Some Control Is Just Fine: Ninth Circuit Upholds Independent Contractor Status in Jones v. Royal Admin. Servs.

Just the other week, in Jones v. Royal Admin. Servs., the Ninth Circuit reaffirmed the federal common law standard for distinguishing agents from independent contractors and upheld the independent contractor status of telemarketers providing direct sales services for a company, Royal Administration Services, Inc. (“Royal”).

At issue were telemarketers employed by All American Auto Protection, Inc. (“AAAP”), one of about twenty marketing vendors used by Royal to sell vehicle service contracts.  Several recipients of these telemarketing calls filed suit, first against AAAP and then against Royal, alleging violations of the Telephone Consumer Protection Act (“TCPA”).  The telemarketing call recipients alleged that Royal was vicariously liable because the AAAP telemarketers were Royal’s agents.  Royal filed for summary judgment, asserting that the AAAP telemarketers were not its agents, but rather independent contractors.  The district court granted summary judgment for Royal.

The Ninth Circuit affirmed the decision, citing ten factors in determining independent contractor status: (1) the control exerted by the employer; (2) whether the one employed is engaged in a distinct occupation; (3) whether the work is normally done under the supervision of an employer; (4) the skill required; (5) whether the employer supplies tools and instrumentalities [and the place of work]; (6) the length of time employed; (7) whether payment is by time or by the job; (8) whether the work is in the regular business of the employer; (9) the subjective intent of the parties; and (10) whether the employer is or is not in business.  The court emphasized that “the ‘extent of control exercised by the [principal]’ is the ‘essential ingredient’” in the agent vs. independent contractor determination, but cautioned that “[t]hese factors are not exhaustive” and that they merely “guide our analysis.”

Significantly, the court found that Royal did exercise some control over the telemarketers, but that the control did not destroy their independent contractor status. As evidence of control, the court identified that Royal conducted some training of the telemarketers, had some oversight of AAAP’s operations and also required AAAP and its telemarketers to maintain records of telemarketing calls, provide weekly reports, handle payments to Royal, follow Royal guidelines and procedures and use Royal scripts and materials.  The court also concluded that the telemarketers’ services were a regular part of Royal’s business, but found that this too did not remove the telemarketers’ independent contractor status.

On the other hand, and favoring independent contractor status, the court identified that Royal did not have Royal employees performing these services and did not control the telemarketers’ hours worked, pay them by the hour, set their quotas or directly supervise their calls.  Also favoring contractor status, the court noted that AAAP was an independent and distinct business from Royal and supplied most (but not all) of the tools and instrumentalities for the work.  It also focused on the fact that the telemarketers did not only sell Royal vehicle service contracts, but instead sold for multiple other companies as well.

After balancing these factors, the Ninth Circuit determined that that the telemarketers were independent contractors and thus Royal could not be held vicariously liable.

This Ninth Circuit decision is an important reminder and authority for the proposition that a company exercising some control over workers and engaging with workers who perform services that are a regular part of the business of the company does not necessarily defeat the workers’ independent contractor status.