616 F.3d 895 (9th Cir. 2010), 07-16487, Narayan v. EGL, Inc.

Docket Nº:07-16487.
Citation:616 F.3d 895
Opinion Judge:KORMAN, District Judge:
Party Name:Mohit NARAYAN; Hanna Rahawi; and Thomas Heath, Plaintiffs-Appellants, v. EGL, INC.; Eagle Freight Systems, Inc.; and Does 1-10, Defendants-Appellees.
Attorney:Stacey Leyton (argued) and Michael Rubin (briefed), Altshuler Berzon, LLP, San Francisco, CA, for the plaintiffs-appellants. Aaron Kaufmann (briefed), David Pogrel, Hinton, Alfert & Sumner, Walnut Creek, CA, for the plaintiffs-appellants. R. Ted Cruz (argued), Morgan, Lewis & Bockius, LLP, Housto...
Judge Panel:Before: HAWKINS and SIDNEY R. THOMAS, Circuit Judges, and EDWARD R. KORMAN,[*] District Judge.
Case Date:July 13, 2010
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 895

616 F.3d 895 (9th Cir. 2010)

Mohit NARAYAN; Hanna Rahawi; and Thomas Heath, Plaintiffs-Appellants,

v.

EGL, INC.; Eagle Freight Systems, Inc.; and Does 1-10, Defendants-Appellees.

No. 07-16487.

United States Court of Appeals, Ninth Circuit.

July 13, 2010

Argued and Submitted Nov. 4, 2009.

Amended Aug. 5, 2010.

Page 896

Stacey Leyton (argued) and Michael Rubin (briefed), Altshuler Berzon, LLP, San Francisco, CA, for the plaintiffs-appellants.

Aaron Kaufmann (briefed), David Pogrel, Hinton, Alfert & Sumner, Walnut Creek, CA, for the plaintiffs-appellants.

R. Ted Cruz (argued), Morgan, Lewis & Bockius, LLP, Houston, TX, and Y. Anna Suh (briefed), Hunton & Williams LLP, San Francisco, CA, for the defendants-appellees.

Robert R. Roginson, Division of Labor Standards Enforcement, Department of Industrial Relations, State of California, San Francisco, CA, Amicus Curiae in support of the plaintiffs-appellants.

Matthew Goldberg, The Legal Aid Society-Employment Law Center, San Francisco, CA, and Cynthia Rice, California Rural Legal Assistance Foundation, Sacramento, CA, Amici Curiae in support of the plaintiffs-appellants.

Appeal from the United States District Court for the Northern District of California, Ronald M. Whyte, United States District Judge, Presiding. D.C. No. CV-05-04181-RMW.

Before: HAWKINS and SIDNEY R. THOMAS, Circuit Judges, and EDWARD R. KORMAN,[*] District Judge.

ORDER

Appellees' Petition for Panel Rehearing is granted for the limited purpose of amending the Opinion, without further oral argument.

The Opinion filed July 13, 2010, slip op. 10069, is amended as follows:

On page 10084, line 20: ‹ This is not all.› is deleted.

On page 10085, second indented paragraph, first sentence: ‹ The fact that the

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Drivers here had contracts " expressly acknowledging that they were independent contractors" is simply not significant under California's test of employment.› is replaced with ‹ That the Drivers here had contracts " expressly acknowledging that they were independent contractors" is simply not dispositive under California's test of employment.› .

No subsequent petitions for rehearing and rehearing en banc may be filed.

KORMAN, District Judge:

OPINION

The California Labor Code (" Labor Code" ) confers certain benefits on employees that it does not afford independent contractors. Of particular relevance here are the provisions that, inter alia, require employers to pay overtime compensation, Cal. Lab.Code §§ 510 & 1194, prohibit employers from making certain improper deductions from wages, Cal. Lab.Code § 221, reimburse employees for necessary business expenses, Cal. Lab.Code § 2802, and provide off-duty meal periods, Cal. Lab.Code §§ 226.7 & 512. These provisions are part of a broad regulatory policy defining the obligations that " ‘ the law places on an employer without regard to the substance of its contractual obligations to its employee.’ " Nedlloyd Lines B.V. v. Super. Ct., 3 Cal.4th 459, 11 Cal.Rptr.2d 330, 834 P.2d 1148, 1153 (1992) (quoting Foley v. Interactive Data Corp., 47 Cal.3d 654, 254 Cal.Rptr. 211, 765 P.2d 373, 394 (1988)). As Judge Easterbrook observed in a closely analogous context, statutes enacted to confer special benefits on workers are " designed to defeat rather than implement contractual arrangements." Sec'y of Labor v. Lauritzen, 835 F.2d 1529, 1545 (7th Cir.1987) (Easterbook, J., concurring).

This appeal from a judgment of the United States District Court for the Northern District of California granting the motion of an employer for summary judgment dismissing claims for benefits under the Labor Code principally presents the issue whether, assuming the existence of an employer-employee relationship in California, the employer may avoid its obligations under the Labor Code by inserting a clause in an employer-drafted pre-printed form contract in which: (1) the employee acknowledges that he is an independent contractor and (2) agrees that the contract would be interpreted in accordance with the laws of another jurisdiction where such an agreement is generally enforceable.

BACKGROUND

EGL, the employer, is a global transportation, supply chain management and information services company incorporated under the laws of Texas and headquartered in Texas.1 EGL's services include, inter alia, " air and ocean freight forwarding, customs brokerage, [and] local pickup and delivery service." EGL operates through a network of over 400 facilities located in over 100 countries. One of the many aspects of EGL's business is domestic delivery services. Such services may be provided either as part of EGL's freight-forwarding operations or for customers requiring local pick-up and delivery services.

Mohit Narayan, Hanna Rahawi and Thomas Heath (the " Drivers" ) were residents of California who were engaged to provide freight pick-up and delivery services for EGL in California. All three Drivers signed agreements with EGL for

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" Leased Equipment and Independent Contractor Services" (the " Agreements" ). The Agreements provided that the " intention of the parties is to ... create a vendor/vendee relationship between Contractor and [EGL]," and acknowledged that " [n]either Contractor nor any of its employees or agents shall be considered to be employees of" EGL. The terms of the Agreements provide, inter alia, that the Drivers " shall exercise independent discretion and judgment to determine the method, manner and means of performance of its contractual obligations," although EGL retained the right to " issue reasonable and lawful instructions regarding the results to be accomplished."

Notwithstanding the terms of the Agreements, the Drivers filed a complaint in California against EGL and one of its subsidiaries, Eagle Freight Services (collectively, " EGL" ), alleging that they were EGL employees who were deprived of benefits conferred upon them by the Labor Code. They sought money damages for unpaid overtime wages, business expenses, meal compensation and unlawful deductions from wages as well as other relief, including statutory penalties.

After the case was removed pursuant to 28 U.S.C. § 1332, EGL moved for summary judgment arguing that, under the terms of the Agreements, the Drivers were not employees. Instead they were independent contractors who were not entitled to the benefits conferred upon employees by the Labor Code. Relying on a choice-of-law clause in the Agreements, the district court held that the law of Texas applied, and that declarations in the Agreements that the Drivers were independent contractors rather than employees, compelled the holding that they were independent contractors as a matter of law. Moreover, although California does not regard such declarations as controlling, and applies a multi-factor analysis in which the intent of the parties is one of over a dozen and a half factors, the district court held, without undertaking any analysis of the relevant factors, that the result would be the same under California law. Narayan v. EGL, Inc., No. CV-05-04181-RMW, 2007 WL 2021809, at *9 n. 12 (N.D.Cal. July 10, 2007). Consequently, the district court granted EGL's motion for summary judgment.

DISCUSSION

I. Choice-of-Law

EGL argues that the choice-of-law clause in the Agreements, which provides that the contracts " shall be interpreted under the laws of the State of Texas," applies to the...

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