Opinion
NOT TO BE PUBLISHED
Super. Ct. No. 39200800184992CUCOSTK
DUARTE, J.
For a little more than a year, appellant Bryan Stull delivered pharmaceuticals and medical supplies for respondent PharMerica Corporation (PharMerica). For the deliveries, PharMerica required Stull to wear a blue polo shirt and khaki pants or shorts, begin his routes at a specific time and location, complete deliveries without detours or breaks, and promptly return invoices and undelivered pharmaceuticals to PharMerica’s pharmacy. Asserting that PharMerica exercised complete control over his deliveries, Stull filed suit claiming that he was PharMerica’s employee and had been denied the benefits and protections for employees provided by the Labor Code. The trial court entered judgment for defendants based on its conclusion that Stull was an independent contractor.
On appeal, Stull argues that the trial court erred in finding him to have been an independent contractor to PharMerica. (ARB 2) We shall reject his contention that the “economic realities” test articulated in Real v. Driscoll Strawberry Associates, Inc. (9th Cir. 1979) 603 F.2d 748 (Real) governs his claim of employee status. Finding sufficient evidence in support of the judgment, we shall affirm.
FACTUAL AND PROCEDURAL HISTORY
In May 2008, Stull filed suit alleging that he had been denied employee protections and benefits such as minimum wage, rest periods, and overtime wages. (Lab. Code, §§ 201, 203, 226, 226.3, 226.7, 510, 1194, 1194.1, 1197, 1198; Industrial Wage Com. Order No. 4-2001.) Stull also asserted an unfair competition claim under Business and Professions Code section 17200. The complaint named as defendants: (1) Aspen Contracting California, LLC (Aspen), (2) Conifer Services CA, LLC (Conifer), (3) PharMerica Corporation (PharMerica), (4) Pharmacy Corporation of America, (5) SRS California Management, LLC, and (6) three individual defendants.
Further undesignated statutory references are to the Labor Code.
Stull erroneously sued Aspen as Noble Logistic Services, PharMerica Corporation as PharMerica, and Pharmacy Corporation of America as PharMerica of Stockton. SRS California Management, LLC, was named in the complaint but never served with process. The individual defendants-–Erika Brenner, Michael Allen, and Mark Nelson-–were dismissed after the trial court sustained their demurrers without leave to amend.
Aspen and Conifer are wholly owned subsidiaries of Noble Logistics, Inc., which provides logistics and transportation consulting services. Aspen was formed for the purpose of acquiring and retaining independent contractors to perform delivery services. Although Aspen supplies drivers to PharMerica, they are separate companies with no common management or ownership. PharMerica is a health care provider of pharmaceuticals, pharmaceutical supplies and service; it also provides pharmacy management services for long-term care nursing facilities, assisted living facilities, and long-term care hospital providers.
Defendants answered, generally denying Stull’s allegations and asserting the affirmative defense that Stull operated as an independent contractor. The matter proceeded to a court trial.
Evidence Regarding Aspen and Conifer
In December 2006, Stull signed an independent contractor agreement with Aspen. In pertinent part, the agreement stated: “The parties agree and acknowledge that [Stull’s] relationship with A[spen] hereunder is that of an independent contractor, and any and all services provided by [Stull] hereunder shall be provided in that capacity. Neither [Stull] nor any of [his] employees or servants shall in any way or for any purpose be considered an agent, servant, employee, partner or co-venturer of A[spen] or be deemed to hold any relationship with A[spen] other than that of independent contractor.” The term of the contract was for one year unless cancelled for enumerated reasons.
The agreement with Aspen further stated that Stull “need not perform any services hereunder personally, but may hire or engage others to perform any or all such services on [Stull’s] behalf. [Stull] shall be solely responsible for the direction and control of Contractor’s employees, agents and servants, including (i) hiring, (ii) firing, (iii) supervising, (iv) setting wages, hours of work, performance standards and routes of travel, (v) providing all necessary tools or assistance, (vi) paying wages and (vii) resolving grievances. A[spen] shall have no right to request [Stull] to discontinue use of any particular employee, agent or servant.”
The agreement also provided that Stull, “as an independent contractor, retains the right to work for others and to hold itself out to the public generally as an independent contractor. It is understood that [Stull] intends to make [himself] available to furnish services under this Agreement from time to time, but only at such times as [Stull], in [his] discretion, shall elect.”
At Aspen’s request, Stull provided an online advertisement and business card showing that he was doing business as Arise and Go Delivery. When Aspen reviewed the business card, it asked Stull to stop using a card imprinted with the trademark symbol for Noble Logistics Services.
On cross-examination, Stull admitted that Aspen “did not tell [him] how to do anything....” Stull also testified that he “never had any kind of relationship with Conifer.” His contract was only with Aspen.
Evidence Regarding PharMerica
PharMerica operates a pharmacy located in Stockton, California, where it provides prescription medications and medical consulting services. Some of the prescriptions are prepared in “patient-specific packaging” that allows custom formulations for specific patients. PharMerica’s customers include nursing homes, prisons, and hospitals with long-term care facilities.
During the time period relevant to this appeal, PharMerica hired delivery drivers to transport its pharmaceuticals. PharMerica did not have contracts with its delivery drivers. PharMerica also did not select delivery drivers. Instead, drivers were provided by Aspen. To receive payment for deliveries made on behalf of PharMerica, drivers filled out invoices and submitted them to Noble Logistics Services. PharMerica did not require any particular type of invoice form to be used by delivery drivers.
Drivers started their delivery routes at PharMerica, where they picked up pharmaceuticals and medical supplies. Drivers were required to be at PharMerica by 9:30 a.m. Drivers for PharMerica were assigned specific routes for each delivery day. At 10:00 a.m., drivers would depart to make deliveries. If the pharmacy required extra time to fill orders, drivers were compensated for the “late launch.” When making deliveries for PharMerica, drivers were required to wear some sort of blue polo shirt (with or without a Noble Logistics logo on it) and khaki shorts or pants.
As Stull put it, he delivered “everything” including narcotics, “IV kits, ” and “dangerous drugs.” The lead pharmacist at PharMerica instructed drivers not to take breaks or stop before deliveries were completed. Even so, no one supervised Stull while he was on route making deliveries. He was not required to check in during deliveries, and he carried no tracking device.
Deliveries took about five hours to complete. Drivers had to obtain a customer signature for each delivery. When drivers completed their deliveries, they returned to PharMerica’s pharmacy to drop off the shipping manifests and undelivered or returned pharmaceuticals.
In making deliveries for PharMerica, Stull drove his own vehicles, and paid for his gas, oil, vehicle maintenance, and automobile insurance. Drivers were paid by the route, not by the hour. Stull received payment from Aspen rather than from PharMerica. Aspen did not withhold any taxes from payments made to Stull. Although Stull was paid in two-week intervals, his earnings varied considerably depending on the routes he drove. Stull made himself available to drive routes at any time in order to earn more money.
On several occasions, David Venezuela made deliveries for Stull. When Venezuela lost his driver’s license, he worked under Stull’s name to keep his job. Thus, Stull was paid both for his routes and those of Venezuela.
Stull testified that he attempted to negotiate prices for particular routes but received no response to his proposals. However, Aspen’s general manager testified that Stull was able to and did in fact negotiate pay rates for particular routes.
While Stull delivered pharmaceuticals for PharMerica, he had no other employment. Even so, Stull never told anyone that he believed himself to be a PharMerica employee.
At trial, Stull admitted that he had not disclosed his four prior felony convictions when he signed his contract with Aspen. Had Stull disclosed the convictions, PharMerica would not have allowed him to deliver pharmaceuticals.
Trial Court Ruling
The trial court concluded that Stull was an independent contractor in the business of making deliveries for PharMerica under a contract with Aspen. In support of its conclusion, the court made the following findings:
Stull signed the independent contractor agreement with Aspen in December 2006. The agreement did not allow Aspen to discharge Stull at will. There was no evidence that Aspen exercised any control over how Stull performed his deliveries. The court also found no evidence showing that Conifer had any relationship with Stull.
When making deliveries for PharMerica, Stull drove his own vehicles, and paid for his own gasoline, repairs, and liability insurance.
Stull received no employee benefits and taxes were not withheld from payments made to him by Aspen. Stull was not paid by PharMerica, nor did he seek reimbursement for expenses from the company. On his income tax return, Stull declared himself to be a sole proprietor and deducted his business expenses.
The court found that Stull could turn down deliveries and routes offered by PharMerica. Accordingly, Stull’s pay varied considerably according to the routes he drove.
PharMerica allowed Stull to hire others to make deliveries for him, and Stull actually did have another driver make deliveries for him on a number of occasions.
Stull was required to begin and end his delivery routes at PharMerica’s pharmacy. However, the court noted that Stull went to PharMerica “because that was where [the pharmaceuticals] were stored, [and he] dropped returned drugs and documentation there.” Although Stull did not wear a badge, he “would wear a blue shirt and khaki pants to identify himself as the delivery person to the customers.”
So long as Stull met the “delivery window times” requested by PharMerica’s customers, he was “free to make the deliveries in those times as he decided.” PharMerica did not check on Stull while he was making deliveries, and he did not have to carry a tracking device. Stull received no training on how to make deliveries and was not required to follow any particular route.
Stull stopped making deliveries for PharMerica in February 2008.
After weighing the evidence, the trial court concluded that Stull made deliveries as an independent contractor. The court found that “[e]ven though PharMerica exercised some control over the driver’s appearance (blue shirt and khaki pants), issued some directions such as special delivery instructions, and had information meetings, these did not amount to control over the specific tasks required to be carried out by [Stull] for his assignments....”
The trial court entered judgment in favor of the defendants. Stull timely filed a notice of appeal.
DISCUSSION
Stull’s Classification As An Employee Versus An Independent Contractor
Stull argues that the evidence presented at trial compels the conclusion that he was an employee of PharMerica under the “economic realities” test articulated by the Ninth Circuit in Real, supra, 603 F.2d 748. We reject the argument.
On appeal, Stull does not contend the trial court erred in concluding that he was not an employee of Aspen or Conifer. He also does not assert that the trial court wrongly dismissed his unfair competition claim. Accordingly, we limit our discussion to Stull’s argument that he was an employee of PharMerica.
A. Standard of Review
The determination of whether a person who renders paid services on behalf of another is an employee or an independent contractor constitutes a legal standard. (Air Couriers Internat. v. Employment Development Dept. (2007) 150 Cal.App.4th 923, 932-933 (Air Couriers).) Determination of “the correct legal standard to be applied by the trial court presents a question of law, which we review de novo.” (Ibid.)
The trial court’s factual findings that underlie the determination of legal standard are findings “of fact and thus must be affirmed if supported by substantial evidence.” (Estrada v. FedEx Ground Package System, Inc. (2007) 154 Cal.App.4th 1, 11 (Estrada).) Substantial evidence is evidence that is reasonable, credible, and of solid value when viewed in light of the whole record. (People v. Johnson (1980) 26 Cal.3d 557, 576-578.) “In reviewing the evidence on appeal, we resolve all conflicts in favor of the prevailing party, and we indulge in all legitimate and reasonable inferences to uphold the finding if possible. Our power begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted, that will support the finding. When two or more inferences can be reasonably deduced from the facts, we cannot substitute our own deductions for those of the trial court.” (Air Couriers, supra, 150 Cal.App.4th at p. 937.)
B. The “Economic Realities” Test Does Not Apply
The responsibilities that companies have to persons performing services on their behalf differs substantially depending on whether the persons are employees or independent contractors. (Cristler v. Express Messenger Systems, Inc. (2009) 171 Cal.App.4th 72, 76-77 (Cristler).) By claiming to have been a PharMerica employee, Stull sought to avail himself of employee benefits and protections, including payment of minimum wages, provision for rest periods, and compensation for overtime work. (See §§ 201, 203, 226, 226.3, 226.7, 510, 1194, 1194.1, 1197, 1198.) Thus, Stull’s causes of action depended on his ability to prove that he was an employee of PharMerica. (See Cristler, supra, 171 Cal.App.4th at pp. 76-77.)
Stull argues that the trial court applied the wrong legal standard for determining whether he was an employee or independent contractor. To this end, he urges us to conclude that he was an employee of PharMerica based on the test articulated in Real, supra, 603 F.2d 748, for claims brought under the Fair Labor Standards Act of 1976 (FLSA) (29 U.S.C. §§ 201 et seq.). We find the test employed in Real to be inapposite.
In Real, 15 strawberry growers sued under the FLSA on grounds that they were employees of the farm where they planted their crops. (Real, supra, 603 F.2d at pp. 750-751.) The Ninth Circuit reversed the district court’s grant of summary judgment in favor of defendants and explained that “[c]ourts have adopted an expansive interpretation of the definitions of ‘employer’ and ‘employee’ under the FLSA, in order to effectuate the broad remedial purposes of the Act.” (Id. at p. 754, fn. omitted.) The FLSA broadly defines term “employ” to mean “suffer or permit to work.” (Id. at p. 754, fn. 12.)
Based on the expansive definition of employees provided by the FLSA, Real adopted an “economic realities” test. (Real, supra, 603 F.2d at p. 755.) As the Real court explained, “Economic realities, not contractual labels, determine employment status for the remedial purposes of the FLSA.” (Ibid.) This test was intended to provide a more inclusive categorization of “employees” than the definition provided by the common law agency test. (Id. at p. 754.) Indeed, the economic realities test was intended to “stretch” the common law definition to fit the unique definition of employees to comport with the FLSA’s unique terminology. (Frankel v. Bally, Inc. (2d Cir. 1993) 987 F.2d 86, 89.)
The economic realities test under the FLSA does not apply to this case because Stull did not bring his action under federal law. Instead, Stull sought to avail himself of various provisions in this state’s Labor Code that provide benefits and protections for employees.
C. Distinguishing Employees From Independent Contractors Under The Labor Code
The Labor Code supplies its own meaning for the term “employee.” Under section 3351, “‘Employee’ means every person in the service of an employer under any appointment or contract of hire or apprenticeship, express or implied, oral or written, whether lawfully or unlawfully employed....” Conversely, section 3353 provides that, “‘Independent contractor’ means 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.”
As a practical matter, distinguishing between employees and independent contractors under the Labor Code’s definitions can prove challenging. (See 3 Witkin, Summary of Cal. Law (10th ed. 2005) Agency, § 21, p. 60.) For this reason, “our Supreme Court has supplemented these statutory definitions with a host of classification factors. In doing so, the court has consistently emphasized, in keeping with the statutory definition, that ‘the most important factor is the right to control the manner and means of accomplishing the result desired.’ (Empire Star Mines Co. v. Cal. Emp. Com. (1946) 28 Cal.2d 33, 43-44 (Empire Star Mines), disapproved on other grounds in People v. Sims (1982) 32 Cal.3d 468, 479-480, fn. 8).” (Cristler, supra, 171 Cal.App.4th at p. 77.)
In Empire Star Mines, the California Supreme Court held that unemployment insurance taxes were owed for miners who were employees, despite claims to the contrary by the mine owners. (Empire Star Mines, supra, 28 Cal.2d at p. 36.) In so holding, the high court explained that “[i]n determining whether one who performs services for another is an employee or an independent contractor, the most important factor is the right to control the manner and means of accomplishing the result desired. If the employer has the authority to exercise complete control, whether or not that right is exercised with respect to all details, an employer-employee relationship exists. Strong evidence in support of an employment relationship is the right to discharge at will, without cause.” (Id. at p. 43.)
The Empire Star Mines court further explained that “[o]ther factors to be taken into consideration are (a) whether or not the one performing services is engaged in a distinct occupation or business; (b) 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; (c) the skill required in the particular occupation; (d) whether the principal or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work; (e) the length of time for which the services are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is a part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee.” (Empire Star Mines, supra, 28 Cal.2d at pp. 43-44; see also Bowman v. Wyatt (2010) 186 Cal.App.4th 286, 299-300.)
The Empire Star Mines test serves to distinguish between employees and independent contractors for purposes of the Labor Code sections relied upon in Stull’s complaint. (Cristler, supra, 171 Cal.App.4th at pp. 76-77 [applying Empire Star Mines test to issue of “whether... persons are classified as employees or independent contractors under the Labor Code”]; Estrada, supra, 154 Cal.App.4th 1, 10 [explaining that the common law test for distinguishing between employees and independent contractors governs claims brought under section 2802]; see also Martinez v. Combs (2010) 49 Cal.4th 35, 66-68 [rejecting the argument that the definition of “employee” used by section 1194 for agricultural field workers incorporated the economic reality test used by the FLSA].)
In determining whether a person rendering paid services on behalf of another is an employee or independent contractor, “[t]he label placed by the parties on their relationship is not dispositive, and subterfuges are not countenanced.” (S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, 349.) Thus, “[e]ach service arrangement must be evaluated on its facts, and the dispositive circumstances may vary from case to case.” (Id. at p. 354.) Nonetheless, as we have noted, our review does not extend to second-guessing the findings of fact made by the trial court in support of the judgment. (Air Couriers, supra, 150 Cal.App.4th at p. 937.)
D. The Trial Court Correctly Classified Stull As An Independent Contractor
Here, the trial court concluded that Stull was an independent contractor. Our review of the record shows that substantial evidence supports the trial court’s conclusion.
Stull’s own testimony established that Aspen and Conifer exerted no control over his work as a delivery driver. Instead, Stull claimed that PharMerica was his employer based on the assertion that he “and his fellow drivers lacked any control over their delivery operations.” The trial court rejected the claim by finding that Stull could accept or decline delivery routes, hire other drivers to make deliveries for him, and decide when to make deliveries within the “delivery window times” requested by PharMerica’s customers.
Stull relies on his own testimony and assertions in challenging these findings. However, the trial court was entitled to credit the testimony of PharMerica and Aspen employees who testified that Stull suffered no penalty for turning down routes, actually hired another driver to complete routes for him on a number of occasions, and had the ability to determine when he made deliveries so long as he met the customers’ window times.
Stull’s argument depends on his contention that the company was “required to maintain all controls in conformance with Federal and State requirements for delivery of pharmaceutical controlled substances. By following the State and Federal Mandated requirements, it is not possible that [Stull] and his class of drivers could ever be anything but employees.” (Italics added.) We disagree with this contention.
Stull focuses on restrictions imposed on drivers to ensure that the pharmaceuticals (which included narcotics and other powerful drugs) reached PharMerica customers as promised. The nature of the products to be delivered made it necessary for PharMerica to require drivers to pick up the products at its pharmacy, complete routes without diversion, and to return either the signed delivery forms or undelivered drugs to the pharmacy. However, these restrictions did not preclude Stull from operating as an independent contractor.
“When one person is performing work in which another is beneficially interested, the latter is permitted to exercise a certain measure of control for a definite and restricted purpose without incurring the responsibilities or acquiring the immunities of a master, with respect to the person controlled. [Citations.] Even one who is interested primarily in the result to be accomplished by certain work is ordinarily permitted to retain some interest in the manner in which the work is done without rendering himself subject to the peculiar liabilities which are imposed by law upon an employer.” (Millsap v. Federal Express Corp. (1991) 227 Cal.App.3d 425, 432 (Millsap), quoting Bohanon v. James McClatchy Publishing Co. (1936) 16 Cal.App.2d 188, 199 (Bohanon).)
The Millsap court held that delivery drivers for a national delivery company were independent contractors even though drivers were required to begin their routes at the company, to deliver packages at specified times and in a particular order, and to obtain customer signatures for each delivery. (Millsap, supra, 227 Cal.App.3d at p. 431.) In Millsap, as here, drivers supplied their own vehicles, paid for their own gas and repairs, were paid by the route rather than by the hour, and could accept or decline deliveries as they wished. (Ibid.)
PharMerica’s need to ensure that deliveries reached customers as promised did not preclude it from engaging independent contractors to make deliveries. Crediting Stull’s argument would mean that any company imposing controls to guarantee the integrity of the delivery process would be precluded from hiring independent contractors to make deliveries. Such a result is untenable and contrary to Millsap. (Millsap, supra, 227 Cal.App.3d at p. 431; see also Bohanon, supra, 16 Cal.App.2d at p. 199 [newspaper deliverers held to be independent contractors even though they were precluded from allowing others to complete their routes or distributing other newspapers, and were required to make efforts to increase newspaper subscriptions].)
Stull’s own actions provide further support for the trial court’s conclusion that he operated as an independent contractor. Stull signed a contract with Aspen in which he agreed that he was an independent contractor. To this end, Stull produced his own business card and posted an online advertisement for his delivery services. On his income tax forms, Stull listed himself as a sole proprietor and deducted his expenses. He did not seek reimbursement of his expenses from PharMerica or Aspen. And, he never told anyone that he considered himself to be a PharMerica employee.
Stull points out that Aspen withheld an amount to cover his occupational accident insurance. Thus, he contends that the withholding showed that he was treated as an employee. However, the evidence at trial established that Stull asked for the insurance premium be withheld from his payments. Consequently, Aspen deducted the premium from Stull’s paychecks as a matter of request rather than in recognition of his status as an employee.
Stull also argues that he was an employee based on this court’s decision in Air Couriers, supra, 150 Cal.App.4th 923. Stull asserts that, as in Air Couriers, he received pay on regularly scheduled paydays, drove “regular routes, ” and “worked regular schedules.” However, Air Couriers is readily distinguishable from the instant case.
In Air Couriers, we affirmed the trial court’s conclusion that the delivery drivers in that case were employees of the defendants. (Air Couriers, supra, 150 Cal.App.4th at p. 926.) The evidence in Air Couriers showed that the defendants’ courier businesses had the same primary function as that performed by their delivery drivers. (Id. at p. 938.) The drivers, “as a practical matter, ” did not turn down delivery routes. (Id. at pp. 937-938.) Moreover, the company used dispatchers who sent drivers to each delivery, imposed deadlines for each delivery, and were notified at the completion of each delivery. (Id. at p. 938.)
In contrast to Air Couriers, Stull was not “performing an integral and entirely essential aspect” of PharMerica’s business. (Air Couriers, supra, 150 Cal.App.4th at p. 938.) PharMerica provided medical consulting services, formulated custom packages of pharmaceuticals for particular patients, and supplied medical equipment. PharMerica was not a delivery company as in Air Couriers. Moreover, Stull retained far more freedom en route than did the drivers in Air Couriers. Stull was not controlled by a dispatcher for each delivery nor did he have to check in at any time during the five-hour delivery runs. He was able to select the route himself and to determine when to make deliveries within the window times of PharMerica’s clients. In short, PharMerica did not exercise the same level of control over Stull as in Air Couriers.
Finally, Stull relies on section 2750.5 to contend that the Labor Code sets forth a rebuttable presumption that he was an employee because he was required to operate with a license. However, as Stull acknowledges, section 2750.5 applies only to construction contractors. “Labor Code section 2750.5 places responsibility for the payment of unemployment fund contributions and various taxes on hirers of unlicensed contractors. (Hunt Building Corp. v. Bernick (2000) 79 Cal.App.4th 213, 218-220.) The legislative history of Labor Code section 2750.5 indicates that it was intended to ‘help end the “subterranean economy” where contractors hire unlicensed subcontractors and pay them in cash, resulting in the “loss of large sums in taxes, employee social insurance contributions, and employee pension funds.”’ [Citations.]” (Smith v. Workers’ Comp. Appeals Bd. (2002) 96 Cal.App.4th 117, 127.) Stull did not work for PharMerica as a construction contractor. Thus, section 2750.5 does not apply.
In pertinent part, section 2750.5 provides: “There is a rebuttable presumption affecting the burden of proof that a worker performing services for which a license is required pursuant to Chapter 9 (commencing with § 7000) of Division 3 of the Business and Professions Code, or who is performing such services for a person who is required to obtain such a license is an employee rather than an independent contractor.”
The trial court did not err in concluding that Stull was not an employee of PharMerica.
DISPOSITION
The judgment is affirmed. Respondents shall recover costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1) & (2).)
We concur: BLEASE, Acting P. J., ROBIE, J.