WCDefenseCA

And a happy Monday to you, dear readers!

Are you going to watch the eclipse today?  Remember to wear your glasses…

Reform after reform; legislative session after legislative session; trial after trial – the workers’ compensation community has the same issue come up over and over again: employee vs. independent contractor.  And, to date, the controlling case on this matter is Borello, in which the California Supreme Court set out several factors to consider in determining whether the injured worker was an employee or an independent contractor.

Recently, the Court of Appeal denied review of the WCAB’s confirmation that a deceased truck driver was an employee, rather than an independent contractor, in the claim for death benefits brought by his widow.

The case is that of Schnore v. Progress Rail Services.  Therein, applicant’s late husband suffered a fatal cardiac arrhythmia while driving defendant’s truck.  Defendant claimed that the deceased was an independent contractor rather than an employee, so no liability was to be had.

By contrast, applicant claimed her husband was an employee and was entitled to workers’ compensation benefits.  At trial, the WCJ found the deceased to have been an employee, noting in particular that because defendant set the points at which the drivers pick up and drop off the freight, there is sufficient control to suggest employment.  The WCJ also weighed the fact that the trailer pulled by the truck driven by the deceased was specialized for the cargo (wheels) which suggested specialization of instrumentalities favoring employment.

The WCAB and the COA both declined to disturb the WCJ’s ruling.

Just a thought about this – it seems to be getting harder and harder to prove independent contractor status.  The longer the relationship, the greater the extent of interaction between the parties, the more likely the WCAB will be to find the relationship one of employment rather than independent contractor status.

For that reason, parties should be prepared for the possibility that the independent contractor defense will fail.  Although this may be a valid reason to deny the claim initially, a thorough investigation should be made and every effort should be extended to defend and mitigate the claim itself.

In this case, it appears the medical-legal process found industrial causation for the worker’s death.  Accordingly, the independent contractor defense is a bit of a longshot in California.

On the bright side, there’s always the possibility of settlement…

Alright, dear readers! WE ARE BACK!

Spring break is finally over all around, so the kids are back in school, and we can all return to focusing on the important issues facing the world such as the proper reimbursement rate for a CNA to fluff pillows or why a victim of an industrial hand amputation should only be reimbursed 50% for a pair of gloves (what if he sells the other glove on e-bay? Then he’s double dipping!)

Before I get to today’s post, quick question for you.  If a lion performing in a circus sustains injury during one of the acts, what is he to do?  Why, obviously, apply for workers’ CHOMP-ensation.  Get it? Because he’s a lion so… well, anyway.

Today I bring to your caffeinated and under-rested attention the case of Barragan v. Mission Builders Home Improvement, a panel decision recently denied review by the Court of Appeal.

The topic is, of course, everyone’s favorite: independent contractor vs. employee.  But, to add a bit of spice to the equation, not only was applicant unrepresented, the defendant was (allegedly) uninsured, dragging the Uninsured Employer Benefit Trust Fund into the mix as well!

Applicant fell through a skylight and fell twelve feet, sustaining injury to a list of body parts. At the time, he was working as a salesman and estimator.  Obviously, there was a bit of dispute as to whether this was an independent contractor arrangement, or one more befitting the title “employee.”

The matter proceeded to trial to address the issue of employment.  Applicant was trained by defendant, and was provided some equipment, while other pieces of equipment he provided himself (like a folding ladder).  He paid for his own shirts and could turn down leads and set his own schedule.  He got the luxury of using his own vehicle, and was not burdened by his generous employer with reimbursement for gas, insurance, or mileage.  Compensation was based on a commission for projects completed off of the gross profit, NOT hourly wages.

The WCJ found that applicant was an independent contractor, and he sought reconsideration, which the WCAB granted and substituted a new finding that applicant was an employee.

So, no big deal right?  Yes, big deal, because the WCJ (you know, the magistrate tasked with ascertaining credibility and observing witnesses) specifically found that the injured worker was not credible.  In footnote 4 of its opinion, the WCAB wrote that “the testimonial inconsistencies do not alter the analysis of whether applicant is an employee or an independent contractor.”

So how could the WCAB find that applicant was an employee when the WCJ determined him not to be credible?  Because, even if applicant’s testimony was completely removed from the equation, the facts provided by the defense witnesses as to the relationship between applicant and defendant sufficed to weigh the Borello factors toward a finding of employment.

So, what does that tell us on the defense side?  It doesn’t matter how poor a memory or how tattered the credibility of the applicant.  If applicant spent the entire length of the trial teaching Clams how to juggle, the evidence might still support a finding of employment.

Hello, dear readers!

Your humble blogger brings you a post today about the wonderful topic of classifying workers as independent contractors vs. employees. Of course, prior to being hurt, many workers jump at the chance of being independent contractors – higher pay, the prospect of deducting various expenses from their taxes, and the ability to take on more than one client at a time… all of these are wonderful things!

But, like an offended child retroactively withdrawing an invitation to his or her birthday party (at the party, mind you), once injured, many workers want to claim that there was no agreement, no meeting of the minds, no basis upon which to rely on someone’s honor or good word.

Unfortunately, California is one of those states that is all too happy to disregard the intent of the parties at the start of the relationship.  Nor is California inclined to force former independent contractors to repay the extra money they were paid as compared to similarly situated employees.

Then again, you have other cases, where the facts suggest that the worker was an employee in everything but name.  Is it any less dishonorable to take a worker who is not sophisticated and educated in employee/independent-contractor classification and undercut competitors by unfairly classifying the worker at the employee’s expense?

In the case of Lozano v. Universal Logistics System, applicant claimed he was an employee and defendant raised the argument that he was actually an independent contractor.  Defendant argued that when applicant-truck-driver got into a traffic collision in 2014, he was carrying a load for defendant as an independent contractor because when he had first started working for defendant in 2006 he provided his own truck and could decline to take on loads.

But applicant testified that these terms changed in 2009 – he could no longer refuse loads and his truck could not comport with the emission laws for the port he visited.  He was apparently paid in his individual capacity and his checks showed deductions for various related expenses, including insurance and administrative fees.

The WCJ found applicant to be an employee, but defendant sought reconsideration arguing that (1) applicant interrupted his interpreter to answer questions, suggesting he didn’t need an interpreter; and (2) applicant’s testimony about who provided him with a vest (presumably one piece of a uniform) conflicted as to whether it was defendant or the Port where deliveries were sometimes made (or originated).

Ultimately, neither issue persuaded the commissioners to grant reconsideration.  The WCJ was rightly afforded a tremendous amount of weight on credibility issues, and given the state of the law and the natural presumption of a finding of employment, there was sufficient evidence in the record to conclude applicant was an employee.

Recall, if you will, that the applicant in Lozano was completely fine with the arrangement until he wasn’t.  From 2006 until 2014 it doesn’t appear there were any real complaints.  And you know how I know? Because he continued to do the job.

The dispute of independent contractor vs. employee is one that comes up with considerable regularity in California, and the defense needs to be prepared to offer thorough and fact-specific evidence of the relationship.  Simply put, mutual agreement at the outset of the relationship is not enough and employers would be wise, if they intend to retain the services of independent contractors, to properly document the relationship and give due regard to the Borello factors.

Happy Friday, dear readers!

Remember that wacky bill I wrote about previously, AB 2883 – The one that makes it harder for officers and business owners to opt out of workers’ compensation coverage? Well, California is a magical place.  In some states, bad ideas get shrugged off – state legislatures might even splash cold water on their faces and say “Come on, Phil, get it together – this is bush league!”  Well, in California, bad ideas are nurtured and grown into horrible ideas, at which point they are harvested and processed into laws.

Now that AB 2883 is law, going into effect January 1, 2017, the Department of Insurance has issued a press release advising insurers of the additional documentation necessary to maintain the opt-outs of owners and officers.  Presumably, failure to comply would make the owner or officer an illegally uninsured employer of him or herself.  Absent a falling out or a very disgruntled officer… who would file the claim?

Anywho, in light of other news, namely the $34.9 million issued as grants to fight workers’ compensation fraud, it made your humble blogger realize something: there are a whole lot of people that would prefer to opt out of workers’ compensation.

Owners, officers, and employees, often enough, would prefer not to be stuck in the comp system.  Think about it – why do officers and employees opt out?  Probably because the money used to ensure coverage can be more efficiently used for general health insurance and as savings.  Perhaps that money could be used to keep the lights on in the business – officers and owners of various ventures might realize that if they had to pay to insure themselves under the comp system, they might be out of the job.

While, previously, the law afforded ample opportunity to get out of Dodge for the business owners, the same was not the case for employees.  How often have you had a file land on your desk where the employer protests that the alleged employee was an independent contractor?  Sometimes, the ONLY Borello factor was that the parties agreed, at the time of hire, to an IC status arrangement.

So, with all this “fraud” and misclassification of employees going on, WHY do so many employees agree to be labeled independent contractors (at least, until they file their claims for WC or whatever else)?  It’s because the employees, employers, officers, managers, owners, etc. are all in the exact same boat: there are only so many dollars, and owners and employees both would rather have the money in hand than the benefits of the workers’ comp system (until they get hurt, of course).  Many jobs can offer higher wages or employee status but not both.

Your humble blogger submits that with AB 2883, California is headed in the wrong direction.  Instead of allowing more Californians to have choice and control, California is creating more headaches (at best) and more ruin (at worst) for smaller businesses.  In a state large and diverse enough to have industries practicing the ancient trades of farming and the futuristic developments of Silicon Valley, is Sacramento really competent to make rules to serve everyone?

And on that lovely note – have a good weekend!

Happy Wednesday, dear readers!

It’s no secret that you humble blogger is a big fan of ventures like Uber – the intrepid citizen, eager to shrug off the shackles of punching the clock; the end-customer dropping the middle-man and transacting business on the direct.  And, the simplicity of straight-forward numbers, no deductions or notices or insurance …

The growing business model in California and elsewhere is for an entity to provide a platform for consumers to engage labor directly – the compensation of the labor(er) is determined by his or her hustle, and a small cut goes back to the business that set up the deal.  Everybody wins!

The benefit is the flexibility to the worker and the lack of administrative and overhead pains for the platform – no workers’ comp insurance, for example.  No minimum wage, or overtime, or any of the other stuff employers have to go through in California.  The savings make for lower costs and higher earnings.

Well, the California Labor Commission ruled regarding one driver, finding her Uber’s employee, rather than an independent contractor.  Uber has appealed, but it’s a scary thought.

The ruling cited Borrello & Sons v. DIR, a Supreme Court case which has made an appearance or two on this humblest of blogs, and also applied the analogy of pizza delivery drivers – ones who own the car, pay for gas and insurance, and merely deliver pizzas for the customers of the employer, but are still considered employees.  The opinion also relies on the fact that the Uber driver’s car is the driver’s only investment – the intellectual property (and often the iPhone itself) are provided by Uber.

Of course, in the pizza-delivery situation, the driver is a tiny part of a large service, which is primarily the pizza.  In the Uber model, the “employee” provides almost the entire service, with Uber just providing the platform for the exchange of money and contact information.

Rulings like this, especially if there’s one that is more wide-spread and binding throughout, could pretty much kill this industry and business model.  If rates, investments, loans, etc. are all arranged based on the good-faith agreement between companies like Uber on one hand and the drivers on the other, those foundations all come apart when the agreement is set aside by an outside party (like the Labor Commission).

Seriously folks – there’s enough people who are out of work – do we really want to kill something that lets anyone with a car and an iPhone get a gig on his or her own time?  Do we really need to burden more and more people with so-called protections that they don’t want?

There are about 160k Uber Drivers making on average $19 per hour – and those are hours they set themselves; sometimes they aren’t even hours, but 45 minute stretches in between other obligations.  Now, who wants to see all those earnings opportunities disappear?

It would make sense to your humble blogger to let grown-ups be grown-ups and enter into their own arrangements and contracts.

But, let’s say you don’t care much for this Uber – you hated Nietzche in high school and college; you don’t like the idea of being driven around in anything other than a black limo or a yellow cab; you can’t stand the idea of “apps” and the kids with their music and their Facebooks on the phones…

what about YOUR business?  What about the countless business models that drive (get it?) the businesses in California that rely on arrangements presumed to be rooted in independent contractor status, but are really employee-based?

The reason we have contracts, and the reason we enforce them, is because uncertainty kills business ventures – the more risk, the harder it is to get someone to venture money and time.  When the clear intent of both parties at the start of the relationship is to form an independent contractor arrangement, and NOT an employee-employer relationship, and California allows one party (typically the labor side) to void the contract on a whim, you’re teaching young, impressionable businesses to check under their beds for California.

Happy Monday, dear readers!  And, to those of my beloved followers who are members of the Jedi Faith, May the 4th Be With You.

Today’s post comes from the workers’ paradise of San Francisco, with the story of an Uber driver who reportedly sustained injuries following an attack from one of his passengers.  The passenger was taken into custody and has entered a plea of not guilty, but the Uber Driver is now suing Uber, demanding that he be covered by workers’ compensation.

Uber, of course, is arguing that no employment relationship exists, and that Uber drivers are independent contractors.

This has been an area of contention for some time, as Uber does not pay for workers’ compensation, Uber doesn’t obtain medallions from cities, and Uber skips a lot of the operating overhead that its competitors (like traditional taxi cabs) pay and pass on in fares.

Sooner or later, there’s going to have to be a determination about this: are Uber (and Lyft) drivers independent contractors or employees?  Your humble blogger, of course, submits that they are, in fact, independent contractors, and so fall outside the scope of California’s workers’ compensation laws.

The main case and authority on this point is, of course, the Supreme Court decision in Borello.  When analyzed in light of Borello, it appears that the Uber driver is an independent contractor.  What does Uber provide?  It provides a dispatch service – the passenger sees a list of available drivers, picks one, and sets a destination.  Uber takes a reported 25% commission and keeps a publicly-viewable log of driver reviews.

What do the drivers provide?  Their time (drivers set their own hours by turning on or turning off the Uber app), their own cars, their own gas, their own charm… What part of this spells an employment relationship?

Furthermore, the driver in this particular lawsuit, like every single driver that downloads the Uber app and starts picking up passengers, knows full well what he (or she) is getting into.  There’s no question when new drivers download the app that they love the independence of being an Uber driver – but independence comes with a price, and that involves bearing your own risk.

Now, bear in mind, dear readers, every Uber driver can call up an insurance broker and buy a workers’ compensation policy for him or herself – but the driver in this case elected not to do that, and so do so many more because they’d rather bear the risk of an injury while driving for Uber than pay California’s workers’ compensation premiums.

Children might be forgiven for gambling and then claiming they didn’t understand the risks.  Grown men and women should be expected to bear the risks of their own ventures.

Here’s hoping Uber succeeds in fighting off this challenge!  Have a good week, dear readers!

Happy Monday, dear readers!

This morning, as your humble blogger stared admiringly into the mirror (“you’re more handsome.  No, YOU’RE more handsome!”) he realized it was time for a haircut.  But… who would cut this glorious hair?  Would it be barbershop employee… or an independent contractor?

In the recent writ denied case of Martinez v. Chelo’s Hair Fashion, the WCJ and WCAB both had found that applicant hairdresser was an employee rather than an independent contractor.  Of particular importance were the facts that the defendant-employer “exerted the right to control the manner and means in which applicant accomplished her job by setting the price, receiving 50% of the payments, deciding when to authorize discounts, paying all the bills, and not giving applicant a IRS Form 1099.  She also supplied instrumentalities in the form of shampoo, towels, and hair products.”

The alleged employer did not testify, but on cross-examination, the applicant testified to providing her own tools, which she must maintain and, if necessary, replace.  She also testified to having a cosmetology license, having spent some time working at another salon at the same time as Chelo’s, and to paying city and business taxes out of her earnings.  She also got to set her own departure time, although she had to open the shop in the mornings.

The WCJ found there to be an employment relationship, and the WCAB affirmed.  Initially, the WCAB declined to address the factors outlined in Borello, on the grounds that defendant did not offer any evidence to rebut the presumption of employment under Labor Code section 3351.  But, even under the Borello the WCAB would find employment on the grounds discussed above.

Interestingly enough, your humble blogger recalls a similar matter – that of Aparicio v. WCAB, in which the WCAB found a hairstylist to be an independent contractor and the Court of Appeal denied review.  There, applicant kept a portion of the money paid to her by her clients in lieu of paying rent or earning hourly wages.  She was provided with a place to work and some supplies.  In Aparicio, applicant did not have a cosmetology license, but Ms. Martinez did.

The Aparicio and Martinez arrangements seem pretty similar, but the commissioners provided very different results.  What does a salon need to do to ensure that its hairstylists are independent contractors and not employees?

Relationships can be tricky, and often a lot of time is spent wondering whether the relationship is there, in the real world, or just sharing a bench with the Easter Bunny and Santa Clause (figments of your imagination, all).  Think back to grade school, when Gina asked to borrow your eraser and then returned it with a nice “thank you.”  How many hours were spent agonizing over whether you were now in a committed relationship?

Such was the case with the unfortunate Mr. Graves in the matter of Graves v. Roy’s Concrete & Masonry, Inc.  Applicant claimed to have sustained an injury, but defendant tenderly placed his its finger to his lips, whispering “hush… you were never an employee.”

The matter proceeded to trial and applicant claimed that he had been paid $100 per day as an employee of Roy’s Concrete.  But the Judge noticed that, before the Labor Board, applicant testified to being paid $25.00.  He claimed to have gotten emergency treatment for his injury, but cross-examination showed him to have gotten treatment for his migraines.

In other words, the Judge was not impressed, and found applicant’s credibility to be lacking.  A take-nothing order was issued.

In his petition for reconsideration, applicant argued that the WCJ should have undertaken a Borello analysis.  The WCAB gave this argument very little credence, noting that if there is an affirmative finding that applicant is not a credible witness, then it is easy to proceed to a finding of no credible evidence of an employment relationship.

Defendant was saved from a whole world of pain in this case because the defense attorney was able to properly impeach the applicant-witness.  But, if you pull back the curtain here, you can see there was a lot of communication between the employer and the insurer.  The insurer probably didn’t have much interest in the Labor Board proceedings against the employer, but by all parties sharing information and working together, applicant’s inconsistent testimony could be properly laid out for the record.

Your humble blogger knows it takes extra time and extra money, and sometimes can be downright difficult to do – but while the employee and the employer is sorting out their relationship status (for the Facebook generation, that would be the “it’s complicated” category) the relationship between the insurer and employer should be solid, glowing, and one of trust and cooperation.

And no, dear readers, in case you’re wondering, Gina actually just needed to borrow your eraser – you can still see other people.

Have a good weekend!

So, there I was, sitting in my Uncle Olaf’s kitchen as his possibly-independent-contractor scrubbed his prize-winning giant Clams, getting them ready for sale.  Uncle Olaf was beginning to get worried – what if his upstart nephew was right and, even though Uncle Olaf didn’t get insurance for the Clam Cleaner, an employment relationship was formed.  After all, if Mr. Clam Cleaner was an employee, Uncle Olaf would be liable for any injuries sustained by Mr. Clam Cleaner, and, having lost both hands to giant Clam Bites before, was very much aware of the risks involved.

“I’m pretty sure he is an independent contractor,” said Olaf.  Just then we heard a loud *SNAP* as a clam slapped shut, and the young gentleman in the Clam tank yanked his hand away just in time.  Uncle Olaf breathed a sigh of relief and said “but he signed a contract… the contract says ‘I am not an employee; I am an independent contractor.  I will clean Olaf’s clams.  And if I should lose a hand or two, I will only sue the clam or clams that got me, and not poor Uncle Olaf’.”

I shook my head and told poor Uncle Olaf of the panel decision in the case of Leonard Key v. Los Angeles County Office Education. Leonard Key had signed a contract stating that he was an independent contractor paid to teach music lessons at one of the Los Angeles County schools.  However, the Workers’ Compensation Judge found that Mr. Key was, in fact an employee, and his injury was compensable.  Workers’ Compensation in California is compulsory, after all, and Mr. Key was simply an employee by any other name.  And, after all, the farmers in the Borello case, discussed last time, had signed a contract as well.

The most important thing for Uncle Olaf to remember is the guiding policy of workers’ compensation – to shift the costs of industrial injuries to the produces and not the consumers/public.  Even the Legislature might make efforts to amend the law, defining a contractor vs. an employee based on a long list of factors.

So, dear readers, what should Uncle Olaf do?  Before the young gentleman sticks his hand into another one of Uncle Olaf’s clams, should Olaf pull him out of the tank and cease operations until he can get a workers’ compensation policy?

And so, dear readers, the story picks up just where it left off – there I sat in my dear Uncle Olaf’s kitchen as he ground his hooks into his wooden table, nervously watching the man he hired to clean his prize-winning clams for his Clam sale business, who he thought was his independent contractor but was actually allegedly (your humble blogger is a zealous defense attorney, after all) an employee, place his hands inside the snappiest of Uncle Olaf’s prize-winning clams.  “Scrub from the outside!” he shouted, but the young gentleman cleaning the clams couldn’t hear him…

The California Supreme Court issued its opinion in the case of S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989), outlining the proper analysis for determination of the question of employment or independent contractor status.  S. G. Borello & Sons owned farmland near Gilroy (a place with a wonderful Garlic Festival).  Although they kept regular employees for the various crops grown on these farms, for cucumbers, the nature of the market dictated another approach.  Cucumber harvesting was contracted out to various migrant farm-worker families.

The families were provided with the opportunity to lay claim to a certain amount of plots of cucumbers, were provided with crates into which to harvest the cucumbers, but were otherwise left to their own devices.  The cucumbers were sold to a pickle company in the area, and the profits were shared between the land-owners and the harvesters.

For the multi-week cucumber harvesting season, the harvesters were responsible for taking care of the cucumbers, picking only those ripe and ready for picking, and generally seeing about maximizing profits.  The most aggressive task-masters in S.G. Borello & Sons employ found themselves absolutely powerless at the edge of the cucumber plots, for no employees dwelt there – only independent contractors.

That is, until, the Department of Industrial Relations issued a stop-work order.  Finding that the independent-contractors were actually employees, and uninsured employees at that, the DIR went on the war path against poor Mr. Borello and his sons (as well, effectively, against all other farmers in the Gilroy area that adopted the same practices).

Borello’s argument before the Supreme Court was simple – unlike other crops, cucumbers required a degree of knowledge and skill for harvesting, and the harvest workers were compensated for the final product and not the means of rendering service.  But the Supreme Court found that other factors, primarily found in the Restatement Second of Agency, play into the analysis as well, among them:

1. The right to discharge at will, without cause;
2. Whether the workers is engaged in a distinct occupation or business;
3. Whether the occupation, in that locality, is typically performed by a specialist without supervision;
4. The skill required in the particular occupation;
5. Whether the worker supplies the instrumentalities, tools, and the place for doing the work;
6. The length of time for which services are performed;
7. The method of payment (hourly or by task);
8. Whether the work is part of the regular business of the principal; and
9. The intent of the parties.

The Borello Court noted that “under the [Workers’ Compensation] Act, the “control-of-work-details” test for determining whether a person rendering service to another is an ‘employee’ or an excluded ‘independent contractor’ must be applied with deference to the purposes of the protective legislation.”

The Court also noted that the workers made minimal investment in their work – no heavy equipment but just basic tools.

Other cases followed too.

In the case of Jose Luis Lara v. Workers’ Compensation Appeals Board (2010), for example, the Court of Appeal examined whether a garden-variety handy-man could be an independent contractor.  Lara sustained a pretty serious injury while doing work for a small shop called Metro Diner.  Metro Diner didn’t have Lara covered by its workers’ compensation policy because he had no regular employment – he was called up to do odd work such as trimming bushes along Metro Diner’s roofline.

Lara provided his own equipment, paid his own taxes, and, although he was paid by the hour, was hired by the job rather than on a general basis.  Nor did Metro Diner set Lara’s hours – he was just told to come early or late to avoid interfering with the operation of the Diner.

The workers’ compensation Judge found that Lara was an employee, and the Workers’ Compensation Appeals Board reversed.  In affirming the WCAB’s finding that Lara was a contract employee, the Court of Appeal cited Borello.  Specifically, the Court noted that gardening was Lara’s line of work (and not the Diner’s), that Diner could not control the manner of Lara’s work, Lara had his own clients (other than Diner), and Lara had a substantial investment in his business (lots of tools, equipment, etc.).

As Uncle Olaf scratched his head (very carefully, mind you, as those razor sharp hooks hurt!), I could see that he wasn’t convinced.  His prize-winning-hand-eating-giant-clam-raising mind was working.  What else did Uncle Olaf think he had up his sleeve?