The Common Law Test for Employment Status

By August 5, 2014Articles

On June 30, 2014, The California Supreme Court ruled on the case of Ayala v. Antelope Valley Newspapers, Inc., providing clarification and guidance regarding application of the common law test for determination of employee status.  The common law test originally addressed in the case of S.G. Borello & Sons v. Department of Industrial Relations emphasized that whether a common law employer-employee relationship exists turned foremost on the degree of an employer’s right to control how the end result was achieved.

In this case, newspaper carriers employed under a preprinted standard form contract identifying them as independent contractors sued Antelope Valley Newspapers alleging they were misclassified as independent contractors, when in reality they were employees.  As such, Plaintiffs alleged various Labor Code violations by the newspaper company including unpaid overtime, unlawful deductions, and wage order violations.

The trial court held that newspaper carriers had not shown a common question to be resolved between the putative class members, therefore, resolution of their cases as a class would lead to individualized and unmanageable inquires.  The Court of Appeals affirmed in part agreeing that Plaintiffs did not show how their claims could be managed on a class wide basis, but disagreed that proof of employee status would necessarily entail a host of individual inquiries.  Antelope petitioned the Supreme Court for review.

The Supreme Court began its analysis by emphasizing that “the principal test of an employment relationship is whether the person to whom services is rendered has the right to control the manner and means of accomplishing the result desired.”  The court indicated that even when there is some freedom in the nature of the work, it doesn’t change the character of employment where an employer has general control and supervision.  “What matters under the common law test is not how much control a hirer exercises, but how much control the hirer retains the right to exercise.”  It is the right to act distinguished from the act itself.

Based on the foregoing, the Supreme Court identified the proper issue to be addressed in this case which the trial court had failed to identify: “Is Antelope Valley’s right of control over its carriers, whether great or small, sufficiently uniform to permit classwide assessment?  That is, is there a common way to show Antelope Valley possessed essentially the same legal right of control with respect to each of its carriers?”

In this case, Plaintiff’s relationship with Defendant was governed by two form contracts which spelled out the degree of control Defendant could exercise.  Specifically, it detailed out what was to be delivered, when and how, as well as Defendant’s right to terminate the contract on 30 day notice without cause.  The trial court failed to give the contract the attention it should have received, and instead focused on how the exercise of control varied from carrier to carrier. Although evidence on variation of how the work is performed may indicate the employer is not exercising control over those areas of work, it does not alone prove that the hirer did not retain the right to do so.  “For class certification under the common law test, the key question is whether there is evidence a hirer possessed different rights to control with regard to its various hires, such that individual mini-trials would be required.”  Individual issues among Plaintiffs do not prevent certification so long as those issues may be effectively managed.

Based on the foregoing, the Supreme Court affirmed the court of appeals judgment and remanded for reconsideration of class certification under the proper application of the common law test for an employer-employee relationship.

After addressing the common law test and its application and use in certification of a class, the Supreme Court commented on the use of secondary factors.  Secondary factors include but are not limited to the kind of occupation and whether it was typically performed under the direction of the principal, the skills required, who supplied the instrumentalities, tools and workplace, length of time for which services are to be performed, and whether or not the parties believed that they were creating an employer-employee relationship.  The Supreme Court cautioned on the use of these factors and the weight each factor is given in light of the realities of the employment relationship.  Many of the secondary factors are merely evidentiary indicia of an employer’s right to control, and may be of little importance when independent evidence clearly establishes that right.

To read this case, click here:  Maria Ayala v. Antelope Valley Newspapers, Inc.