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Ruiz v. Affinity Logistics Corp.

United States Court of Appeals, Ninth Circuit

June 16, 2014

FERNANDO RUIZ, individually and on behalf of all others similarly situated, Plaintiff-Appellant,
v.
AFFINITY LOGISTICS CORPORATION, Defendant-Appellee

Submitted, San Francisco, California: February 22, 2013. [*]

Page 1094

U.S. District Court for the Southern District of California, D. C. No. 3:03-cv-02125-JLS-KSC--Janis L. Sammartino, Presiding District Judge.

Appeal from a decision and order of the U.S. District Court for the Southern District of California. Decision reversed, matter remanded, and costs awarded to Ruiz.

For plaintiff-appellant--Osborn Law, New York, New York, by Daniel A. Osborn

For defendant-appellee--Scopelitis, Garvin, Light, Hanson & Feary, Indianapolis, Indiana, by James H. Hanson

Before: Harry Pregerson and Richard A. Paez, Circuit Judges, [**and James P. Jones, District Judge. Opinion by Judge Pregerson.

OPINION

Page 1095

PREGERSON, Circuit Judge:

This is the second time this case is before us. Plaintiff-Appellant Ruiz and putative class members (collectively, " drivers" ) are California residents who worked for Defendant-Appellee Affinity Logistics (" Affinity" ), a Georgia corporation. Drivers allege that Affinity wrongfully classified them as independent contractors; failed to pay them sick leave, vacation, holiday, and severance wages; and improperly charged them workers' compensation insurance fees. The outcome of these state law causes of action depends on whether the drivers were employees or independent contractors of Affinity.

This case first came before us after the district court, following a three-day bench trial in December 2009, held that the drivers

Page 1096

were independent contractors under Georgia law. Ruiz appealed. On February 8, 2012, in Ruiz v. Affinity Logistics Corporation (" Affinity I " ), 667 F.3d 1318, 1325 (9th Cir. 2012), we concluded that California law, not Georgia law, applies to the independent contractor versus employee question in this case, and remanded the matter to the district court. On remand, the parties agreed that no further evidence was necessary. The district court ordered the parties to submit briefs arguing their respective contentions under California law. Based on these briefs and the December 2009 bench trial record, the district court, on August 27, 2012, issued a memorandum decision and order concluding that, under California law, the drivers were independent contractors.

Ruiz timely appealed the district court's judgment on remand. We have jurisdiction under 28 U.S.C. § 1291. For the reasons set forth below, we reverse.

FACTUAL BACKGROUND

The following facts are undisputed.

A. Affinity's Hiring of Ruiz

Fernando Ruiz previously worked as a driver for Penske Logistics Corporation, a furniture delivery company that had a contract with Sears. His job status was that of an " employee." When Sears terminated its contract with Penske in November 2003, Sears advised the drivers that Affinity Logistics Corporation (" Affinity" ), a company providing home delivery services for various home furnishing retailers,[1] would take over Penske's contract. Sears advised Ruiz and other drivers employed by Penske to speak with Danny Hansen, an Affinity manager, about working for Affinity.

Hansen told Ruiz and the other drivers that if they wished to be hired by Affinity, they had to become independent contractors. Specifically, Hansen told the drivers they needed a fictitious business name, a business license, and a commercial checking account. Affinity then advised the drivers on how to complete the necessary forms. Affinity went so far as to complete the forms for Ruiz, leaving only the spaces for his signature blank. With Affinity's help, Ruiz formed R& S Logistics (" R& S" ). Ruiz obtained a Federal Employer Identification Number and a separate business banking account for R& S.

Additionally, to work for Affinity, each driver was required to sign an Independent Truckman's Agreement (" ITA" ) and Equipment Lease Agreement (" ELA" ). The ITA and the ELA included clauses stating that the parties were entering into an independent contractor relationship. The ITA and ELA stated:

Control and Exclusive Use. ... The parties intend to create an independent contractor relationship and not an employer-employee relationship.
Independent Contractor
(a) Contractor,[2] in the performance of this Agreement, will be acting in his own separate capacity and not as an agent, employee, partner, joint venture or associate of Affinity. It is expressly understood and agreed that Contractor is an independent contractor of Affinity in all manners and respects and that Contractor is not authorized to bind Affinity to any liability or obligation or to represent that it has any authority. ...

The ITA was a one-year contract that automatically renewed from year to year. The contract could be terminated at any

Page 1097

time by either party without cause upon giving the other party sixty days notice, or with cause upon breach of contract. The ITA set out the drivers' rate of pay, which, regardless of experience, was a flat " per stop" rate of $23.00 in 2004. The ITA also included a provision that a driver " at [Affinity's] option, may be transferred to another location then being served by [Affinity]," and a driver's failure to comply with a transfer would be a breach of the ITA.

After Ruiz and the other drivers signed the ITA and ELA, the drivers received an Affinity Contractor Procedures Manual (" Procedures Manual" ). The Procedures Manual, prepared by Affinity, outlined procedures drivers were required to follow regarding loading trucks, delivering goods, installing goods, interacting with customers, reporting to Affinity after deliveries, and addressing returns and refused merchandise, damaged goods, and checking in with Affinity after deliveries. The Procedures Manual included mandatory language such as " must," " will report," " must contact," " required," " not acceptable," " 100 percent adherence," and " exactly as specified."

Affinity hired Ruiz as a driver in 2003. Ruiz worked for Affinity from November 2003 to October 2004. Ruiz and the other drivers were responsible for loading furniture and appliance deliveries, unloading the deliveries, and installing the deliveries. Affinity did not require that drivers obtain special licenses. Nor did Affinity require that drivers have any specific work experience or training; rather, drivers simply had to have a driver's license, sign the ITA and ELA, and pass a drug test and physical exam.

B. Affinity's Regulation of Its Drivers

Drivers regularly worked about five to seven days per week. An Affinity employee would call the drivers each day to tell them whether or not they were working the following day. Drivers had a fairly regular rate of pay since they worked five to seven shifts per week, and every route had approximately eight deliveries. Drivers had to request time off three to four weeks in advance, and Affinity had discretion to deny those requests. Affinity denied requests for time off when it decided the delivery schedule was too busy.

Affinity encouraged, if not required, drivers to lease trucks from Affinity. All but one driver in the San Diego area leased their trucks from Affinity. Affinity automatically deducted $350 per week from a driver's paycheck to pay for the leased truck. Drivers were required to paint their trucks white, and could not put signs on their trucks. The trucks had a Sears logo and Affinity's name and motor carrier number on the door. Most drivers drove the same truck every day.

Affinity handled upkeep of trucks and arranged for loaner trucks when trucks broke down, deducting these costs from drivers' pay. Affinity required drivers to stock their trucks with certain supplies, as outlined in the Procedures Manual. These supplies included appliance and furniture totes, plastic mattress return bags, protective blankets, pads, tie-down straps, and tools including a level, power drill, and drill bits. Affinity required that drivers use a specific type of mobile telephone. Affinity supplied the phones and deducted monthly costs for the phones from drivers' paychecks. Affinity also required ...


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