Wage & Hour Counsel : Wage & Hour Lawyer & Attorney : Littler Mendelson Law Firm : Employment Law, Labor Relations

Texas-based EGL, Inc. retained delivery drivers in California for its freight forwarding, custom brokerage, and pickup and delivery lines of business. The contract that these delivery drivers signed provided that the parties intended to form a vendor/vendee relationship and recited that “[n]either Contractor nor any of its employees or agents shall be considered to be employees” of EGL. The contract further stated that the drivers “shall exercise independent discretion and judgment to determine the method, manner and means of performance of its contractual obligations.” Either party could terminate the agreement on 30 days notice, but otherwise the contract was automatically renewed. The contract also provided that any dispute between the drivers and EGL was to be decided under Texas law.

Undeterred by this language, some drivers sued EGL in California, seeking to apply various California Labor Code provisions applicable to employees to obtain, among other benefits, overtime, expense reimbursement, and meal break premium pay. EGL relied on the choice of Texas law provision in its contract and argued the parties’ relationship should be construed in line with the stated intention in the contracts. The district court agreed and granted the motion for summary judgment.

On appeal, the Ninth Circuit rejected the choice of law argument. According to the Court, the drivers’ claims did not arise out of the contract, did not involve interpretation of the contract terms, or otherwise require that any contract exist at all. Instead, the drivers’ claims simply arose out of the California Labor Code. Therefore, California law governed the question of whether the drivers were employees, even though the contract said otherwise.

Applying California law, the Ninth Circuit concluded that the drivers clearly were employees, not independent contractors. Among other things, the Court stated that the company told drivers what deliveries to make and when to show up each day for work, and exercised control over their vacations as well as any passengers who might ride along with them. Further, the drivers did not appear to work for multiple clients, but rather worked exclusively for EGL. Moreover, EGL’s own manuals informed the drivers that they had “the key role in the shipping process” and were EGL’s “largest sales force” – representations that underscored their essential role in the regular business of EGL.

Although this ruling does not prevent EGL from marshalling other facts to prove its case at trial, it does demonstrate the challenges businesses face when attempting to establish an independent contractor relationship. While a strong contract remains essential, businesses must pay equal attention to the reality of the relationship they establish to be sure that independent contractors are being given the discretion and freedoms necessary to meet the law’s requirements.

This entry was written by Alison Hightower.
 

Providing context for its decision, the court noted that Congress intended to exclude certain pre- and post-shift activities from work time when it enacted the Portal-to-Portal Act to amend the Fair Labor Standards Act. Under that amendment, as further stated in a persuasive 2006 DOL memorandum, changing clothes under usual circumstances is not compensable. In this case, the City had a policy of allowing officers to dress wherever they preferred, including at home, but required motorcycle officers to dress at home. The Court agreed that to the extent officers elected to dress at work, their decision was strictly a matter of employee convenience, and, as a result, their decision to change clothes at work did not render that time compensable.

The court recognized that previous decisions from the United States Supreme Court and the Ninth Circuit allowed compensation for donning and doffing, but in all those cases, changing clothes had to be performed on the employer's premises because of the nature of the work, a policy of the employer, or applicable law. Those cases provided the following three-part test to assess whether pre- and post-shift activities are compensable: (1) does the activity constitute "work"? (2) is the activity an "integral and indispensable duty" of the job?, and (3) is the activity so insignificant in scope and duration as to be excluded from compensability as de minimis?

The court expressed doubt whether the act of changing in and out of a uniform and gear constituted "work," but proceeded to the second prong of the test where the officers' argument "fatally falter[ed]." To be "integral and indispensable, a pre- or post-shift activity must be "necessary to the principal work performed and done for the benefit of the employer." Both the majority and the dissent deemed that the act of donning and doffing a uniform was not integral to the job and, therefore, was not compensable. The majority noted that, although there was no dispute that the uniform and gear was required, the process of donning and doffing was not required to occur at work, and was equally effective whether performed at home or work. There was no mutual obligation fulfilled by donning and doffing at work, and the ultimate decision was a matter of convenience to the employee, not the employer. The dissent also recognized that the uniform may connote authority but does "not assist the officers in making arrests, interviewing witnesses or writing reports," and, therefore, is not integral.

The majority considered the gear used by officers in the same context as (and as part of) their uniform and found it to be indispensable but not integral to the principal duty of law enforcement. The dissent reasoned that the police gear assisted officers in the performance of their principal duty, and, consequently, was both indispensable and integral. The dissent further noted that the time spent donning and doffing gear was most likely a matter of only "seconds, or a few minutes," which would make that time non-compensable as de minimis. The dissent concluded that the case should be remanded because the record does not contain evidence of the amount of time actually required for donning and doffing gear.

This decision is significant for private employers as well. To the extent any employer requires its employees to wear a uniform (or gear), this decision provides a framework for determining whether an employee is entitled to compensation. Although certain factors or set of facts may lead to variations, employers requiring its employees to don and doff uniform and gear at work are likely required to compensate employees for that time—provided it is not de minimis—but employees are generally not entitled to compensation if they have the right to change at home at the beginning and end of their workday.
 

This entry was written by Laurent Badoux.