Filed Under:Agent Broker, E&S/Specialty Business

Who’s an Employee?

California court rules nonexclusive agent is independent contractor

Kimbly Arnold, by contract with Mutual of Omaha, sold Mutual products as a nonexclusive agent and also sold insurance products for other insurers. She was unhappy with the relationship with Mutual, terminated the contract, and then sued for benefits. In Kimbly Arnold v. Mutual of Omaha Insurance Co., No. A131440 (Cal.App. Dist.1 12/30/2011), Arnold claimed unpaid employee entitlements under the California Labor Code. Summary judgment was granted in favor of Mutual because the facts established she was not an employee, but rather an independent contractor. Seeking serious profits from the suit, Arnold also filed as the representative plaintiff of a class.

The complaint listed three causes of action. Mutual allegedly failed to fully reimburse Arnold and class members for “necessary business-related expenses and costs,” to which they were entitled under the California Labor Code. The second cause of action alleged Mutual had willfully failed to pay Arnold and class members for wages earned but unpaid prior to being discharged from employment or prior to quitting employment, for which they were entitled to recover under multiple labor codes. A third cause of action alleged Mutual’s conduct constituted an unlawful business practice in violation of the unfair competition law, for which Arnold and class members sought compensation, an injunction requiring Mutual to pay all outstanding wages and costs.

It also considers:

  • Whether the one performing services is engaged in a distinct occupation or business
  • Whether the principal or the worker supplies instrumentalities, tools and a place of work
  • Whether the work is a part of the regular business of the principal
  • Whether the parties believe they are creating the relationship of employer-employee
  • The length of time for which the services are to be performed
  • The method of payment, whether by the time or by the job.

The individual factors must not be applied as separate tests but are intertwined and often given weight depending on the particular combination of factors.

THE COMMON LAW TEST FOR EMPLOYMENT

In California, a statute is construed in light of the common law unless the legislature clearly and unequivocally indicates otherwise. Thus, when a statute refers to an employee without defining the term, courts have generally applied the common law test of employment to that statute.

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