Yellow Cab Cooperative, Inc. v. Workers' Comp. Appeals Bd.

Decision Date16 January 1991
Docket NumberNo. A046628,A046628
Citation277 Cal.Rptr. 434,226 Cal.App.3d 1288
CourtCalifornia Court of Appeals Court of Appeals
PartiesYELLOW CAB COOPERATIVE, INC., Petitioners, v. WORKERS' COMPENSATION APPEALS BOARD and Richard Edwinson, Respondents.

Jeffrey E. D'Andre, Law Offices of Joseph D'Andre, San Francisco, for petitioners.

W.C.A.B. Legal Unit, William B. Donohoe, Asst. Secretary and Craig Dykman, Needham, Hull & Dykman, San Francisco, for respondents.

RACANELLI, Presiding Justice.

Petitioners Yellow Cab Cooperative, Inc. ("Yellow") and Golden Eagle Insurance Co. challenge a decision by the Workers' Compensation Appeals Board holding that Yellow was the employer, for workers' compensation purposes, of applicant Richard Edwinson, a cabdriver. We have concluded that the Board did not err.

I. BACKGROUND

Prior to 1976, the drivers of Yellow cabs were unionized employees. In 1976 the company went into bankruptcy. In 1979 it adopted a system under which drivers leased cabs and were no longer deemed employees of the company.

Applicant first drove a Yellow cab for about seven years starting in the mid-1960's. When the company went into bankruptcy, he quit and tried various other endeavors. In 1986, he went to Yellow's front office and applied for work as a driver. He attended a meeting between prospective drivers and a representative of Yellow. The drivers were tested on their familiarity with the city, and the Yellow spokesman "explained some of what the job required of us."

During or after this meeting applicant executed a written "Taxicab Lease Agreement" designating him as "Lessee" and Yellow Leasing Co., a division of Yellow Cab Cooperative, Inc., as "Lessor" or "Leasing Company." The lease provided in part that applicant would lease a cab for ten-hour shifts; that he would pay $56 per shift; that the lease would be automatically renewed at the end of each week; that it could be terminated by either party on prior notice; that it could be cancelled for breach without notice; that applicant was not required to render any service to Yellow; that no employment relationship existed between them; that the relationship was strictly one of lessor and lessee; that applicant was a self-employed person "free from authority and control of LEASING COMPANY"; that applicant was not eligible for workers' compensation insurance and Yellow was not obliged to provide it; that "once LESSEE takes possession of the taxicab, he or she will exercise complete discretion in its operation"; that he would not share his fares with Yellow or account to it for them; that he was not restricted in any way in the area where he could operate and was not required to use any stand, answer radio calls, or report his location; that he would display a sign in or on the cab identifying him as a self-employed lessee; that Yellow Cab would provide telephone call service, radio service, and repair and maintenance service; that it would furnish all necessary supplies except that applicant had to purchase his own gasoline; and that it would furnish liability insurance and would pay for all licenses, taxes, and fees on the cab.

Applicant testified that he signed the lease without negotiation because he was in a financial bind and needed work. He saw that there would be no workers' compensation; it was too expensive for him to get; it was not important to him then. He could have sought employment elsewhere, but he had worked for Yellow before; if he wanted to work for them he had to sign. After he started work under the lease, there was hardly any difference from when he had worked for Yellow before. The only differences were that in the old days he received fringe benefits; he was on commission with a guaranteed wage from which taxes were withheld; and he could not go to the airport.

Applicant was injured on March 3, 1988, when he was pinned between two cabs at a taxi stand. He filed a claim for workers' compensation, naming Yellow as his employer. Yellow denied that it was applicant's employer, alleging that he was a "lessee/independent contractor." After an evidentiary hearing, the workers' compensation judge (WCJ) ruled that Yellow was applicant's employer for workers' compensation purposes. The Board denied reconsideration. Yellow and its compensation insurer brought this proceeding for a writ of review. 1

II. RENDITION OF SERVICE

By statute, any person rendering "service" to another is presumed to be an employee except as excluded from that status by law. (Lab.Code, § 3357.) 2 Where an injured worker was "performing service" for a putative employer, the latter has the burden of affirmatively proving that the worker was not an employee. 3 ( § 5705.) In ruling that applicant was Yellow's employee, the WCJ cited both of these sections. Petitioners assert that this was error because applicant was not rendering or performing "service" for Yellow when he was injured.

In Laeng v. Workmen's Comp. Appeals Bd. (1972) 6 Cal.3d 771, 783, 100 Cal.Rptr. 377, 494 P.2d 1, the court held that a job applicant injured during a tryout was "in the service of the employer" for compensation purposes because his conduct was undertaken for the employer's benefit and was under the employer's direction and control. It appears that both these elements--"control" and "benefit"--were amply demonstrated here. The question of control is discussed in detail below. (See Section V.) We here address the question whether applicant's efforts as a cab driver were undertaken for Yellow's benefit.

Contrary to Yellow's portrayal here, the essence of its enterprise was not merely leasing vehicles. It did not simply collect rent, but cultivated the passenger market by soliciting riders, processing requests for service through a dispatching system, distinctively painting and marking the cabs, and concerning itself with various matters unrelated to the lessor-lessee relationship. Applicant testified that he and other drivers were instructed in "service" and "courtesy," i.e., "being properly presented in our dress, keeping the cabs clean, going on calls that we were sent on and being courteous and helpful to the public." Written radio regulations provided, among other things, "Never just sit there waiting and/or blasting your horn unless you have been told to do so by the dispatcher. [p] In case of disputes with other drivers about who should get the call, never argue about it in front of customers."

We follow courts elsewhere in holding that Yellow's enterprise consists of operating a fleet of cabs for public carriage. (See Central Management v. Industrial Com'n (App.1989) 162 Ariz. 187, 781 P.2d 1374, 1377-1378; Globe Cab Co. v. Industrial Commission (1981) 86 Ill.2d 354, 55 Ill.Dec. 928, 932, 427 N.E.2d 48, 52; Hannigan v. Goldfarb (App.Div.1958) 53 N.J.Super. 190, 147 A.2d 56, 62.) The drivers, as active instruments of that enterprise, provide an indispensable "service" to Yellow; the enterprise could no more survive without them than it could without working cabs. Thus the factual predicate was laid for application of sections 3357 and 5705, subdivision (a).

III. PRESUMPTION OF EMPLOYMENT

Petitioners object to the WCJ's reliance on section 3357 on the further ground that the statutory presumption of employment is inapplicable by its terms when the putative employer asserts that the worker was an independent contractor. For this proposition they cite Mission Ins. Co. v. Workers' Comp. Appeals Bd. (1981) 123 Cal.App.3d 211, 176 Cal.Rptr. 439, where the court said that the statute "does not apply to a person rendering service for another as an independent contractor" and "[w]hether the applicant ... was an independent contractor or an employee is the very issue to be decided." (123 Cal.App.3d at p. 226, 176 Cal.Rptr. 439.)

Concededly, the statute is somewhat tautological. However, we know of no other authority which holds it entirely inapplicable where the injured worker is contended to be an independent contractor. Several cases have cited the statute in such a context. (E.g., S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, 256 Cal.Rptr. 543, 769 P.2d 399; Germann v. Workers' Comp. Appeals Bd. (1981) 123 Cal.App.3d 776, 783, 176 Cal.Rptr. 868; Johnson v. Workmen's Comp. Appeals Bd. (1974) 41 Cal.App.3d 318, 321, 115 Cal.Rptr. 871.) It is best understood as creating a presumption that a service provider is presumed to be an employee unless the principal affirmatively proves otherwise.

Indeed the supposed inapplicability of section 3357 is of little significance given the meaning generally attributed to section 5705, subdivision (a), supra (footnote 3). The Supreme Court recently described that section as creating "a general presumption that any person 'in service to another' is a covered 'employee.' " (Borello, supra, 48 Cal.3d at p. 354, 256 Cal.Rptr. 543, 769 P.2d 399.) In the same opinion it cited section 3357 in connection with the burden of proof. (Id. at p. 349, 256 Cal.Rptr. 543, 769 P.2d 399.) Whether these statutes are described in terms of a presumption, an affirmative defense, or an allocation of the burden of proof, the effect is the same: the employer must show that the applicant is not entitled to the benefits of the Act. (See § 3202; Laeng v. Workmen's Comp. Appeals Bd., supra, 6 Cal.3d 771, 777, 100 Cal.Rptr. 377, 494 P.2d 1.) Therefore if the WCJ erred in citing section 3357, the error was harmless.

IV. EFFECT OF COMMON-LAW AUTHORITIES

The traditional definition of "employment" evolved at common law to delineate the hirer's vicarious liability for the tortious acts of the person hired. (Borello, supra, 48 Cal.3d at p. 350, 256 Cal.Rptr. 543, 769 P.2d 399.) Although a number of "secondary" indicia were considered, the primary factor in drawing the distinction was the degree of "supervisory power" possessed by the principal. (Ibid.) Traditionally, employment was found only if the principal possessed "the...

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