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Delineating the Distinction Between Employees & Independent Contractors

Given the broad protections provided to employees under California labor laws, it comes as no surprise that many employers have attempted to avoid compliance with these protections by classifying workers as "independent contractors" rather than employees. Two recent decisions in the Northern District of California provide some clarification of the law with respect to employees vs. contractors by providing a more concrete delineation between the two, which aims to prevent employee misclassification and payroll fraud. In Cotter v. Lyft, Inc. and O'Connor v. Uber Technologies, Inc., both courts denied defendants' motions for summary judgment, which effectively posed that the plaintiffs involved were not employees but independent contractors.

In the analysis, the courts looked to the right-to-control test, which ultimately provides that an employer-employee relationship exists where the employer retains sufficient control regarding the method and manner of job performance. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341 (1989). In both Cotter and O'Conner, numerous factors were considered in the courts' analysis and denial of defendants' motions for summary judgment, including the companies' requirements that drivers download an app to match their vehicles with nearby customers, submit their vehicles for inspection, submit to a background check; agree to the companies' terms of service, and submit to monitoring requirements.

As the Borello court reasoned, for an employer-employee relationship to exist, the company must retain "all necessary control" over work performance. Id. at 357. However, courts may find that an employer-employee relationship exists absent direct supervision by employer. In Borello, the agricultural employer exercised control over "sharefarmer" employees through incentive programs rather than direct supervision over their work.

Ultimately, courts consider several factors in determining the nature of a work relationship. These factors, as cited in the Borello opinion, include:

"(a) whether or not 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 workman 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." Id. at 351.

As illuminated by these factors and the decision in Borello, employers can exercise control over employees in numerous ways. Courts must ultimately consider the totality of the circumstances in making these determinations, which can have major bearing on the respective rights and responsibilities of employees and employers.

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