HR Management & Compliance

How Much Control Is Too Much When It Comes To Establishing an Independent Contractor Relationship?

Yesterday, we looked at the case of a district manager at an insurance agency. After she voluntarily left the company, she sued for breach of contract and sex discrimination. A California appeals court dismissed all of her claims, concluding that she was an independent contractor rather than an employee.

[For yesterday’s case facts, click here.]

Written agreement does not support a finding of “control,” court concludes

Erin Beaumont-Jacques, the district manager, had executed a District Manager Appointment Agreement (DMAA) with several insurance companies. She argued that the terms of the DMAA itself supported her claim that she was an employee rather than an independent contractor.

Beaumont-Jacques contended that the insurers’ right to control the means and manner of her efforts was captured in the DMAA’s dictate that she must conform to their “normal business practice” and “goals and objectives.”

She also pointed to her supervisor’s testimony that he expected annual business plans from his nine district managers, including Beaumont-Jacques, and required her attendance at district manager meetings. The supervisor also acknowledged that he had sole final authority to hire and dismiss any agent in her district and to provide a 2-year subsidy (partially at her expense) for her newly hired agents.

The court, however, found that these circumstances didn’t mean the insurers controlled to any meaningful degree the means by which Beaumont-Jacques performed and accomplished her district manager duties.

Manner of performance not specified

Beaumont-Jacques further asserted that the insurers’ “New District Manager Minimum Acceptable Performance Standards” demonstrated the insurers’ control. The 2-page document laid out a minimum number of agents she was to bring on within certain time periods.

But the court found that the document said nothing about the manner in which the insurers wanted or expected Beaumont-Jacques to comply with the minimum performance standards. Rather, the court said, the document was a “classic example of the setting of results” while leaving the means to the worker.

Moreover, months before signing the DMAA, Beaumont-Jacques had already submitted a 30-page business plan draft addressing “agency development” and her own “priority to develop the district by expanding our distribution system through agency development.” In other words, she had already formulated the manner in which she would achieve the insurers’ desired results.

If you’ve got employees, you need to worry about overtime in California. Learn how to properly calculate it, every time, at our webinar next week. Learn more.

Right to terminate was mutual, court says

Finally, the Court of Appeals rejected Beaumont-Jacques’s argument regarding the insurers’ right to terminate. It agreed that the threat of termination is an indicator of an employer’s control but clarified that it must be evaluated along with other factors. In this case, the right to terminate the relationship was a mutual right—one that Beaumont-Jacques exercised by voluntarily resigning.

Because Beaumont-Jacques wasn’t an employee, the court ruled that none of her claims were viable. (Beaumont-Jacques v. Farmers Group, Inc., Calif. Court of Appeals (Dist. 2) No. B239855, 2013)

Be safe, not sorry

It’s worth noting that the Court of Appeals focused largely on how the worker performed and accomplished her duties, particularly her discretion. In fact, the court noted that the DMAA provided there was no employer-employee relationship almost in passing.

Remember that such agreements are not considered decisive on the question of whether a worker is indeed an employee—courts care much more about the employer’s right of control.

Calculating Overtime in California: How to Avoid Computational Errors and Master Your Wage and Hour Obligations

Webinar coming next Tuesday, March 11, 2014

10:30 a.m. to Noon Pacific

$3.5 million.

That’s the amount of money a multinational trucking and transportation services company recently agreed to pay to settle a case alleging that it failed to properly pay 200 of its mechanics for overtime. The class of workers claimed the employer intentionally applied unlawful policies that required them to work an alternative workweek schedule without complying with California’s Labor Code or accompanying wage orders and didn’t pay them all the daily overtime compensation they were owed.

And just this past January, an Oakland Raiders cheerleader filed a class action lawsuit against the team alleging numerous wage and hour violations—including the failure to pay the Raiderettes minimum wage and overtime.

Miscalculating overtime compensation owed to nonexempt workers can result in huge exposure to liability for your organization, including collective actions under the Fair Labor Standards Act and California’s more stringent wage and hour regulations.

Don’t get caught off guard. Join us for an in-depth webinar on March 11 on how California’s laws differ from federal regulations, so you can ensure that you’ve got your bases covered when calculating overtime owed under state law. Our presenter, a seasoned California labor and employment attorney, will cover many common issues that trip up employers when computing overtime compensation owed to nonexempt employees.

Participate in this interactive webinar, and you’ll learn:

  • How to calculate the regular rate of pay under California law
  • Where California law stands on reporting-time and split-shift pay
  • How to account for bonus payouts, piece rates, commissions, and shift differentials so you’re in compliance with California wage and hour law and FLSA
  • How to account for call-back and reporting time pay and missed rest breaks and meal periods that employees must work due to the press of business
  • How to properly apply the weighted average when an employee works two or more jobs at different pay rates for your organization
  • Whether an employee can earn holiday and overtime pay in the same week and what effect it has on the overtime calculation
  • How to calculate overtime for nonexempt salaried employees
  • How to master alternative workweek scheduling so you don’t inadvertently violate state wage and hour rules
  • The huge exposure to liability for back wages and penalties you could face if overtime calculations are off—and how to avoid this
  • And much more!

In just 90 minutes, you’ll learn the correct way to calculate overtime pay, so you’ll have a better understanding of what to look for when assessing whether your compensation practices may run afoul of California wage and hour law.

Don’t miss it! Claim your spot today.

Download your copy of Who’s Entitled To Overtime: How To Avoid Mistakes When Classifying California Employees today!