California Case Clarifies Independent Contractor Classification Criteria

Now that I’ve used every word that begins with “C” in the title, here’s the post:

On July 11, 2013, a California appellate court, in Beaumont-Jacques v. Farmers Group Ins., affirmed summary judgment in favor of an insurance company on the question whether a District Manager was properly classified as an independent contractor and not an employee. In so holding, the court provided clarification on the proper analysis for determining this important issue.

Why is this important?

California employers that misclassify workers as independent contractors face potential liability, which can include compensatory damages, stiff penalties and attorney’s fees.

What happened in the Beaumont-Jacques case?

A former District Manager, Erin Beaumont-Jacques, sued Farmers Insurance on various theories all of which hinged on a determination that she was a Farmers Insurance employee. In support of her position, Ms. Beaumont-Jacques pointed out that: (1) she was bound by a contract to only represent Farmers in recruiting and training sales agents; (2) she could train such agents only to sell Farmers’ insurance products; (3) the applicable contract required her to “conform” to Farmers’ “normal business practices” and “goals and objectives”; and (4) Farmers enjoyed the option to terminate her contract without cause.

In affirming the trial court’s granting of a motion for summary judgment brought by Farmers, the California Court of Appeal for the Second Appellate District clarified that, even where other factors may suggest an employment relationship, it was sufficient for independent contractor classification that Ms. Beaumont-Jacques “exercised meaningful discretion with reference to her efforts” undertaken on behalf of Farmers. Specifically, the Court said: “While [Farmers] . . . had input over the quality and direction of [her] . . . efforts, they did not have sufficient ‘control over the details’ with respect to those efforts” to render the relationship one of employment rather an independent contractor.

What is the takeaway?

The paramount consideration in determining whether a worker can be properly classified as an independent contractor under California law is whether the worker maintains the right to control the means by which she accomplishes her duties.