Once again, a California Court of Appeal has relied upon S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 [256 Cal.Rptr. 543] to articulate the test for employment. In Caso, et al. v. Nimrod Productions, Inc., et al. (June 4, 2008) ___ Cal.Rptr.3d ___, the Court of Appeal (Second Appellate District, Division Seven) evaluated the interesting doctrine of "special employment." Explaining the term, the Court said:
“When an employer lends an employee to another employer and relinquishes to the borrowing employer some right of control over the employee’s activities, a “special employment relationship” arises between the borrowing employer and the employee.
(Slip op., at p. 7.) Citing Borello and other authority, the Nimrod Court (heh) said:
““In determining whether a special employment relationship exists, the primary consideration is whether the special employer has ‘“[t]he right to control and direct the activities of the alleged employee or the manner and method in which the work is performed, whether exercised or not . . . .”’” (Kowalski, supra, 23 Cal.3d at p. 175; see Borello, supra, 48 Cal.3d at p. 350.)
(Slip op., at p. 7.)
What makes this of interest is the (perceived - my opinion) increase in class action litigation arising from the practice of misclassifying employees as independent contractors, discussed previously here. Estrada v. FedEx Ground Package System, Inc. (2007) 154 Cal.App.4th 1 [64 Cal.Rptr.3d 327] provides one example in this trend. And it seems reasonable to speculate that if the economy is actually entering a significant downturn (a premise that the media repeats but I decline to accept until real data shows a major downturn), employers may attempt with greater frequency to re-classify employees as independent contractors. Were that to happen, an increase in that type of wage & hour class action would surely follow. However, given that the strong emphasis on Borello seems to confirm that "right to control" and not actual control is the touchstone test for finding an employment relationship, class actions challenging independent contractor classifications may not go well, on the whole, for employers. The long term costs of that miscalculation would likely exceed the immediate savings of designating employees as independent contractors.