BRG Expert David Lewin Featured in a California Court Decision on the Issue of Independent Contractor vs. Employee Status
In a recent decision, the Superior Court of California, County of Sacramento ruled in favor of the plaintiff, a well-known ground transportation company specializing in delivering and picking up passengers to and from airports, and against the State of California Employment Development Department (EDD). In this litigation, the plaintiff sought to recover three years’ worth of “payroll” taxes plus penalties and interest that the EDD had previously imposed upon the company, asserting that the company’s van drivers were employees rather than independent contractors.
The EDD did so even though the company and its van drivers voluntarily settled a prior lawsuit in which a class of the van drivers claimed that they were employees and should have been reclassified as such. That settlement provided for no change of classification.
In reaching that settlement, the parties relied on an analysis, conducted by BRG Managing Director David Lewin and his staff, of terabytes of Global Positioning System (GPS) data that showed that the van drivers exercised considerable autonomy, independent judgment, and discretion in deciding whether to accept jobs proffered to them by the company’s dispatchers; turn on and off their cellular communications devices; use their vans for additional purposes beyond transporting this company’s customers; hire other individuals to drive their vans; and obtain one or more partners in the ownership of their vans. This analysis showed that the company exercised relatively low control over its van drivers and thus that the drivers were in fact “independent” in the work that they performed for the company. Nonetheless, shortly following this settlement, the EDD imposed the aforementioned taxes, penalties, and interest on the company, which the company paid. The company subsequently filed the aforementioned lawsuit.
In finding for the plaintiff, the Court relied in part on the GPS data analysis conducted by Dr. Lewin and his staff. In addition, the opinion notes a critique—rebuttal—that Dr. Lewin submitted of an audit-related survey of the company’s van drivers conducted by the EDD that ostensibly asked the drivers’ about their uses of the vans. In this regard, the Court commented:
The EDD’s “survey methodology was largely discredited by expert witness David Lewin. According to Lewin, the sample size of the survey (11 to 21) was ‘scientifically meaningless’ and there was no evidence that those surveyed were randomly selected. Mr. Lewin also persuasively criticized the design of the survey questions. The audit methodology was not consistent with ‘generally accepted scientific principles.’ (RT 5502:4-11). There is documentation in the record that [only] 17 questionnaires were submitted to EDD and a total of 21 survey respondents. (Exh 500).”
As a result of this decision, the EDD had to return to the company the taxes that it imposed on the company, plus fees and costs.
Of larger consequence, this decision could help establish a precedent whereby the thousands of California companies—and, by inference, nonprofit institutions—that use independent contractors will be less likely than previously to risk having their contractors be reclassified as employees and to incur payroll taxes resulting from such reclassification.
David Lewin, PhD, is Head of BRG’s Human Capital practice and BRG’s Labor & Employment practice. He can be reached at firstname.lastname@example.org and at 310-499-4931.