Opinion
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Los Angeles County Super. Ct. No. MS005119, Barry Hammer, Judge.
Law Offices of Patrick J. Sullivan and Patrick J. Sullivan; Zinser Law Firm, L. Michael Zinser and Glenn E. Plosa for Plaintiff and Appellant.
Edmund G. Brown Jr., Attorney General, Felix Leatherwood and Philip C. Griffin, Deputy Attorneys General, for Defendant and Respondent.
Robert W. Daneri, Charles W. Savage, Betty R. Quarles and Isabel C. Lallana for Respondent and Real Party in Interest, State Compensation Insurance Fund.
CROSKEY, J.
This case poses the question whether, for purposes of worker’s compensation insurance, persons who make deliveries of newspapers for the newspaper publisher Antelope Valley Press (AVP) are independent contractors or employees. The question arises not under a claim for worker’s compensation benefits by one of the newspaper carriers (carriers), but rather with respect to the premium that AVP was assessed for its worker’s compensation coverage.
California’s State Compensation Insurance Fund (State Fund) classified the carriers as employees for purposes of AVP’s workers’ compensation policy. AVP appealed the classification to the Department of Insurance’s Administrative Hearing Bureau. (Ins. Code, § 11737, subd. (f); Cal. Code Regs., tit. 10, § 2509.46). The administrative law judge (ALJ) who heard the case issued a lengthy proposed decision wherein he concluded that the carriers are employees for purposes of worker’s compensation insurance, and the Insurance Commissioner (Commissioner) adopted the decision.
Testimony and other evidence at the administrative hearing focused on the year 2003 because AVP applied to State Fund for workers’ compensation coverage for 2003, and it was State Fund’s assessed premium for that policy year that sparked the disagreement over whether AVP’s carriers are employees or independent contractors for workers’ compensation purposes.
Thereafter, AVP filed a petition for writ of administrative mandamus. (Code Civ. Proc., § 1094.5). Reviewing the Commissioner’s decision under the substantial evidence test, the trial court determined that the ALJ’s findings were supported by substantial evidence. The court also concluded that under the state of California’s workers’ compensation law, the ALJ’s conclusion that AVP’s carriers are employees should be affirmed. AVP has appealed the trial court’s judgment denying its petition for writ of administrative mandamus.
Both State Fund and the Commissioner participated in this appeal and opposed AVP.
Our review of the facts of this case and relevant law convinces us that the carriers are employees for purposes of workers’ compensation law, not independent contractors. Therefore, we will affirm the judgment of the trial court.
The facts that we recite are based on the evidence presented at the administrative hearing.
1. AVP’s Publications
AVP publishes and circulates newspapers. The circulation areas are Los Angeles and Kern counties. AVP publishes a daily newspaper called the Antelope Valley Press (the Press). Circulation of the Press in home delivery is 18,000 to 20,000 copies Monday through Saturday, and 24,000 to 25,000 on Sunday. The carriers delivery the Press to the subscribers’ homes. If a carrier leaves AVP, his or her route is covered by a district manager or assistant district manager until a new carrier is hired.
The carriers are paid per the number of copies of the Press they are given to deliver. If a home delivery subscriber fails to pay his or her bill, the carrier is not docked unless and until a written stop delivery notice for that customer is given to the carrier. Home delivery subscribers pay their subscription fees to AVP, not to the carriers.
Additionally, the carriers also receive approximately 20 complementary (free sample) copies of the Press each day. The free samples are called the “C’s.” The carriers drop them off at homes of nonsubscribers and are paid 3 cents for delivering each C. They are required to put the C’s in orange plastic bags as a means of facilitating management’s determination that the carriers are actually delivering the C’s along their routes. The routes are checked once a week and the orange bags are provided to the carriers by AVP.
AVP also publishes a “TMC” (total market coverage) advertisement paper, which is called the A.V. Express. It is a free newspaper with a circulation of approximately 42,000 copies. The carriers are required to place the A.V. Express in red plastic bags, which are provided by AVP, and deliver them on Saturday mornings by noon. Management checks the routes once a week to verify that deliveries of the Express are made. The carriers receive 3 cents per copy of the TMC’s. Sometimes the carriers are required to call in to AVP to give them a status update when they are delivering the TMC’s. Carriers are charged 23 cents for each copy they do not actually deliver.
AVP publishes a fourth paper called “Lifestyles.” It is a magazine-type of publication, is delivered with the Press to subscribers of the Press, and comes out on the last Thursday of the month. Carriers are required to put them in white plastic bags, which AVP provides to them, and they receive 5 cents per copy they deliver.
Some carriers also deliver copies of USA Today.
2. Pick-up and Delivery Requirements
Carriers are expected to pick up their bundles of the Press by a specific time from a specific location. If a carrier is late, he or she is charged $35 per hour ($0.58333 per minute) to cover AVP’s cost of having someone oversee the pick-up location until the carrier picks up his or her copies of the Press for home delivery. Additionally, personnel of AVP may begin folding and bagging the tardy carrier’s newspapers after the deadline for pickup so as to facilitate prompt delivery of papers to the customers, and the carrier is charged for “each bag that was removed from the Dock Office inventory” even though carriers are not required to put the Press in bags. For the pick-up location that is not manned by AVP personnel, there is no requirement as to when a carrier must pick up his or her newspapers there, but the carrier runs the risk that the newspapers will be stolen if the carrier is not on site when they are dropped off, and stolen papers are the economic responsibility of the carrier both in terms of cost of the papers and cost for AVP to make the deliveries for the carrier.
The newspapers are ready to be picked up by the carriers between 12:30 a.m. and 1:00 a.m. On weekdays, carriers are required to finish their delivers by 5:00 a.m. on in-town routes and 6:00 a.m. on out-of-town routes. On weekends, the delivery deadline is 6:00 a.m. for in-town routes and 7:00 a.m. for out-of-town routes. As indicated earlier, the A.V. Express is to be delivered by noon on Saturday.
Sometimes there is more than one part to the Press (usually on Sundays), and the carrier is required to assemble the various parts (such as advertising inserts) into a complete package prior to delivering the package to the subscribers. The various parts of the Press are all delivered to the same location where the carrier normally picks up the Press.
The contract between the AVP and the carriers provides that the paper being delivered by the carrier must be delivered in a safe and dry condition. If a carrier chooses to wrap the Press in a plastic bag to keep it from getting wet or otherwise harmed, the bag must be yellow or white. As noted, carriers are required to bag the free sample Press and the A.V. Express in color coded bags.
The carriers are charged a $2.50 complaint recording fee if a customer does not receive his or her Press, does not receive it in a timely manner, or it is damaged. If there are more than 2 complaints per one thousand paid deliveries and the carrier has elected to have AVP redeliver the Press, the carrier is also charged a $2.50 redelivery fee per complaint. However, if the carrier has elected to correct subscriber complaints by him or herself but does not make the correction within one hour of being notified of the problem, or cannot be reached to receive such notification, then if AVP corrects the complaint the carrier is charged $35 per hour and $.31 per mile driven by an AVP employee to correct the problem. As noted in footnote 3, ante, based on the fact that these latter fees ($35 per hour and $.31 per mile) are pretyped into the contracts, and based on what the ALJ described as unconvincing testimony from AVP’s home delivery manager in response to a series of leading questions by AVP’s attorney, the ALJ found that those fees were not negotiated or negotiable.
When the carrier receives the newspapers for delivery, he or she also receives a “bundle top” on which is written information to the carrier from AVP, such as a customer’s complaint, notice that a customer wants delivery stopped for a certain period of time, notice that a customer has completely terminated delivery service or has begun delivery service, notice that service was terminated for nonpayment, or notice that a customer wants the newspaper left at a certain location at his or her house. Failure to follow the instruction on a bundle top can result in economic charges to the carrier. AVP uses the customer’s complaints as a means of monitoring the quality of carriers’ work. Under the terms of the contracts between carriers and AVP, more than one complaint per month “per one thousand contracted subscriber deliveries per edition (paid, free, sample, or TMC, or other)” can result in immediate termination for cause.
Besides home delivery of the Press to subscribers, AVP also hires carriers for delivery of “single copy” drops of bundles of the Press to AVP news racks and retail stores, and they are paid by the bundle/drop. Besides delivering the bundles, they are required to use an electronic “wand” at the racks to determine how many papers were sold at the rack and the amount of money in the coin box. They are not required to collect the money. However, AVP also has drivers that it considers employees (rather than independent contractors) who also deliver the single copy bundles.
3. Pay and Deduction Invoices
As stated, carriers are paid for their deliveries on a per-paper basis. Invoices are issued to them every two weeks wherein are listed credits for deliveries of AVP’s various publications, charge backs for complaints, non-deliveries, re-deliveries, and late pickups from the drop off location, charges for supplies purchased from AVP (white and yellow bags, rubber bands), and credits for tips that were paid, to AVP, by persons on the carrier’s route for the benefit of the carrier. Along with the invoices the carrier is given the pay due him or her.
4. The Contracts Signed by AVP’s Carriers
a. The Contracting Process
A person seeking to become a carrier for AVP comes to its office and speaks with a district manager or the home delivery manager. The only information one of those managers asks for from the prospective carrier is whether he or she has a California driver’s license, proof of vehicle insurance, and a social security number. After obtaining that information, the manager goes over AVP’s form contract with the applicant. First, the manager assures him or herself that the applicant can read, understand, and speak English because the contract is written in English. Then the process of going over the contract continues, and that can take anywhere from three hours to days, including affording the applicant an opportunity to have an attorney review it. However, AVP’s home delivery manager testified he did not know of anyone ever having asked to have an attorney review the contract.
Although AVP’s home delivery manager testified that applicants are asked for proof of vehicle insurance, the ALJ noted the evidence shows that AVP’s file maintenance forms for several applicants state that the applicants have no insurance. The information (including lack of insurance) on those file maintenance forms is marked approved, and the forms were filled out the day of, or the day before, the carrier’s “start date.” Also, the contracts were signed on behalf of AVP on those start dates.
The form contract used by AVP is entitled “Independent Contractor Distribution Agreement.” It consists of 11 pages, including an appendix and two addendums. The ALJ’s decision notes it is in 10-point type. The ALJ also noted that there was no evidence presented that any of the preprinted terms in the contract were negotiable by the applicants, and he found that in fact, they were not negotiable. He found it “clear . . . that there was an extreme disparity in bargaining position between the Carriers and AV[P]. What is also clear is that the Carriers wanted work, and they signed what they needed to in order to get it.” The ALJ went on to say that the many page, small print contracts were “drafted by sophisticated lawyers [and] were in no sense the product of arm’s length negotiations, as might occur, for example, in hiring an independent contractor, specialized and sophisticated in the costs of his business, and able to garner trade from other actual and potential customers.”
AVP objects to the finding of a disparity in bargaining power. Citing Borello, AVP argues that such disparity is not a factor in determining employee/independent contractor status. We view the ALJ’s discussion about the relative bargaining strengths of AVP and its carriers as a comment on the fact that the carriers were in no position to object to the contractual provisions that explicitly or implicitly stated that their status is that of an independent contractor, not an employee (or for that matter, the many other unfavorable terms of the contracts). The Supreme Court in Borello took note of that same situation when it stated that “there is no indication that Borello offers its cucumber harvesters any real choice of terms. . . . The record fails to demonstrate that the harvesters voluntarily undertake an ‘independent’ and unprotected status.” (Borello, supra, 48 Cal.3d at p. 359.)
b. Financial Terms in the Contracts
The parties stipulated that the carriers all signed the same basic form contract when coming to work for AVP and that there are blanks on the contract that are filled in at the time each individual person signs on to work as a carrier, such as rates that AVP would pay the carrier for delivering copies of the Press. That rate, as demonstrated by the copies of the contracts that several of the carriers signed and that were presented at the administrative hearing as exhibits, varied widely. The various rates for per copy delivery of the Press were 10, 11, 12, 13, 16.5, and 43 cents. AVP’s home delivery manager testified as to factors that can cause a rate for delivery of the Press to vary, such as the density or sparseness of customers in a delivery route, the size of a delivery route, the quality of roads in a route, and the number of customers that have special needs delivery, like requiring that the Press be delivered to a certain place on their property. Also, carriers can renegotiate the payment for delivering the Press if factors in a route change.
The contracts give AVP the right to alter the carriers’ route assignments on 30 days notice.
On the other hand, each of the exhibit contracts provided a standard rate of 3 cents per copy delivery of the A.V. Express and the C’s, and for those carriers who also deliver copies of USA Today, they are all paid 8 cents per copy. The home delivery manager testified that “more than likely” drivers accept the rate that is offered to them for delivering the Press, and carriers always accept the price offered to them by AVP for delivering the A.V. Express. Exhibits in the file show that the rates for delivering copies of the C’s and the A.V. Express (3 cents per copy) are preprinted on the “file maintenance” forms for each carrier. Only the rate for delivering the Press is left blank, to be filled in for each individual carrier. Also, the amounts of the complaint recording fee, the complaint redelivery fee, the uncorrected complaint fee and the charge for being late in picking up papers to be delivered are preprinted on the contracts.
c. Non-exclusive Employment
The carriers are permitted, under their contracts with AVP, to have other jobs. However, the ALJ found there was no evidence presented at the administrative hearing that any of AVP’s carriers hold themselves out as being an independent delivery business. Of the six carriers who testified for AVP at the administrative hearing, one previously worked as a gardener. Two have their own landscape business, and one of those two delivers for AVP to earn money for her daughter’s college tuition. A fourth witness stated he is employed at a movie studio as an office worker. Another stated he had recently started an internet distribution business that he works from his home and in 2003 his only income was from being a carrier for AVP. The sixth carrier works as a contract mail carrier.
Using the evidence presented on the length of carrier service and earnings at AVP, the ALJ found that the majority of carriers working for AVP in 2003 signed delivery contracts with AVP for the first time in 2003 or 2002, and earned less than $5,000 in 2003. Only ten carriers earned more than $20,000.
AVP’s home delivery manager testified that in the two years prior to the administrative hearing, AVP had experienced “a lot of turnover in [carriers].”
d. Provisions Asserting Independent Contractor Status
Under the paragraph of the contracts entitled “independent contractor status,” the parties agree that the carrier is an independent contractor and not an employee of AVP. The carrier is described as a “self-employed, independent distributor,” and is referred to throughout the contract as “contractor.” Another paragraph provides that carriers will not receive the benefits that are paid by AVP “to its employees.”
e. Termination of the Contracts
The contracts state they are for a term of one year. Either party can terminate the contract without cause with 30 days written notice. Either party can terminate the contract, effective immediately with written notice, if the other party commits a material breach. Material breaches by a carrier include, but are not limited to, failure to deliver or timely deliver, failure to remedy a subscriber’s complaint, failure to obtain and maintain automobile insurance and workers’ compensation insurance for the carrier’s employees. AVP also reserved the right to suspend the contract without notice in the event of natural disasters, strikes, riots, war, and other causes beyond AVP’s control, and in the event AVP temporarily or permanently ceases to publish the Press.
3. Industry Custom
A witness employed by the California Newspaper Publishers Association testified that in 2003, there were 117 daily newspapers in California and none of those newspapers were delivered by acknowledged employees. Rather, the daily newspapers treat the persons who deliver their papers as independent contractors.
4. State Fund’s Classification of the Carriers as Employees
An underwriting manager from State Fund testified that when determining whether workers should be classified as employees or independent contractors, the underwriters at State Fund apply a 11-point test to determine the correct status and in applying that test, they look at the relationships between the workers and the employer.
DISCUSSION
Before analyzing the evidence in this matter, we first summarize (1) the law governing administrative mandamus and (2) the relevant principles of worker’s compensation law.
1. Administrative Mandamus
a. Relevant Provisions of Code of Civil Procedure Section 1094.5
Under the pertinent provisions of Code of Civil Procedure section 1094.5 (§ 1094.5), in an administrative mandamus proceeding the trial court “inquir[es] into the validity of any final administrative order or decision made as the result of a proceeding in which by law a hearing is required to be given, evidence is required to be taken, and discretion in the determination of facts is vested in the inferior tribunal, corporation, board, or officer.” (Id. subd. (a); JKH Enterprises, Inc. v. Department of Industrial Relations (2006) 142 Cal.App.4th 1046, 1056, fn. 9, “JKH Enterprises.”)
The trial court’s “inquiry in such a case shall extend to the questions whether the respondent has proceeded without, or in excess of jurisdiction; whether there was a fair trial; and whether there was any prejudicial abuse of discretion. Abuse of discretion is established if the respondent has not proceeded in the manner required by law, the order or decision is not supported by the findings, or the findings are not supported by the evidence.” (§ 1094.5, subd. (b).)
“Where it is claimed that the findings are not supported by the evidence, in cases in which the court is authorized by law to exercise its independent judgment on the evidence, abuse of discretion is established if the court determines that the findings are not supported by the weight of the evidence. In all other cases, abuse of discretion is established if the court determines that the findings are not supported by substantial evidence in the light of the whole record.” (§ 1094.5, subd. (c).)
“This language [in subdivision (c) of section 1094.5] does not attempt to specify which cases are reviewable under which standard. ‘The sole legislative guidance on this point is that the courts may independently weigh the evidence whenever “authorized by law” to do so. In using this language, the Legislature simply intended to codify existing rules governing the applicable standard of judicial review. [Citation.] In other words, the courts are left with the ultimate task of deciding which cases warrant such review. [Citations.]’ (County of Alameda v. Board of Retirement (1988) 46 Cal.3d 902, 906 . . . .)” (JKH Enterprises, supra, 142 Cal.App.4th at p. 1057, fn. 10.)
Where an administrative decision does not involve or substantially affect a fundamental vested right of the person challenging that decision, the substantial evidence test is applied by the trial court in a section 1094.5 review. (JKH Enterprises, supra, 142 Cal.App.4th at p. 1057.) Determination whether a right is fundamental and vested is made on a case- by-case basis, and a right can be found to require a trial court’s independent judgment review on the basis of one or both of the following factors: “(1) the character and quality of its economic aspect; (2) the character and quality of its human aspect.” (Interstate Brands v. Unemployment Ins. Appeals Bd. (1980) 26 Cal.3d 770, 780.) “The ultimate question in each case is whether the affected right is deemed to be of sufficient significance to preclude its extinction or abridgement by a body lacking judicial power. (Id. at p. 779, fn. 5.)
“Even though the fundamental vested right determination is made on a case-by-case basis, as a general rule, when a case involves or affects purely economic interests, courts are far less likely to find a right to be of the fundamental vested character. [Citations.]” (JKH Enterprises, supra, 142 Cal.App.4th at p. 1060.) Thus, “ ‘[a]dministrative decisions which result in restricting a property owner’s return on his property, increasing the cost of doing business, or reducing profits are considered impacts on economic interests, rather than on fundamental vested rights.’ (E.W.A.P., Inc. v. City of Los Angeles (1997) 56 Cal.App.4th 310, 325, 326-327 . . . .)” (JKH Enterprises, supra, 142 Cal.App.4th at p. 1061.)
JKH Enterprises is of particular interest here because it involved the same issue as is presented in the instant case—a challenge to an administrative determination that a business was required to provide workers’ compensation insurance for the benefit of its delivery service drivers, whom the business had asserted were really independent contractors, not employees. In upholding the trial court’s application of the substantial evidence test rather than the independent judgment test, the JKH Enterprises court stated that (1) the case “involves agency regulation of labor relations and the enforcement of legislated social policies”; (2) “the purpose of the [administrative] decision was to impose JKH’s compliance with the law as a condition of doing business, not to put it out of business”; and (3) “[e]ven if [it] were the case [that JKH would be put out of business if required to provide workers’ compensation insurance for its drivers], the continued operation of a business in a manner that violates the applicable regulatory scheme governing all employers is not a fundamental vested right or one that was legitimately acquired. It is true that requiring JKH to purchase workers’ compensation insurance would mean that it would have to incur an expense, and that this expense would cause an increase in the cost of doing business and potentially a decrease in profits. But this result would affect a purely economic interest and would not involve or affect a right that is fundamental and vested . . . .” (Id. at pp. 1061-1062.)
b. Standard of Appellate Review
The nature of an issue on appeal determines the appellate court’s standard of review in an administrative mandamus case. Questions of law and issues regarding the nature or degree of an agency’s penalty are given a de novo review, the latter being examined to determine whether the administrative agency abused its discretion. JKH Enterprises, supra, 142 Cal.App.4th at p. 1058, fn. 11.)
The substantial evidence test is applied to the trial court’s decision if a vested fundamental right is involved in the case and the trial court exercised its independent judgment in examining the administrative decision. On the other hand, if the trial court properly applied the substantial evidence test, then the reviewing court’s task is the same as the trial court’s—examination, under the substantial evidence test, of the administrative agency’s findings. (JKH Enterprises, supra, 142 Cal.App.4th at p. 1058.) When the administrative findings are supported by substantial evidence, the reviewing court then determines whether those findings support the administrative agency’s conclusions of law. (Id. at pp 1058-1059.) The agency’s findings are presumed to be supported by the administrative record and the party that challenges the findings must demonstrate that they are not. (JKH Enterprises, supra, 142 Cal.App.4th at p. 1062)
Under the substantial evidence test, we do not reweigh the evidence. We determine whether there is any evidence, or any reasonable inferences which can be deduced from the evidence, whether contradicted or uncontradicted, which when viewed in the light most favorable to the judgment, will support the ALJ’s or the trial court’s findings of fact. (Booth v. Robinson (1983) 147 Cal.App.3d 371, 377; Robinson v. Pediatric Affiliates Medical Group, Inc. (1979) 98 Cal.App.3d 907, 910.)
In Gonzalez v. Workers’ Comp. Appeals Bd. (1996) 46 Cal.App.4th 1584, 1593 (“Gonzalez”), the court stated that when the evidence is undisputed, the issue of person’s status as an employee or independent contractor is one of law (but deference to the administrative agency’s view is appropriate). However, de novo review is not appropriate here because there is at least one area of disputed evidence. It concerns rates, charges and fees in the carrier’s contracts with AVP.
2. Workers’ Compensation Law
a. Independent Contractor Status
Worker’s compensation benefits extend to employees for injuries they sustain that arise out of and in the course of their employment. (Lab. Code, § 3600.) The term “employee” does not include independent contractors. Section 3353 of the Labor Code defines an independent contractor as “any person who renders service for a specified recompense for a specified result, under the control of his principal as to the result of his work only and not as to the means by which such result is accomplished.”
Labels placed by the parties on the character of their relationship (employee vs. independent contractor) are not dispositive of that issue. Workers’ compensation law is liberally construed to provide benefits to persons injured in their employment. There is a general presumption that someone who provides services to another is an employee covered by such law. One who argues that a person who provides services to its business is not covered by workers’ compensation law has the burden of proving that such person is an independent contractor. (S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, 349 (“Borello”).)
b. Determination of Employee Status
The right of the person to whom service is rendered to control the manner and means of accomplishing the desired result of those services is a significant test for determining whether the person performing the work is an employee or an independent contractors. (Borello, supra, 48 Cal.3d at p. 350. However, many other factors are examined in determining, for workers’ compensation purposes, the status of the person delivering the services.
The additional factors include (1) the right to discharge at will, without cause; (2) whether the person performing the services is engaged in a distinct occupation or business; (3) whether such person has made a substantial investment in his business other than his services; (4) whether such person is the one that is best situated to distribute the risk and cost of injury as an expense of doing business; (5) whether the work, in the given locale, is usually performed under the supervision of a principal; (6) the skill required in the occupation; (7) whether the alleged employee’s remuneration depends on his or her initiative, judgment or managerial abilities; (8) whether the principal or the worker supplies the tools, equipment and place of work; (9) the length of time that the services will be performed; (10) whether payment is by the job or a unit of time; (11) whether the work is part of the principal’s regular business; (12) whether the person performing the services hires his own workers; and (13) whether the parties believe they are operating in an employer--employee relationship. (Borello, supra, 48 Cal.3d at pp. 350-355.) These factors and their import are generally viewed not as separate tests but rather as they combine in the individual case, and with reference to the protective, social purpose of workers’ compensation law. (Id. at pp. 351-353.)
3. Substantial Evidence Supports The Administrative Ruling
Given the evidence in this case and California’s worker’s compensation law, and given the clear analysis of similar situations in JKH Enterprises, supra, 142 Cal.App.4th 1046 (delivery of packages and papers by persons whom their employer wrongfully claimed to be independent contractors) and Gonzalez, supra, 46 Cal.App.4th 1584 (delivery of newspapers by a person whose employer wrongfully claimed was an independent contractor), it is clear to us that there is substantial evidence to support the ALJ’s findings and decision.
AVP’s reliance on Labor Code section 4157 to support its claim of independent contractor status for its carriers carries no weight. That statute is part of the Labor Code provisions that permit employers and their independent contractors (as well as other persons in their employ who are not entitled to worker’s compensation coverage) to elect to have such persons be subject to the compensation law. Section 4157 states: “Where an employer has made an election pursuant to this chapter to include under the compensation provisions of this division an independent contractor engaged in vending, selling, offering for sale, or delivering directly to the public any newspaper, magazine, or periodical, the status of such person as an independent contractor for all other purposes shall not be affected by such election.”
As noted in Borello, supra, 48 Cal.3d at page 350, workers’ compensation statutory law utilizes the “control-of-work” analysis in its definition of an independent contractor: the Labor Code defines an independent contractor as “any person who renders service for a specified recompense for a specified result, under the control of his principal as to the result of his work only and not as to the means by which such result is accomplished.” (Lab. Code, § 3353.) The Borello court also observed that the right to control the manner and means of another’s work has long been considered a most significant consideration by California courts, but the right to discharge at will without cause is also an important indicator of an employee-employer relationship. Likewise, several other factors are given consideration in making a determination of the character of a relationship where services are rendered. (Borello, supra, at p. 350 et seq.) Regarding the right to discharge at will without cause, that right is clearly given to AVP under the terms of the contract. Only a 30-day written notice to the carrier is required.
Addressing the right to control manner and means factor, it is clear to this court that although the AVP contracts state the carrier “has the right to control the manner and means of delivery” of AVP’s publications and “has the right to determine the equipment and supplies needed to perform delivery services,” that is not actually the case. The many pages of the contract signed by the carriers are filled with manner and means provisions, as well as detailed negative consequences if the carriers do not comply with those manner and means directives. Thus, the carriers are actually constrained by many contract provisions as to how they accomplish the task of delivering AVP’s publications. By way of example, carriers are required to make efforts to secure new subscribers. They are required to bag certain of the publications, and to use specific colors in doing so. Customers can dictate where they want the papers placed on their property, and any harm to, or loss of the papers results in a financial loss to the carrier. The carrier must abide by the pick up and delivery times specified in the contract and the decision of the ALJ shows there are carriers whose routes take several hours to complete. Financial penalties are imposed for failures to abide by these many dictates, and failures are grounds for termination for cause. The use of the many financial penalties, as well as reports of complaints of customers, and the visual surveys to determine whether red and orange bagged papers have been delivered, enables AVP to maintain significant supervision over the carriers. Moreover, AVP has control over the price paid by customers to AVP, which includes both the cost of the newspaper and the delivery service.
While it is true that carriers can choose the sequence of their delivery, the vehicle they use to make deliveries, whether and when to take breaks, and the clothes they wear during their deliveries, those choices are in reality a function of the weather, the size and density of their routes, and whether they can afford to have a vehicle for deliveries separate and apart from a vehicle for their own personal use. Moreover, our test is the substantial evidence test. Not whether each and every one of the many factor discussed in Borello indicates an employee status for the carriers.
Regarding the other factors set out in Borello, and earlier in this opinion, the carriers are not engaged in a distinct occupation or business of their own. There was no evidence that any of AVP’s carriers hold themselves out as being an independent delivery service that happens to have AVP as one of its customers. Further, AVP does not cite evidence showing that the carriers have a substantial investment in their AVP delivery duties other than their time and the vehicles they use, which also are not shown to be other than vehicles they use for their other jobs and their family activities. Further, delivery of AVP’s publications is part and parcel of the newspaper business. Indeed, there was evidence that AVP directs its “admitted employees” to make deliveries of its publications. AVP essentially supplies much of the materials used by the carriers (newspapers, the mandatory orange and red plastic bags, the subscriber lists), as well as facilities they use (loading docks for pickup and assembly of the various parts of the Press, and truck delivery of the bundles of papers to the outlying area).
Moreover, the evidence does not demonstrate that the carriers are the contracting parties best situated to distribute the risk and cost of injury as an expense of doing business. Evidence showed that 62 of the 170 carriers that had earnings in 2003 were between the ages of 19 and 29, and 56 of them earned less than $10,000 that year. Indeed, 130 carriers earned less than $10,000 that year. Only 30 carriers earned between $10,000 and $19,000, and only 10 carriers earned more than $20,000. After they pay their gasoline and car maintenance expenses associated with delivering AVP’s publications, they are even less able to distribute the risk and cost of injury as an expense of doing business. Indeed, the very concept of distributing the risk and cost of injury as an expense of doing business includes the notion that one has other sources of business income which can be tapped for payment of insurance that covers potential on-the-job injuries when making delivery of AVP publications. As noted, here there was no evidence that any of the carriers have a delivery business. In contrast, AVP has the ability to make adjustments in the price of its advertising and publications as a means of paying for workers’ compensation insurance.
The ALJ found that of the 195 carriers who had contracts with AVP in 2003, about 20 per cent were under 21 years of age when they first contracted with AVP, and of those, 27 of them were still in their teens.
Although the contract states the carrier has “the right to hire employees of his/her choosing and to [c]ontract with others to fulfill [the carrier’s] obligations under this Contract,” the contract qualifies this right by later stating the carrier can “hire employees and substitutes when [the carrier] deems it necessary.” Further, the contract mandates that “the receipt, transportation, distribution and delivery by [the carrier] of copies of newspapers shall be made only in vehicles under [the carrier’s] control and direction.” Additionally, the carrier is not permitted to “disclose in any form to any other person any subscriber list, non-subscriber list, customer list, or route records.”
Under several provisions of the contract, the carrier is responsible for procuring new subscribers to the Press. The contract states the carrier is to (1) use his or her best efforts to procure as many new subscribers as possible, (2) make every good faith effort to solicit subscriptions, and (3) maintain or increase the number of home subscribers on his or her route. Indeed, a decrease in subscribers on a carrier’s route of more than two per cent gives AVP the right to terminate the contract. There is no indication that persons who work in AVP’s circulation department and have procurement of new subscribers as one of their tasks are not considered employees by AVP.
There are other indications of an employee-employer relationship. The skill required to deliver papers is minimal. The length of service is at least 12 months by contract, and evidence showed that of the 170 carriers that earned money working for AVP in 2003, 49 of them had begun working by 2002, and 25 of those 170 carriers signed their first contract with AVP in the 1990’s. Thus, the notion of an independent contractor being someone hired for a specific result that is attainable within a reasonably short period of time, such as plumbing work, tax service, construction of an addition to a building, or creating a work of art for a building’s lobby is at odds with these carriers who engage in prolonged service to AVP. Moreover, payment for the carriers is essentially in a piece work fashion, like turning out dresses for a clothing manufacturer, with a certain number of papers needing to be delivered each day.
Lastly, although the language of the contracts makes it clear that AVP intended to have an independent contractor relationship with the carriers, it was not clear to the ALJ that the carriers fully understood what such a relationship would mean for themselves. He found that the carrier-witnesses at the administrative hearing “appeared to appreciate the ‘notion’ of ‘being their own bosses,’ without fully understanding whether the [contracts] in fact accomplished this.”
DISPOSITION
The judgment from which AVP has appealed is affirmed. Costs on appeal to the Commissioner and State Fund.
We Concur: KLEIN, P. J., KITCHING, J.
AVP states in its opening brief that “the unrebutted testimony in the record demonstrated [] that all of the contract fees were negotiated by ‘all’ [of the carriers].” However, although the parties stipulated at the outset of the administrative law procedures that all of the carriers signed “the same basic form” and that the rates, charges and fees were negotiable, they also stipulated that testimony could be taken regarding such negotiations about rates, charges and fees.
After the hearing, the ALJ essentially determined that the stipulation regarding negotiation of rates, charges and fees was too broad. For example, the ALJ observed that when a carrier has contractually elected to correct complaints about delivery rather than have AVP correct them, if the correction is not made within an hour after receiving notice of the complaint, or if the carrier cannot be reached for notification, the carrier is charged $35 an hour, plus mileage of 31 cents per mile for AVP to correct the complaint, as measured by the round trip mileage and time from the work station of the AVP employee that is sent to make the correction. The ALJ found that although AVP’s home delivery manager “assented to” AVP’s attorney’s characterization that these correction charges were negotiated charges, there was no evidence that the charges had ever been negotiated, the manager’s testimony was not convincing, and the charges were pretyped into the contracts. The ALJ concluded that the charges were not negotiated or even negotiable. Moreover, given that AVP states in its opening brief that “[w]hen a customer made a . . . delivery complaint to AVP, AVP merely passed on the customer’s [complaint] to the [carrier] and let the [carrier] determine how to address the complaint,” (italics added), the application of such fees is another example of disputed evidence.
The ALJ also found that the delivery rates for a carrier’s delivery of all but one of AVP’s various publications was “fixed.” The ALJ cited to testimony of the home delivery manager, whereat he stated that “[t]he contract fee for the sample product is 3 cents per copy, whereas it varies for the [Press].” The manaager added that although AVP would negotiate the 3 cent contract fee, “[h]istorically it hasn’t [been negotiated]” and he did not know of any such negotiation because every carrier has accepted that price. Additionally, the ALJ noted that “the various chargeback and redelivery fees are pre-typed into the contract forms and are not negotiated.”
We note that the home delivery manager testified that “not every time you sit across the table from a [carrier] will they negotiate. More than likely they accept whatever the proposed rate is.” He also testified that with respect to the “complaint recording fee” of $2.50 for each complaint against a carrier, which fee is part of the standard language of the form contracts, the amount of the fee “can be” negotiated but no carrier has ever tried to negotiate it.
One of AVP’s district managers, who was a carrier prior to the time she became a district manager, testified that in her position as a district manager, she reviews contracts with applicant carriers and she tells them that the rates are negotiable. However, on cross-examination by State Fund, she amended her answer and stated she usually does not tell applicants that rates are negotiable but that she does negotiate rates with them. A reasonable inference is that she does not tell applicants that rates are negotiable but she will negotiate if asked to do so.
Section 4157 speaks for itself. It recognizes that independent contractors and the persons who employ them can jointly elect workers’ compensation coverage, but the independent contractor retains that status for all other purposes. The statute is not applicable here to the issue whether the carriers are employees or not. The statute merely includes a recognition that some people who vend, sale or deliver newspapers, magazines and periodicals can be independent contractors in that work.
AVP’s contention that section 4157 is a shield to prevent courts from finding that newspaper carriers cannot be independent contractors flies in the face of the statutory language itself. It is a shield to prevent a joint election for workers’ compensation coverage from being perceived as anything but that election.