Status as Employee v. Independent Contractor Impacts Wage and Hour Claims

February 26, 2018, 6:00PM. By Gordon Gibb

The responsibility of an employer to pay fair wages and provide meal breaks and rest periods in accordance with labor laws becomes clouded, when employees are misclassified as independent contractors. In the emerging gig-economy, the lines are blurring…

Los Angeles, CAA California unpaid wages lawsuit filed last fall is still pending, while a ruling by a US District Court Judge in a separate case over whether, or not a driver with GrubHub is an employee, or an independent contractor may be deemed moot by a pending decision by the California high court.

Such are the complexities in an ever-changing employment / contractor landscape where new challenges to a traditional employee / employer relationship continue to muddy the waters and blur jurisdictional lines.

The latter case is Raef Lawson v. GrubHub Inc. et al, Case No. 3:15-cv-05128, originally filed in the US District Court for the Northern District of California. In Lawson v. GrubHub, the plaintiff held that there was sufficient control and supervision over his activities as a GrubHub delivery driver that he should benefit from the perks normally associated with status as an employee under California law. Employment statutes inherent with both state, and federal governance holds that employees are entitled to fair wages, overtime wages, rest breaks and meal periods, together with any other benefits usually associated with an employee.

Employee? Or independent contractor?

Independent contractors, on the other hand, provide a service and thus are usually more autonomous with regard to the delivery and provision of service according to agreed timelines and specifications. Independent contractors do not receive the benefits normally ascribed to an employee - including overtime pay and mandated rest periods - under California law. Not having to pay for those benefits represents a saving for the recipient of those services, which makes contracting work out more attractive. The trade-off, of course is that the service recipient holds little sway over the contractor in how that service is provided, as long as contractual obligations are met.

With the increase in pseudo-contractor relationships mushrooming up from the so-called gig-economy, the lines are blurring. To that end, in the wage and hour lawsuit brought by Lawson the judge in the case, US District Judge Jacqueline Scott Corley of the Northern District of California, determined that while there were a handful of secondary factors that suggested Lawson was an employee, Corley nonetheless found that overall the plaintiff's relationship with GrubHub presented as that of a contractor. Her decision was largely based on S.G. Borello & Sons v. Department of Industrial Relations, a 1989 Supreme Court ruling largely used by the State of California as a benchmark for misclassification cases.

However that benchmark may get a reboot pending the outcome of a California Supreme Court decision with regard to Dynamex Operations West Inc. v. The Superior Court of Los Angeles County, Case No. S222732, in the Supreme Court of California.

At issue is whether Borello should be replaced with a benchmark test that would make it easier for workers to demonstrate status as an employee, rather than an independent contractor.

Benchmark guidance for determining status could be changing

Meanwhile, a former employee of California Resources Corp. (CRC) who worked for the firm as an employee from 2010 through 2014 filed a California unpaid wages lawsuit in October of last year against his former employer citing various violations to California labor laws. The plaintiff, identified only by his given name, asserts that he did not receive proper overtime wages for hours worked beyond eight hours in a day, or 40 hours in a week as mandated under California Labor law.

Additionally, The Department of Industrial Relations for the State of California mandates that "an employer may not employ an employee for a work period of more than five hours per day without providing the employee with a meal period of not less than thirty minutes."

The plaintiff asserts violations against the Fair Labor Standards Act (FLSA) in that CRC, or so it is claimed, misclassified him as an independent contractor in his role as a drill site manager. In so doing, he asserts his employer effectively skirted around its responsibility as an employer to pay an employee proper overtime wages.

To wit, the plaintiff asserts that he received straight time for overtime hours, rather than the standard rate of 1.5 times the standard rate for work hours over, and above 40 hours in a week.

And he feels he isn't the only one. To that end, the plaintiff is taking a lead role in what has been proposed as a class action lawsuit.

The case is Terry S. v. CLC, Case No. 2:17-cv-07195-JAK-JEM, in the US District Court for the Central Division of California, Western Division.