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Editorial: Employment Contracts Keep Lawyers Employed

Thank God we have appellate courts.

Without them causing confusion and misdirection, we employment attorneys might have to get some real work.\


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 Two cases that came down at the end of 2011 illustrate what I mean by befuddling interpretations of the law.

If you’re an employee, one case gives you a feeling of protection and righteousness. But the other case will have you convinced you can’t challenge the system.

For an employer, one case reaffirms the widely held belief that California unreasonably coddles the employees (although I’m not aware of reasonable coddling), while the other delivers the pot of gold at the end of the rainbow.

The pro-employer case is Arnold v. Mutual of Omaha. In that one, Arnold quit her position as an agent for Mutual of Omaha, then sued the company for not paying many of her expenses and earned wages.

Mutual’s response: “What are you talking about? You’re an independent contractor, not an employee.”

The appellate court agreed with the big insurance company.

The court cited these factors as determining whether Arnold was an employee or an independent contractor: “Whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired (and) additional factors.

“These factors were: whether the principal has the right to discharge at will, without cause; whether the one performing services is engaged in a distinct occupation or business; the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; the skill required in the particular occupation; whether the principal or the worker supplies the instrumentalities, tools and the place of work for the person doing the work; the length of time for which the services are to be performed; the method of payment, whether by the time or by the job; whether or not the work is a part of the regular business of the principal; and, whether or not the parties believe they are creating the relationship of employer-employee.”

Using these factors, the court found that Arnold was registered by the Department of Insurance as an independent agent, authorized to offer products to prospective clients from different companies.

Arnold was responsible for keeping the license current. She received commissions and 1099 tax forms. She decided on her own what potential clients to solicit. She signed a contract on which she was identified as an independent contractor.

During her deposition, Arnold said she had read the contract and understood when she signed it that her appointment with Mutual was as an independent contractor. Mutual didn’t evaluate Arnold’s performance and didn’t monitor or supervise her work schedule.

There was a host of additional evidence showing that Arnold shouldn’t be considered an employee, all of which convinced the appellate court that she had no right to sue Mutual for violations of employment law.

So, score one for the employer.

The other case, Wisdom v. Accentcare, went the opposite way. In that one, most applicants to Accentcare had to sign agreements that required all disputes to be resolved by binding arbitration. One of Wisdom’s co-plaintiffs, Rodriquez, signed such an agreement.

She, along with Wisdom, went to work for Accentcare, and then sued it for not paying them and the class they represented for overtime and what was called “off-hours” work.

Accentcare responded by arguing that since Rodriquez had agreed to binding arbitration when she filled out her employment application, then she could only use arbitration. Consequently, everything needed to be put on hold until that arbitration finished.

The employer lost that argument in both the trial and appellate courts. Both ruled that the so-called “agreement to arbitrate” was unconscionable.

The reasons for the decision included that there was no opportunity to negotiate the agreement; the arbitration rules were not explained or provided; and the prospective employees didn’t know they were waiving their rights to a jury trial.

No one explained the agreement to them or told them that signing it was optional. (Yeah, right. Try applying for a job and telling the employer you won’t sign an arbitration agreement. What are your chances of then getting hired?)

So, don’t assume all employment agreements are binding. Check with a labor attorney first. But even then, sometimes it’s anyone’s guess.

Carl Kanowsky is an attorney in Santa Clarita. He can be reached atcjk@kanowskylaw.com. Visit him online at www.kanowskylaw.com.




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