One of the endlessly debatable questions in any matter involving employment law is whether a party is an employee or an independent contractor. The recent decision of the Second District Court of Appeal of California in Beaumont-Jacques v Farmers Group Inc offers a useful review of the factors to consider.
Erin Beaumont-Jacques was employed by the defendant and certain related businesses for a number of years. In September 2005 she was appointed as one of their District Managers and signed the District Manager Appointment Agreement (Agreement). The Agreement required her to recruit and train agents for the defendants and granted her commissions based on their sales. The defendants were enabled to set “goals and objectives” for these sales, and the plaintiff was obliged to comply with the Defendants “regulations, operating principles and standards” and engage in “normal good business practice”. The defendants could verify the plaintiff’s actions by examining her records. Both the plaintiff and defendant could cancel the contract with 30 days written notice.
The Agreement stated that
Nothing contained herein is intended or shall be construed to create a relationship of employer and employee. The time to be expended by District Manager is solely within his/her discretion, and the persons to be solicited and the area within the district involved wherein solicitation shall be conducted is at the election of the District Manger. No control is to be exercised by the Companies over the time when, the place where, or the manner in which the District Manager shall operate in carrying out the objectives of this Agreement provided only that they conform to normal business practice.
The plaintiff terminated the agreement in October 2009 and was paid out $196,085.20 under the contract. In May 2010 she issued proceedings based on breach of contract, breach of the implied covenant, sex discrimination and §17200 breaches of the Business and Professions Code. The defendants sought and were granted summary judgment by the trial court on the grounds that the plaintiff was an independent contractor.
Because summary judgment was granted, the Court of Appeal reviewed the trial court’s ruling de novo, based on the evidence presented by the parties and any reasonable uncontradicted inferences.
The Court of Appeal confirmed that the key question was “control of details”, identified as ‘the right to control the manner and means of accomplishing the result desired’; the existence of the right to control, rather than the amount of control, was important concept.
The plaintiff contended that the defendants’ “right to control the means and manner” was established in the requirement that she conform to their “normal business practice” and “goals and objectives”. She also noted that her supervisor required her to provide annual business plans and attend meetings with him and other district managers, and that he was able to hire and dismiss agents in her district. The Court of Appeal, however, did not accept that this established that the defendants had meaningful control over the plaintiff’s means of achieving her commitments as district manager. It was further found significant that the plaintiff had been required to meet certain performance standards but not told by what means the defendant wished her to satisfy them. In effect, they “[set the] results while leaving the means to the [plaintiff]”.
The Court further found that the plaintiff exercised meaningful discretion by (inter alia) –
- Recruiting, training and motivating agents to sell the defendants’ products;
- Determining her own working hours, vacations, lunch-hours and breaks;
- Preparing reports for and attending meetings of the defendants;
- Hiring and supervising her office staff and paying payroll taxes for them as employees;
- Paying her own costs for marketing, office space, telephone services and office supplies and also claiming those costs as a business expense in her personal tax returns; and
- Identifying herself as in her tax returns as self-employed.
Concerning the right to terminate the agreement, the Court had previously accepted that the right to dismiss at will was powerful evidence of an employment relationship. However, that was less so in this case, where either party could cancel the contract.
The Court of Appeal considered the evidence as a whole and concluded that the court at first instance properly ruled that, as a matter of law, the plaintiff was an independent contractor. Judgment was therefore affirmed.