Texas Independent Contractor Agreement Does Not Bar California Wage and Hour Claims

By July 23, 2010Articles

Employers suffered another setback in the July 13, 2010 Ninth Circuit decision Narayan v. EGL regarding independent contractor classification. In Narayan, California delivery drivers who worked for EGL, a Texas based company, signed written contracts expressly acknowledging that they were independent contractors and not employees of EGL. In addition, the pre-printed IC agreement contained a provision stating that it was subject to enforcement under Texas law. When a few of the California drivers sued EGL for overtime pay, meal periods and unpaid reimbursements alleging they were actually employees, the trial court ruled in favor of EGL citing the express independent contractor acknowledgment each driver signed and applied Texas law to conclude that the plaintiffs were not employees.

However, the Ninth Circuit reversed the lower court ruling in favor of EGL, holding that plaintiffs’ wage and hour claims were subject to California law – not Texas – under the state Labor Code and broad regulatory policy defining the employer-employee relationship, irrespective of the contractual Texas choice of law clause agreed to by the parties. The appellate court further held that the express independent contractor acknowledgment made by the drivers “is simply not significant under California’s test of employment.” “The labels placed by the parties on their relationship is not dispositive and subterfuges are not countenanced.”

For any questions or comments regarding this Labor Law Update please contact attorney Michael Daly of the Daly Law Firm at 619-525-7000 or daly@dalylawfirm.co.