Tuesday, September 12, 2006
Justices Rule Drivers for Courier Services Employees, Not Independent Contractors Under State Law
By a MetNews Staff Writer
Courier service drivers are employees, not independent contractors under the state’s workers’ compensation laws, the Sixth District Court of Appeal has ruled.
In an opinion filed Aug. 22 but certified for publication yesterday, the court affirmed Santa Clara Superior Court Judge Thomas W. Cain’s order denying a petition for a writ of administrative mandate brought by JKH Enterprises, Inc. after the Department of Industrial Relations issued a stop work order and $16,000 penalty for JKH’s failure to provide workers’ compensation insurance for its drivers.
JHK, operating as AAA Courier, provided courier services to law firms and title companies in the San Francisco area, the record showed.
Each of JKH’s drivers filled out a form entitled “Independent Contractor Profile” and an application in which each driver acknowledged he or she was an independent contractor. They all used their own vehicles to make deliveries and paid for their own gas, car maintenance and insurance. They used their own cell phones to communicate with JKH.
Neither the drivers nor their cars displayed any JKH or AAA marking or logo. They received no particular training other than brief instruction on how to fill out the log sheets that verify customer deliveries and show the locations of pick-ups and deliveries.
All drivers set their own schedules and chose their own driving routes. Their work was not supervised. They were never required to report to JKH’s business office, and Herrera had never met some of them. The drivers took time off when they wanted, and were not required to seek permission to do so.
AAA paid the drivers twice a month, with no deductions taken, and issued federal tax forms 1099 rather than a W2s. It provided no benefits to the drivers.
In 2004, Deputy Labor Commissioner Benny Cheng, after inspecting JKH’s offices, issued a “Stop Order—Penalty Assessment” and fined JKH $16,000—$1,000 for each driver that was working the day of the inspection.
JKH contested the order and assessment and requested a hearing before the Department. In a written decision, the hearing officer upheld the order and penalty, reduced by $1,000 for one driver who was conducting a delivery business under a separate business license, saying:
“Although some of the factors in this case can be indicative of the workers being independent contractors, the overriding factor is that the persons performing the work are not engaged in occupations or businesses distinct from that of [JKH].
“Rather, their work is the basis for [JKH’s] business.”
The officer explained:
“[JKH] obtains the clients who are in need of delivery services and provides the workers who conduct the service on behalf of [JKH]. In addition, even though there is an absence of control over the details, an employee-employer relationship will be found if the [principal] retains pervasive control over the operation as a whole, the worker’s duties are an integral part of the operation, and the nature of the work makes detailed control unnecessary.”
In its writ application in the superior court and on appeal, JHK argued its lack of control over the details of the work, the drivers’ use of their own cars, and the presence of the “Independent Contractor Profiles” signed by the drivers compelled a finding that the drivers were independent contractors.
But Justice Wendy Clark Duffy, writing for the Sixth District, said:
“[T]he functions performed by the drivers, pick-up and delivery of papers or packages and driving in between, did not require a high degree of skill. And the functions constituted the integral heart of JKH’s courier service business. By obtaining the clients in need of the service and providing the workers to conduct it, JKH retained all necessary control over the operation as a whole.”
“[T]hese circumstances are enough to find an employment relationship for purposes of the Workers’ Compensation Act, even in the absence of JKH exercising control over the details of the work and with JKH being more concerned with the results of the work rather than the means of its accomplishment. . . . And neither JKH’s nor the drivers’ own perception of their relationship as one of independent contracting, or any other single factor, either alone or in combination, mandates a different result.”
Department attorney David M. Balter told the MetNews that the department requested that the opinion be certified for publication so employment attorneys, other courier services and other employers will be aware of the decision.
JKH’s attorney Rona P. Layton, of the San Jose firm Sims & Layton, told the MetNews she disagreed with the opinion, but said, “All [JKH] is looking for is a level playing field.” She said it lost some customers when it made its drivers employees and had to raise rates after the stop work order.
Justices Franklin D. Elia and Patricia Bamattre-Manoukian concurred in the opinion.
The case is JHK Enterprises, Inc. v. Department of Industrial Relations, 06 S.O.S. 4865
Copyright 2006, Metropolitan News Company