Tuesday, September 2, 2014

9th Circuit Upholds Employer's “Right to Control” as the Primary Test of Independent Contractor or Employee Status

This is from Kilpatrick Townsend & Stockton LLP:
On August 27, 2014, the U.S. Court of Appeals for the Ninth Circuit upheld California’s long-standing reliance on the “right to control” test as the primary factor determining whether workers are properly classified as independent contractors or employees and rejected the District of Columbia Circuit’s “entrepreneurial opportunities” test. ...  
In finding for the drivers, the Ninth Circuit expressly rejected the “entrepreneurial opportunities” test that had been applied by another federal appellate court, the District of Columbia Circuit, in determining independent contractor status. Under that test, the primary factor used to determine a worker’s status is whether the worker has significant entrepreneurial opportunity for profit or loss. The Ninth Circuit rejected that test, holding there is no evidence California has replaced its long-standing “right to control” test. The court went further, however, in stating that even if the “entrepreneurial opportunities” test applied, the drivers here lacked important rights typical of a self-employed contractor. Those rights included the right to hire whomever they wished as helpers and to operate more than one vehicle or more than one route, as FedEx Ground’s consent was required for each. ...
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Recall that under the rules set forth in Health Reform, employers of larger than 50 employees must provide healthcare benefits to all common law employees irrespective of the employer's labeling of such worker as a contractor or temp worker.  If the employer has the right to control the worker's daily activities, the worker will be an employee under PPACA pursuant to the logic set forth above.