangement must be evaluated on its facts, and the dispositive circumstances may vary from case to case.”
(Air Couriers Intern. v. Employment Development Dept. (2007) 150 Cal.App.4th 923, 935-936 [59 Cal.Rptr.3d 37].) And Estrada v. FedEx Ground Package System, Inc. (2007) 154 Cal.App.4th 1 [64 Cal.Rptr.3d 327] cited Borello as the source of the common law test of employment. (Id., at p. 10.) It appears pretty well settled that Borello is the seminal California decision on the nature of a service arrangement. (Parenthetically, I am aware that Antelope Valley Press arises in the realm of worker's compensation insurance. However, that distinction has become meaningless, given the manner in which Court's routinely rely on Borello.)
On April 30, 2008, the Court of Appeal (Second Appellate District, Division 3), relying solely on Borello, applied its employment factors to newspaper carriers delivering the Antelope Valley Press. Applying the various Borello factors, Antelope Valley Press v. Poizner (April 30, 2008) ___ Cal.Rptr.3d ___ said:
In analyzing the evidence in this case under the substantial evidence test, we will first address the question whether AVP's relationship with its carriers gives it the right to control the manner and means by which the carriers accomplish their tasks. Although the form contract between AVP and the carriers states that each carrier “has the right to control the manner and means of delivery” of AVP's publications and “has the right to determine the equipment and supplies needed to perform delivery services,” there is substantial evidence that is not actually the case.
The pages of the form contract are filled with manner and means provisions regarding the task of delivering AVP's publications, as well as detailed negative consequences to the carriers if they do not comply with those manner and means directives. By way of example, carriers are required to bag certain of the publications, and to use specific colors in doing so. AVP permits its customers to dictate where they want the publications placed on their property. Any harm to, or loss of the papers can result in financial loss to the carrier. The carrier must abide by the pick up and delivery times specified in the contract, or face economic consequences. In addition to the financial penalties imposed for failure to abide by these many dictates, failures are also grounds for termination for cause. The use of the many financial penalties, as well as reports of complaints of customers, and the visual surveys to determine whether red and orange bagged papers have been delivered, enable AVP to maintain significant supervision over the carriers. Moreover, AVP has control over the price paid by customers to AVP, which includes both the cost of the newspaper and the delivery service. While it is true that carriers can choose the sequence of their delivery, the vehicle they use to make deliveries, whether and when to take breaks, and the clothes they wear during their deliveries, those choices are, in reality, a function of the weather, the size and density of their routes, and whether they can afford to have a vehicle for deliveries separate and apart from a vehicle for their own personal use.
We also note that under several provisions of the contract, the carrier is responsible for procuring new subscribers to the Press. The contract states the carrier is to (1) use his or her best efforts to procure as many new subscribers as possible, (2) make every good faith effort to solicit subscriptions, and (3) maintain or increase the number of home subscribers on his or her route. Indeed, a decrease in subscribers on a carrier's route of more than two per cent gives AVP the right to terminate the carrier's contract. However, there is no indication that persons who work in AVP's circulation department and have procurement of new subscribers as one of their tasks are not considered employees by AVP.
Substantial evidence also supports the ALJ's finding that most of the additional factors adopted by the Borello court indicate an employer-employee relationship between AVP and its carriers. Regarding the right to discharge at will without cause, that right is clearly given to AVP under the terms of the contracts. Only a 30-day written notice to the carrier is required; and, more than one complaint per month “per one thousand contracted subscriber deliveries per edition (paid, free sample, or TMC, or other)” can result in immediate termination for cause. Also, the evidence does not show that in making deliveries for AVP, the carriers are engaged in a distinct occupation or business of their own. There was no evidence that any of AVP's carriers hold themselves out as being an independent delivery service that happens to have AVP as one of its customers. Further, AVP does not cite evidence showing that the carriers have a substantial investment in their AVP delivery duties other than their time and the vehicles they use; and their vehicles are not shown to be other than the vehicles they use for their own personal activities.
Additionally, the evidence does not demonstrate that the carriers are the contracting parties best situated to distribute the risk and cost of an on-the-job injury as an expense associated with delivery of AVP's publications. Evidence shows that 62 of the 170 carriers that had earnings from AVP in 2003 were between the ages of 19 and 29, and 56 of those 62 carriers earned less than $10,000 that year. Indeed, 130 carriers earned less than $10,000 that year. Only 30 carriers earned between $10,000 and $19,000, and only 10 carriers earned more than $20,000. After they pay their gasoline and car maintenance expenses associated with delivering AVP's publications, the carriers are even less able to distribute the risk and cost of injury as an expense of doing business. Indeed, the very concept of distributing the risk and cost of injury as a business expense necessarily requires that the carriers have other sources of business income which can be tapped for payment of health and income insurance premiums to cover potential on-the-job injuries to themselves. Yet, there was no evidence that any of the carriers have a delivery business through which they can distribute that risk and cost. In contrast, as a means of paying for workers' compensation insurance, AVP has the ability to make adjustments in the prices it charges the public for its publications and for advertising in those publications.
There are other factors that indicate the carriers are employees. Delivering papers requires no particular skill. A carrier's remuneration is in very large part dependent on nonnegotiated financial terms in the contract rather than on the carrier's initiative, judgment or managerial abilities. AVP supplies many of the materials used by the carriers (the newspapers, the mandatory orange and red plastic bags, the subscriber lists), as well as facilities the carriers use, like the loading docks for pickup of AVP's publications and assembly of the various parts of the Press. The length of a carrier's service is at least 12 months by contract, and evidence shows that of the 170 carriers that earned money working for AVP in 2003, 49 of them had begun working by 2002, and 25 of those 170 carriers signed their first contract with AVP in the 1990's. Thus, the notion that an independent contractor is someone hired to achieve a specific result that is attainable within a finite period of time, such as plumbing work, tax service, or the creation of a work of art for a building's lobby, is at odds with carriers who are engage in prolonged service to AVP.
Closing out our review of the factors to be considered when an issue of a worker's status arises, we note that payment for the carriers is essentially in a piece work fashion, like turning out dresses for a clothing manufacturer, with a certain number of papers needing to be delivered each day. Moreover, delivery of AVP's publications to homes, retail stores, and newspaper vending machines is part and parcel of the newspaper business. Indeed, there was evidence that AVP has “admitted employees” who make deliveries of its publications. Also, although the contract states a carrier has “the right to hire employees of his/her choosing and to [c]ontract with others to fulfill [the carrier's] obligations under this Contract,” that right is qualified in several respects by the contract. The contract states the carrier can “hire employees and substitutes when [the carrier] deems it necessary.” The contract mandates that “the receipt, transportation, distribution and delivery by [the carrier] of copies of newspapers shall be made only in vehicles under [the carrier's] control and direction.” And the contract forbids the carrier from “disclos[ing] in any form to any other person any subscriber list, non-subscriber list, customer list, or route records.”
Thus, we necessarily conclude that despite the carriers having signed contracts that purport to decide they function as independent contractors rather than employees, substantial evidence supports the administrative findings and decision that they are employees of AVP.
(Slip op., at pp. 19-23.)
Wage Law effectively condenses the Court’s analysis in its post, Paperboys are Employees, not Contractors, but I wanted to provide the full discussion for context.