Hennighan v. Insphere Insurance Solutions, Inc et al

Filing 93

ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT. Insphere's motion for summary judgment is GRANTED and Hennighan's motion for partial summary judgment is DENIED. Signed by Judge William H. Orrick on 04/21/2014. (jmdS, COURT STAFF) (Filed on 4/21/2014)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 THOMAS HENNIGHAN, Case No. 13-cv-00638-WHO Plaintiff, 8 v. ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT 9 INSPHERE INSURANCE SOLUTIONS, INC., 11 United States District Court Northern District of California 10 Defendant. Re: Dkt. Nos. 59, 65 12 INTRODUCTION 13 14 Determining whether an individual is an independent contractor or employee requires a 15 fact-intensive analysis that is not often susceptible to resolution on summary judgment. Plaintiff 16 Thomas Hennighan is an insurance sales agent who signed an independent contractor agreement 17 with defendant Insphere Insurance Solutions, Inc., and each party has asked me to determine his 18 classification as a matter of law. Hennighan was paid only commissions, had his own clients, kept 19 his own hours (more than 50 percent of which were spent out of the office), and paid his own 20 taxes and expenses. While Insphere had certain expectations about his sales results, it did not 21 exercise sufficient control over the means and methods that Hennighan used to do his job to make 22 him an employee. No jury could reasonably find differently, so I will GRANT Insphere’s motion 23 for summary judgment and DENY Hennighan’s motion for partial summary judgment. FACTUAL BACKGROUND 24 25 Insphere is in the business of selling insurance policies. Hennighan used to sell policies 26 for it. His relationship with Insphere began on April 23, 2010, when he signed a contract entitled 27 “Independent Insurance Agent Commission-Only Contract” with Insphere. Pl. Dep. Ex. 1. The 28 agreement stated, 1 2 3 4 5 6 7 8 9 10 United States District Court Northern District of California 11 12 SECTION VII – INDEPENDENT CONTRACTOR By executing this Contract, I [Hennighan] recognize and understand that I am an independent contractor and nothing in this Contract or otherwise is intended to create an employer/employee relationship between Me and Insphere or an Insurance Company. . . . As an independent contractor, I will decide when, where, and the manner and means to conduct My business activities. While Insphere and/or its agents or representatives may from time to time provide Me with models and guidelines, I recognize and acknowledge that I have complete discretion to set My business hours and schedule. As an independent contractor, I will be responsible for payment of all expenses and fees incurred by Me, including but not limited to business overhead, transportation, state and federal income tax, self-employment tax, social security tax, unemployment tax and workers’ compensation. I am responsible for and shall pay all taxes, duties, assessments and other government charges related to My performance under this Contract. If Insphere or an Insurance Company, or any of their respective agents or representatives, takes a position that I feel is contrary to My independent contractor status or requires Me to act in such a manner that I believe to be inconsistent with My independent contractor status, I agree to notify Insphere immediately . . . of such conduct. Pl. Dep. Ex. 1, Section VII, at 6-7. Either Hennighan or Insphere could terminate the agreement at 13 will. Pl. Dep. Ex. 1, Section X, at 8. Hennighan believed that he was hired to be a salesman for 14 Insphere. Pl. Dep. 68:2-8. As part of this agreement, Hennighan would receive a commission 15 whenever he successfully sold a policy for Insphere. Pl. Dep. 88:18-89:8. Hennighan read the 16 agreement before he signed it. Pl. Dep. 134:3-5. 17 18 On the same day that he signed the contract, Hennighan also signed an “Administrative Fee Acknowledgement,” which stated, “[a]s an independent contractor, I agree that I will be 19 responsible for payment of all expenses and fees incurred by Me, or by Insphere on My behalf, 20 including the $130.00 administrative fee required to process My Contract application, appointment 21 fees, business cards and other miscellaneous fees related to My Contract.” Pl. Dep. Ex. 2. 22 Shortly thereafter, in May or June 2010, Hennighan paid for and took online training to get 23 a California health and life insurance license. Pl. Dep. 37:5-17. He paid for and received that 24 license in June 2010. Pl. Dep. 35:7-18. He also paid for and took continuing education 25 requirement classes in order to maintain his license. Pl. Dep. 38:25-39:22. In 2012, he paid for 26 the renewal of his license. Pl. Dep. 35:19-24. There is no evidence that he ever received or 27 requested reimbursement for these expenses. 28 2 1 Insphere offered various insurance products and carriers that Hennighan could sell. Pl. 2 Dep. 58:1-11. These products included life and health insurance, and supplemental dental, vision, 3 and disability policies. Pl. Dep. 70:19-22. Although Insphere brought certain products to 4 Hennighan’s attention, Hennighan could decide which products he would or would not sell. Pl. 5 112:3-19. 6 Hennighan had the opportunity to pursue prospective policyholders from a variety of sources. Schooler Mot. Decl. (Dkt. No. 61) ¶ 3. Hennighan testified that there are “countless” 8 ways to get “leads,” i.e., potential clients, including “talk[ing] to people on the street,” purchasing 9 them, or through networking. Pl. Dep. 79:7-19, 80:10-20. Hennighan purchased leads and even 10 paid for a membership in a “tip club” to seek leads. Pl. Dep. 80:10-20, 81:14-82:5. Ultimately, 11 United States District Court Northern District of California 7 successful leads would become Hennighan’s own clients. Pl. Dep. 131:2-11. However, a witness 12 for Hennighan claims that Insphere “owns and controls all sales prospects and clients.” Shirley 13 Umamoto Mot. Decl. (Dkt. No. 68) ¶ 12. 14 For work, Hennighan paid for or provided his own laptop (Pl. Dep. 119:22-120:6), cellular 15 phone and monthly usage fees (Pl. Dep. 120:11-22), printer (Pl. Dep. 121:5-18), paper and toner 16 (Pl. Dep. 122:6-13), and car (Pl. Dep. 122:14-124:3). Hennighan also paid for the insurance and 17 gas on his car, even when he used it while doing work for Insphere. Pl. Dep. 123:14-20. There is 18 no evidence that he ever received or requested reimbursement for these expenses. Insphere 19 provided Hennighan with access to its San Jose, California, office for use when meeting clients, 20 but he did not have an assigned office. Pl. Dep. 117:2-23. He had to sign up to use office space 21 for a day. Id. Hennighan worked outside of the office more than 50 percent of the time. Pl. Dep. 22 237:15-238:7. He kept his own office in Santa Cruz, California. Pl. Dep. 183:2-16. 23 Hennighan could sell insurance anywhere in California and did not need approval to set up 24 an appointment with a potential client. Pl. Dep. 77:13-20, 146:23-147:2. He initially worked 25 three days a week in the San Jose office, but then decided to work either at home or in his Santa 26 Cruz office. Pl. Dep. 183:2-16. Much of his work was done at clients’ houses, in public settings, 27 or on the road. Pl. Dep. 119:17-19, 183:2-16, 237:15-238:7. 28 Larry Roth was the San Jose office’s Agency Manager during the last few months of 3 1 Hennighan’s contract with Insphere and remains the manager to this day. Roth Decl. (Dkt. No. 2 60) ¶¶ 1, 3. Roth conducts a weekly sales meeting that typically occurs on Tuesday and usually 3 lasts around an hour and one-half to two hours. Roth Decl. ¶ 2. While attendance at the sales 4 meetings by agents is voluntary, he generally encourages them to attend if they feel it would be 5 helpful for them to share marketing and related experiences with other agents. Id. Occasionally, 6 agents are asked to attend product training to ensure that they comply with rules and regulations 7 regarding the marketing of insurance and related products. Id. 8 9 Hennighan, however, says that he was “required” to attend annual regional meetings, to participate in a weekly call-in team meeting, and to participate on a call-in production report meeting three times a week. Hennighan Mot. Decl. (Dkt. No. 66) ¶¶ 12-15. He says that Insphere 11 United States District Court Northern District of California 10 was careful about not calling the meetings “mandatory,” but there was some expectation that they 12 had to be attended. Pl. Dep. 142:20-25. Insphere also “strenuously advised” him that if he wanted 13 to remain “employed by Insphere,” he had to attend every such meeting. Hennighan Mot. Decl. 14 ¶ 16. Other employees also testified that sales agents were required to participate in weekly call- 15 ins and meetings. Greg Umamoto Mot. Decl. (Dkt. No. 69) ¶ 5; Shirley Umamoto Mot. Decl. ¶ 3. 16 Agents were held accountable and threatened with termination if they missed phone-in meetings. 17 O’Connell Mot. Decl. (Dkt. No. 67) ¶ 31-33. 18 Aside from the various meetings, agents “are not regularly in attendance” at the San Jose 19 office but rather market and sell insurance and related products, and communicate with potential 20 policyholders or other customers, on their own schedules and as they see fit. Roth Decl. ¶ 2. But 21 one employee claims that sales agents are required to go into the San Jose office regularly. Shirley 22 Umamoto Mot. Decl. ¶ 22. Roth asserts that other than periodically reviewing agents’ sales 23 reports, he did not set an agent’s work schedule or supervise or monitor an agent’s work. Roth 24 Decl. ¶ 2. He contends that he did not formally evaluate agents’ or Hennighan’s work. Roth Decl. 25 ¶ 3. However, a former employee says that “Insphere requires performance evaluations” and sales 26 agents are required to fill out goal sheets against which they are held accountable. Shirley 27 Umamoto Mot. Decl. ¶ 17. 28 Insphere paid Hennighan commissions; it did not provide him with a salary or wages. Pl. 4 1 Dep. 88:10-89:4. He never filled a time sheet for Insphere. Pl. Dep. 88:14-17. (However, 2 insurance carriers would sometimes award Hennighan bonuses if he sold enough of their policies. 3 Pl. Decl. 99:1-25.) Because Hennighan was free to establish his own schedule and determine the 4 amount of investment, time, and otherwise that he wished to make in selling Insphere products, 5 Hennighan bore the risk of profit or loss by controlling the amount of time, effort, and financial 6 investment he chose to put into his sales activities. Schooler Mot. Decl. ¶ 2. Insphere did not 7 provide him with vacation pay, holiday pay, or group health insurance, and no one ever told him 8 that he would be eligible for it. Pl. Dep. 86:22-87:17. No one at Insphere ever told him that he 9 could not take a lunch or rest break when he wanted to. Pl. Dep. 140:21-142:4, 241:24-242:4. 10 Two witnesses for Hennighan claim that Insphere expects its sales agents to not have United States District Court Northern District of California 11 outside businesses or to sell other companies’ products. Shirley Umamoto Mot. Decl. ¶¶ 31, 34; 12 O’Connell Mot. Decl. ¶ 19. One of them claims that Insphere agents were not allowed to have 13 unapproved outside appointments and that she was told to warn a sales agent that if the agent did 14 not give up her outside appointments, she would be terminated. O’Connell Mot. Decl. ¶¶ 4, 5. 15 Hennighan sold insurance policies outside of his relationship with Insphere because he felt 16 that he needed more work. Pl. Dep. 107:16-18. Through Insphere, Hennighan had appointments 17 to sell for insurance carriers such as Aetna, Health Net, HealthMarkets, Blue Cross Anthem, 18 Genworth, and ING, but Insphere did not get its agents the ability to sell anunuities. Pl. Dep. 19 103:9-19, 105:3-18. So Hennighan got his own appointments outside of Insphere with Aviva and 20 other insurance companies to sell annuities. Pl. Dep. 103:9-104:23, 136:24-137:1. He reached out 21 to Steven Valdez of First Authority to get an annuity contract because Hennighan felt that his 22 commissions were being cut back by Insphere and he needed to make money. Pl. Dep. 106:1- 23 107:13. 24 Hennighan contracted with Insphere to only sell policies throughout California. Pl. Dep. 25 145:20-23, 146:23-147:2. Through Valdez, Hennighan became licensed to sell insurance in 26 Arizona, Texas, and South Carolina. Pl. Dep. 146:4-22. In addition, Hennighan was appointed 27 with Cigna Health and Life Insurance Company (Pl. Dep. 109:12-16, 111:6-12), Humana 28 Insurance Company (Pl. Dep. 109:17-23), Assurety Life (Pl. Dep. 112:20-22), Blue Shield of 5 1 California (Pl. Dep. 112:25-113:18), Time Insurance Company (Pl. Dep. 113:21-114:1), Golden 2 Rule Insurance Company (Pl. Dep. 114:9-14), Guarantee Trust Life (Pl. Dep. 114:15-16), and 3 Royal Neighbors of America (Pl. Dep. 115:10-11).1 Hennighan reported on his tax returns that he did not receive any wages in 2010, 2011, and 4 5 2012. Pl. Dep. Exs. 4 (2010 tax return) & 5 (2012 tax return); McGuigan Decl. Ex. 6 (2011 tax 6 return). Instead, Hennighan reported earning business income and deducted various business 7 expenses, e.g., for his cell phone, lead purchases, and driving mileage. Id. On November 18, 2011, Hennighan filed a complaint with the California Division of Labor 8 Standards Enforcement alleging that he was improperly treated as an exempt employee and that 10 Insphere did not pay all his wages. Pl. Dep. Ex. 6. On February 2, 2012, after a conference was 11 United States District Court Northern District of California 9 held to determine the validity of the claim, a Deputy Labor Commissioner determined that 12 Hennighan was an independent contractor. Pl. Dep. Ex. 8. Roth never met Hennighan after he was assigned to the San Jose office in February 2012 13 14 until he was deposed in this action. Roth Decl. ¶¶ 1, 4. After Roth started in San Jose, Hennighan 15 had no contact with the office, sold no insurance policies or other products, and attended no 16 meetings at the office. Roth Decl. ¶ 4. Based on Hennighan’s inactivity for about two months, 17 Roth contacted Insphere’s corporate office in April 2012 to initiate termination of Hennighan’s 18 contract. Id. Roth claims that his decision was not influenced by Hennighan’s complaint to the 19 California Labor Commissioner and he is not sure he was even aware of Hennighan’s complaint 20 when he initiated the termination. Id. On April 26, 2012, Insphere sent Hennighan a contract 21 termination letter based on Roth’s recommendation. Roth Decl. ¶ 5; Smith Decl. Ex. 3. Mark 22 Smith, Insphere’s Chief Operating Officer, did not know that Hennighan had filed a complaint 23 against Insphere when he signed the termination letter based on Roth’s recommendation. Smith 24 Decl. ¶ 2. 25 26 27 28 1 At the hearing on the motion, Hennighan’s counsel claimed that Hennighan had business outside of Insphere without Insphere’s knowledge. Insphere’s counsel replied that it was Hennighan’s own supervisor who put Hennighan in touch with First Authority. 6 PROCEDURAL BACKGROUND 1 2 Hennighan filed this action in the Superior Court of California, County of Santa Clara, on 3 January 22, 2013, and it was removed to this Court on February 13, 2013. Dkt. No. 1. After 4 several motions to dismiss and various stipulations, Insphere remains the sole defendant. The 5 Second Amended Complaint contains the following causes of action: (1) unlawful discharge, 6 discrimination, and retaliation under California Labor Code Sections 98.6 and 1102.5; (2) 7 wrongful termination in violation of public policy codified in California Labor Code Sections 8 98.6, 1102.5, 204, 226, 226.7, 227, 510, 512, 1194, and 2802 and Business and Professions Code 9 Section 17200; (3) failure to immediately pay wages upon discharge under California Labor Code Section 201; (4) failure to make agreed upon vacation payments under California Labor Code 11 United States District Court Northern District of California 10 Sections 227 and 227.3; (5) failure to provide itemized wage statements under California Labor 12 Code Section 226; (6) failure to provide meal and break periods under California Labor Code 13 Sections 226.7 and 512; (7) failure to pay overtime wages under California Labor Code Sections 14 510 and 1194; (8) failure to indemnify work-related expenditures under California Labor Code 15 Section 2802; (9) unlawful, unfair, and fraudulent business practices under Business and 16 Professions Code Section 17200 as evidenced by violation of public policy and California Labor 17 Code Sections 98.6, 1102.5, 204, 226, 226.7, 227, 510, 512, 1194, and 2802; and (10) violations 18 warranting penalties under the Private Attorneys General Act of 2004, California Labor Code 19 Sections 2698 and 2699. 20 On March 12, 2014, Insphere filed a motion for summary judgment on all causes of action. 21 Dkt. No. 59. On the same day, Hennighan filed a motion for partial summary judgment on the 22 issue of his classification. Dkt. No. 65. A hearing on the motions was held on April 16, 2014. 23 24 LEGAL STANDARD Summary judgment is proper “if the movant shows that there is no genuine dispute as to 25 any material fact and the movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a). 26 The moving party bears the initial burden of demonstrating the absence of a genuine issue of 27 material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The moving party, however, 28 has no burden to disprove matters on which the non-moving party will have the burden of proof at 7 1 trial. The moving party need only demonstrate to the court “that there is an absence of evidence to 2 support the non[-]moving party’s case.” Id. at 325. 3 Once the moving party has met its burden, the burden shifts to the non-moving party to 4 “designate specific facts showing a genuine issue for trial.” Id. at 324 (quotation marks omitted). 5 To carry this burden, the non-moving party must “do more than simply show that there is some 6 metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 7 475 U.S. 574, 586 (1986). “The mere existence of a scintilla of evidence . . . will be insufficient; 8 there must be evidence on which the jury could reasonably find for the [non-moving party].” 9 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). 10 In deciding a summary judgment motion, the court must view the evidence in the light United States District Court Northern District of California 11 most favorable to the non-moving party and draw all justifiable inferences in its favor. Id. at 255. 12 “Credibility determinations, the weighing of the evidence, and the drawing of legitimate 13 inferences from the facts are jury functions, not those of a judge . . . ruling on a motion for 14 summary judgment.” Id. However, conclusory or speculative testimony in affidavits is 15 insufficient to raise genuine issues of fact and defeat summary judgment. See Thornhill Publ’g 16 Co. v. GTE Corp., 594 F.2d 730, 738 (9th Cir. 1979). Similarly, “uncorroborated and self- 17 serving” testimony that “flatly contradicts [ ] prior sworn statements” cannot create a genuine 18 issue of fact. Kennedy v. Applause, Inc., 90 F.3d 1477, 1481 (9th Cir. 1996). 19 A district court need not consider evidence in the record “unless it is brought to the district 20 court’s attention” because the court is “not required to comb the record to find some reason” to 21 grant or deny summary judgment; rather, “if a party wishes the court to consider [evidence for a 22 particular issue], the party should bring that desire to the attention of the court.” Carmen v. S.F. 23 Unified Sch. Dist., 237 F.3d 1026, 1029 (9th Cir. 2001) (citation and internal punctuation 24 omitted); see also Keenan v. Allen, 91 F.3d 1275, 1279 (9th Cir. 1996) (stating that the court is not 25 obligated “to scour the record in search of a genuine issue of triable fact”). 26 27 28 8 DISCUSSION 1 2 I. EVIDENTIARY ISSUES 3 A. Separately Filed Evidentiary Objections 4 Civil Local Rule 7-3(a) states, “Any evidentiary and procedural objections to [a] motion 5 must be contained within the [opposition] brief or memorandum.” Civil Local Rule 7-3(c) 6 similarly states, “Any evidentiary and procedural objections to the opposition must be contained 7 within the reply brief or memorandum.” 8 Despite these provisions, both parties have filed objections (as well as responses to 9 objections) to evidence separate from their briefs and memoranda. Dkt. Nos. 77, 82, 85, 86 & 89. All these objections are STRUCK for failing to comply with the Local Rules. Hennighan’s 11 United States District Court Northern District of California 10 objections, in particular, are also unsupported and appear to have been made for an improper 12 purpose, unwarranted by existing law. I have made independent determinations on the admissibility and materiality of the 13 14 evidence presented, and admit the evidence referred to in this Order. Any other objection is 15 moot.2 16 17 18 19 20 21 22 23 24 25 26 27 28 2 Counsel for Hennighan follows the letter of Federal Rule of Civil Procedure 56(c)(1)(A), which requires parties to “cit[e] to particular parts of materials in the record” when briefing a motion for summary judgment, but does not follow its spirit. Rather than using concise language to explain why there is a genuine dispute of material fact or why Hennighan is entitled to judgment as a matter of law, counsel resorts to a heap of string cites. Nowhere does he provide argument based on the underlying sources or explain what those cites actually say. For example, in support of the simple proposition that sales agents are “closely monitored,” counsel provides nearly 60 citations, without a single parenthetical or other statement explaining what each cite says. Similarly, for the wholly unremarkable proposition that “Sales Agents, Sales Leaders, and Division Managers are transferred, promoted, and terminated by Insphere,” counsel provides nearly 50 citations. One proposition has nearly 100 items listed. See Pl. Mot. 16. Worse, some of the citations have no apparent relation to the proposition. This pattern of abuse continues for another 50 or so propositions (though with varying amounts of citations). Counsel could have wisely used his briefing pages for argument to assist his client. While counsel may suppose that he has made a record for himself simply by throwing a spaghetti of facts against the judicial wall and seeing what disputed material fact sticks, he is wrong. And the Ninth Circuit has made clear that such efforts cannot be countenanced. As the court explained in a similar context: 9 1 B. Testimony Before California Unemployment Appeals Board 2 In his memoranda in opposition to Insphere’s motion for summary judgment, Hennighan 3 cites extensively to testimony given before the California Unemployment Appeals Board.3 See 4 Mancuso Opp’n Decl. (Dkt. No. 81) Ex. A, Roth Dep. Tr. Hennighan’s counsel states that the 5 testimony is drawn from a November 2, 2012, hearing conducted with the California Employment 6 Development Department in the case of Shirley Umamoto v. Insphere Insurance Solutions, Inc. 7 Mancuso Opp’n Decl. ¶ 2. Section 1960 of the California Unemployment Insurance Code states, “Any finding of fact 8 9 or law, judgment, conclusion, or final order” of the Board “shall not be used as evidence in any separate or subsequent action or proceeding” in any court. CAL. UNEMP. INS. CODE § 1960. 11 United States District Court Northern District of California 10 Section 1952 of the Code further provides that the Board is “not bound by common law or 12 statutory rules of evidence or by technical or formal rules of procedure.” CAL. UNEMP. INS. CODE 13 § 1952. 14 Generally, California law cannot bind a federal court on rules of procedure. However, I 15 am not persuaded that testimony before the Board constitutes admissible evidence. First, 16 Hennighan has not identified any relevance between that matter and this action. Second, the 17 proceedings were not subject to the usual rules of evidence, which renders some of the testimony 18 inappropriate for consideration. Third, Insphere did not have the same motive to develop 19 testimony and rebuttal in the unemployment compensation hearing, where the stakes are much 20 lower, as they do in this action. Fourth, though Section 1960 does not apply to me, it matters that 21 22 23 24 25 26 27 28 The cases often refer to the unfairness to the district court, which is substantial, but hardly the full story. If a district court must examine reams or file cabinets full of paper looking for genuine issues of fact, as though the judge were the adverse party’s lawyer, an enormous amount of time is taken away from other litigants. Other litigants could have that judicial time, and get their cases resolved better and faster . . . . Requiring the district court to search the entire record for a genuine issue of fact, even though the adverse party does not set it out in the [ ] papers, is also profoundly unfair to the movant. Carmen, 237 F.3d at 1031. 3 The “transcript” of the proceedings was made on March 22, 2014—nearly a year and a half later—from an unauthenticated audio file. See Mancuso Opp’n Decl. ¶ 2; Ex. A, Roth Dep. Tr. at 139. 10 1 the California legislature has enacted this law and that another judge on this Court has decided to 2 follow it and deny admission of similar testimony. See Totah v. Lucasfilm Entm’t Co. Ltd., No. 3 09-cv-4051-MMC, 2010 WL 5211457, at *7 n.21 (N.D. Cal. Dec. 16, 2010) (refusing to take 4 judicial notice of transcript), aff'd, 500 F. App’x 573 (9th Cir. 2012); but see Baldwin v. Rice, 144 5 F.R.D. 102 (E.D. Cal. 1992). 6 I will not consider Hennighan’s citations to the proceedings in deciding these motions. For 7 the same reasons, I will not consider the Board’s rulings concerning a non-party, cited as authority 8 by Hennighan in his memorandum in support of his own motion for partial summary judgment, Pl. 9 Mot. (Dkt. No. 65) 10-11, in deciding that motion. C. Declarations Accompanying Hennighan’s Partial Motion For Summary Judgment 11 United States District Court Northern District of California 10 Insphere argues that Hennighan’s own declaration in support of his motion for partial 12 summary judgment should be struck because it “is rife with statements contradicting his sworn 13 deposition testimony.” Def. Opp’n (Dkt. No. 72) 3. At the summary judgment phase, credibility 14 determinations and the weighing of evidence are not functions of the court. Anderson, 477 U.S. at 15 252. Nonetheless, “[t]he general rule in the Ninth Circuit is that a party cannot create an issue of 16 fact by an affidavit contradicting his prior deposition testimony.” Kennedy v. Allied Mut. Ins. Co., 17 952 F.2d 262, 266 (9th Cir. 1991). A court is well within its discretion to disregard “sham” 18 declarations when deciding motions for summary judgment. See id. 19 Insphere is correct that Hennighan’s declaration contains conclusory assertions, without 20 any factual enhancement, that appear to contradict his deposition testimony. While I will not 21 strike Hennighan’s declaration in toto, I will only consider facts that do not appear to be a sham or 22 a blatant attempt to create a dispute of fact. 23 Insphere argues that Hennighan’s counsel’s declaration contains inappropriate factual 24 assertions that are not based on personal knowledge and make improper legal conclusions. Def. 25 Opp’n 4. For example, counsel claims, “Insphere controls every aspect of Sales Agents and Sales 26 Leaders work” and “Insphere executives send notifications talking about tracking their work, 27 conference calls, and threatening that if they do not meet Insphere expectations, they will be 28 terminated.” Mancuso Mot. Decl. (Dkt. No. 70) ¶¶ 19 & 20. As Federal Rule of Civil Procedure 11 1 56(c)(4) states, “declaration[s] used to support or oppose a motion must be made on personal 2 knowledge, set out facts that would be admissible in evidence, and show that the affiant or 3 declarant is competent to testify on the matters stated.” Many portions of counsel’s declaration do 4 not meet this standard and I will disregard them where warranted. Hennighan has also submitted the declarations of Deborah O’Connell, Greg Umamoto, and 5 6 Shirley Umamoto in support of his motion for partial summary judgment. See Dkt. Nos. 67-69. 7 While these declarations may be helpful in providing information about Insphere generally, the 8 California Court of Appeals has found it appropriate to disregard declarations in which nothing is 9 said about the plaintiff herself. See Beaumont-Jacques v. Farmers Grp., Inc., 217 Cal. App. 4th 1138, 1145-46 (2013) (“Nothing in [the] lengthy declaration mentions Appellant. We see no error 11 United States District Court Northern District of California 10 in excluding this declaration.”). The declarations proffered by Hennighan do not mention him at 12 all. While I am not bound by state rules about evidence, I find these declarations to be less helpful 13 for the reason articulated by the California Court of Appeals.4 14 II. WHETHER HENNIGHAN WAS AN INDEPENDENT CONTRACTOR 15 A. Applicable Law5 16 “Employers have varying responsibilities with respect to persons performing services on 17 their behalf. These responsibilities depend, in part, on whether those persons are classified as 18 employees or independent contractors under the Labor Code.” Cristler v. Express Messenger Sys., 19 Inc., 171 Cal. App. 4th 72, 76 (2009). Because the California Labor Code does not expressly 20 define “employee,” the common law test for employment applies. Estrada v. FedEx Ground 21 Package Sys., Inc., 154 Cal. App. 4th 1, 10 (Ct. App. 2007). “The parties’ label is not dispositive 22 and will be ignored if their actual conduct establishes a different relationship.” Id. Where a plaintiff has provided services to the employer, the plaintiff has established a 23 24 4 25 26 27 28 There are two other problems with these declarations. First, they are frequently conclusory, making legal conclusions instead of presenting reliable facts and the bases for those facts. Second, they are often vague with regard to time and context. The declarants worked for many years, in multiple positions, and under multiple entities. Yet their declarations rarely delineate when something was true and for whom it was true. I will consider any facts stated where appropriate. 5 Hennighan concedes that the parties do not appear to dispute the law that applies in this case. Pl. Reply (Dkt. No. 87) 12. 12 1 prima facie case that an employer-employee relationship existed. Robinson v. George, 105 P.2d 2 914, 917 (1940). “Once the employee establishes a prima facie case, the burden shifts to the 3 employer, which may prove, if it can, that the presumed employee was an independent 4 contractor.” Narayan v. EGL, Inc., 616 F.3d 895, 900 (9th Cir. 2010). “The right to control the means by which the work is accomplished is clearly the most 5 6 significant test of the employment relationship . . . .”6 Tieberg v. Unemployment Ins. App. Bd., 2 7 Cal. 3d 943, 950 (1970). “An independent contractor is one who renders service in the course of 8 an independent employment or occupation, following his employer’s desires only in the results of 9 the work, and not the means whereby it is to be accomplished.” Varisco v. Gateway Sci. & Eng’g, Inc., 166 Cal. App. 4th 1099, 1103 (Ct. App. 2008) (citations and internal punctuation omitted). 11 United States District Court Northern District of California 10 “On the other hand, the relationship of master and servant or employer and employee exists 12 whenever the employer retains the right to direct how the work shall be done as well as the result 13 to be accomplished.” Id. “But this rule requires that the right to exercise complete or authoritative 14 control, rather than mere suggestion as to detail, must be shown.” Id. Generally, where an 15 employer is more concerned with the quality of the result rather than the manner in which the 16 work is done, that is evidence of an independent-contractor relationship. Missions Ins. Co. v. 17 Workers’ Comp. Appeals Bd., 123 Cal. App. 3d 211, 224 (Ct. App. 1981). “[T]he fact that a 18 certain amount of freedom of action is inherent in the nature of the work does not change the 19 character of the employment where the employer has general supervision and control over it.” 20 Toyota Motor Sales U.S.A., Inc. v. Super. Ct., 220 Cal. App. 3d 864, 875 (Ct. App. 1990). 21 However, because that test “is often of little use in evaluating the infinite variety of service 22 arrangements,” S. G. Borello & Sons, Inc. v. Dep’t of Indus. Relations, 48 Cal. 3d 341, 350 (1989), 23 courts may consider the following factors: 24 25 26 27 28 6 California courts have emphasized that “the right to control, rather than the amount of control which was exercised, is the determinative factor.” S.A. Gerrard Co. v. Indus. Acc. Comm’n, 17 Cal. 2d 411, 414 (1941). In this case, the analysis may overlap because the parties have presented little evidence about what pure rights Insphere has over its sales agents. But I am mindful of this principle and will assess the facts presented by the parties as evidence of Insphere’s right to control. 13 1 2 3 4 (1) whether the worker is engaged in a distinct occupation or business, (2) whether, considering the kind of occupation and locality, the work is usually done under the principal’s direction or by a specialist without supervision, (3) the skill required, (4) whether the principal or worker supplies the instrumentalities, tools, and place of work, (5) the length of time for which the services are to be performed, (6) the method of payment, whether by time or by job, (7) whether the work is part of the principal’s regular business, and (8) whether the parties believe they are creating an employer-employee relationship. 5 Estrada, 154 Cal. App. 4th at 10. Courts also consider whether the employer has the right to 6 discharge at will without cause. Borello, 48 Cal 3d. at 350. 7 “[T]he individual factors cannot be applied mechanically as separate tests; they are 8 intertwined and their weight depends often on particular combinations.” Germann v. Workers’ 9 Comp. Appeals Bd., 123 Cal. App. 3d 776, 783 (Ct. App. 1981). That some factors suggest an employment relationship does not lead to the conclusion that such a relationship necessarily exists. 11 United States District Court Northern District of California 10 Varisco, 166 Cal. App. 4th at 1106. “Under federal law, as under state law, the existence and 12 degree of each factor regarding the status of a person as an independent contractor or employee is 13 a question of fact while the legal conclusion to be drawn from those facts—whether workers are 14 employees or independent contractors—is a question of law.” Harris v. Vector Marketing Corp., 15 656 F. Supp. 2d 1128, 1136 (citations and punctuation omitted). “Even if one or two of the 16 individual factors might suggest an employment relationship, summary judgment is nevertheless 17 proper when, as here, all the factors weighed and considered as a whole establish that [the 18 plaintiff] was an independent contractor and not an employee . . . .” Arnold v. Mut. of Omaha Ins. 19 Co., 202 Cal. App. 4th 580, 590 (Ct. App. 2011) (citation omitted). 20 “[I]n order to prevail on [a] motion for summary judgment . . . [an employer] would have 21 to establish that a jury would be compelled to find that it had established by a preponderance of 22 the evidence that the [plaintiff was an] independent contractor[ ].” Narayan, 616 F.3d at 900. The 23 Ninth Circuit has recognized that “[t]his hurdle is particularly difficult for [a defendant] to 24 overcome in light of . . . the multi-faceted test that applies in resolving the issue whether the 25 [plaintiff is an] employee[ ].” Id. “[I]t is the rare case where the various factors will point with 26 unanimity in one direction or the other.” Id. at 901 (citation omitted). The Ninth Circuit quoted 27 with approval a concurring opinion in Secretary of Labor v. Lauritzen, stating, “If we are to have 28 multiple factors, we also should have a trial. A fact-bound approach calling for the balancing of 14 1 incommensurables, an approach in which no ascertainable legal rule determines a unique outcome, 2 is one in which the trier of fact plays the principal part.” 835 F.2d 1529, 1542 (7th Cir. 1987) 3 (Easterbrook, J., concurring). 4 Determining whether an employer controls the plaintiff in a manner such that the plaintiff 5 is either an employee or independent contractor depends on many facts. One case, Arnold v. 6 Mutual of Omaha Insurance Co., 202 Cal. App. 4th 580 (Ct. App. 2011), is particularly 7 instructive. There, the California Court of Appeals affirmed the trial court’s grant of summary 8 judgment finding that the plaintiff—an insurance sales agent—was an independent contractor. In 9 reaching its decision, the court relied on the following facts: (1) training is generally not mandatory and only required with respect to compliance with state law; (2) while office space is 11 United States District Court Northern District of California 10 available, it is shared and not assigned; (3) agents are not reimbursed for business expenses; (4) 12 the plaintiff could determine the amount of time, place, and manner in which to solicit clients; (5) 13 the plaintiff solicited for other insurance companies while working for the defendant; (6) the 14 assistant general manager of the office did not supervise or evaluate the plaintiff’s work; (7) there 15 was a minimum requirement to submit one application for a product to avoid termination; (8) the 16 plaintiff was paid by commission; (9) at the time of her appointment, the plaintiff and the 17 defendant understood that they were creating an independent-contractor relationship; and (10) the 18 plaintiff engaged in a distinct occupation requiring a license from the Department of Insurance. 19 Arnold, 202 Cal. App. 4th at 588-90. Based on these facts, the court concluded, “we have little 20 difficulty concluding the trial court reached the correct conclusion,” i.e., that the plaintiff was an 21 independent contractor. Id. at 590. 22 Similarly, in Beaumont-Jacques v. Farmers Grp., Inc., 217 Cal. App. 4th 1138 (2013), the 23 California Court of Appeals considered the trial court’s grant of summary judgment finding that 24 the plaintiff was an independent contractor. The plaintiff was a district manager of an insurance 25 company who supervised sales agents. The court noted that the plaintiff “exercised meaningful 26 discretion with reference to her efforts,” and while the defendants “had input over the quality and 27 direction of those efforts, they did not have sufficient ‘control of the details’ with respect to those 28 efforts.” Id. at 1140. The plaintiff was paid on commission, signed a contract stating that she and 15 1 the defendant were not in an employer-employee relationship, their contract was mutually 2 terminable with 30 days’ notice, the plaintiff determined her own hours, and deducted business 3 expenses from her tax returns. Notably, even though the defendant required business plans to be 4 submitted and expected the managers to attend arranged meetings, the court stated that “a 5 weighing and consideration of the record as a whole leads to the conclusion the trial court properly 6 ruled, as a matter of law, that Appellant was an independent contractor.” Id. at 1145, 1147. 7 Several principles stand out in these cases. Where a plaintiff “used her own judgment in 8 determining whom she would solicit”; “the time, place, and manner in which she would solicit, 9 and the amount of time she spent soliciting”; the “appointment [ ] was nonexclusive, and she in fact solicited for other insurance companies” where the manager did “not evaluate her 11 United States District Court Northern District of California 10 performance and did not monitor or supervise her work; and training was voluntary, there is no 12 significant right to control. Arnold, 202 Cal. App. 4th at 589. An individual who determines his 13 own hours and break times “on most days” exercises “meaningful discretion.” Beaumont-Jacques, 14 217 Cal. App. 4th at 1145. Required meetings and training related to legal compliance do not 15 necessarily indicate an employment relationship. Desimone v. Allstate Ins. Co., No. 96-cv-3606- 16 CW, 2000 WL 1811385, at *13 (N.D. Cal. Nov. 7, 2000); Arnold, 202 Cal. App. 4th at 589; 17 Missions Ins. Co., 123 Cal. App. 3d at 221 (stating that the fact that plaintiff “on occasion attended 18 lectures or classes” is not evidence that the company “controlled the manner in which the desired 19 result was to be achieved”). An individual who deducts costs as business expenses or identifies 20 himself as self-employed on personal tax returns weighs in favor of finding an independent 21 contractor relationship. Beaumont-Jacques, 217 Cal. App. 4th at 1145. 22 On the other hand, a company “may retain a broad general power of supervision and 23 control as to the results of the work so as to insure satisfactory performance of the independent 24 contract—including the right to inspect . . . the right to make suggestions or recommendations as 25 to details of the work . . . the right to prescribe alterations or deviations in the work—without 26 changing the relationship from that of owner and independent contractor or the duties arising from 27 that relationship.” McDonald v. Shell Oil Co., 44 Cal. 2d 785, 790 (1955). The ultimate issue in 28 this analysis is whether the company “controlled to any meaningful degree the means by which 16 1 [the plaintiff] performed and accomplished her duties.” Beaumont-Jacques, 217 Cal. App. 4th at 2 1145. 3 B. Application Of Law: Control 4 The undisputed evidence shows that Hennighan was responsible for the means by which he 5 performed his work and that Insphere did not meaningfully “control” him. Hennighan was free to 6 establish his own schedule and determine the extent to which he wanted to work. He could choose 7 which Insphere policies he wanted or did not want to sell. Pl. 112:3-19. There is no evidence that 8 he was required to sell a certain number of policies within a given time period or to generate a 9 certain amount of revenue. Nor is there any evidence that he was required to work a certain number of hours. He could set his own appointments or choose not to work at all. Pl. Dep. 76:16- 11 United States District Court Northern District of California 10 77:3. Insphere did not control the means by which he interacted with clients, i.e., in person or by 12 phone, nor how he sought leads, whether internally or through membership programs. 13 Insphere did not monitor or supervise the work of an agent. Roth Decl. ¶¶ 2-3. There is no 14 evidence of any formal reviews ever occurring, nor has Hennighan put forward any evidence of 15 informal reviews in which he or other agents were held accountable for the manner in which they 16 sold Insphere’s products. Agents were not regularly in attendance at the office, and most training 17 was voluntary except for sessions related to insurance rules and regulations. Roth Decl. ¶ 2. But 18 required meetings or training do not necessarily indicate an employment relationship. Desimone, 19 2000 WL 1811385, at *13. Similarly, merely expecting agents to call in about their progress 20 selling policies is simply evidence that Insphere was concerned about the agents’ results and not 21 the means by which they reached those results. 22 Hennighan had great latitude in the way he went about his work. He had his own office 23 outside of Insphere, he scheduled his own client appointments, and he took rest and lunch breaks 24 whenever he chose. Pl. Dep. 140:21-142:4, 241:24-242:4. He did not have any guaranteed 25 vacation because he could work as little or as much as he wanted. He did not testify that he failed 26 to receive rest or lunch breaks, or vacation time to which he was entitled. Hennighan stated that 27 he worked outside of the office at least half the time. Pl. Dep. 237:15-240:7. 28 The strongest evidence advanced by Hennighan related to Insphere’s expectations for its 17 sales agents. Hennighan declared that he was “required” to attend annual regional meetings, to 2 participate in a weekly call-in team meeting, and to participate on a call-in production report 3 meeting three times a week. Hennighan Mot. Decl. ¶¶ 12-15; Greg Umamoto Decl. ¶ 5; Shirley 4 Umamoto Mot. Decl. ¶ 3. He points to testimony by others stating that sales agents were 5 “required to be in the office three days a week for training” and that they could be terminated if 6 they did not attend. Pl. Opp’n (Dkt. No. 78) 5 (citing Mancuso Opp’n Decl. Ex. F, O’Connell 7 Dep. 104:4-105:25, 150:15-20); Hennighan Mot. Decl. ¶ 16. They were required to have a certain 8 number of appointments per week and were pressured to produce business. O’Connell Mot. Decl. 9 ¶ 26. Sales agents are required to go into the San Jose office regularly. Shirley Umamoto Mot. 10 Decl. ¶ 22. Their productivity was monitored and they were held accountable to certain goals. 11 United States District Court Northern District of California 1 Shirley Umamoto Mot. Decl. ¶¶ 14, 17. Insphere also managed the way sales agents sold its 12 products by requiring them to use an approved script when selling its products over the phone. 13 Hennighan Mot. Decl. ¶ 10; Shirley Umamoto Mot. Decl. ¶ 35. Workers also had to use Insphere- 14 approved advertising materials and all means of advertising, including emails, social media, and 15 physical media, were controlled by Insphere. O’Connell Mot. Decl. ¶ 29. Hennighan also says 16 that he was limited in his ability to have outside business. Henninghan Mot. Decl. ¶¶ 4-6. 17 The totality of the evidence does not raise a triable issue of fact that Insphere controlled the 18 means by which Hennighan performed his work to such an extent that he was an employee. Even 19 if Insphere monitored sales agents’ productivity and set goals for them, that only relates to the 20 results Insphere expected, not the manner by which agents had to achieve those goals—the key 21 distinction for showing control. It also does not matter that agents had to attend training sessions-- 22 that a plaintiff “on occasion attended lectures or classes” is not evidence that the company 23 “controlled the manner in which the desired result was to be achieved.” Missions Ins. Co., 123 24 Cal. App. 3d at 221. As a business, it is also unremarkable that Hennighan had to call in to give 25 periodic production reports on how his sales were going—indeed, counsel conceded at the motion 26 hearing that these calls were brief. Finally, the fact that Insphere might require a script or 27 preapproved materials to be used in sales of its products does not in itself show an undue amount 28 of control sufficient to tip the scale in favor of finding an employment relationship. 18 1 Fundamentally, Insphere is selling a product, so it is not unreasonable to expect minimal standards 2 for remaining “on message,” so long as Insphere has not “affirmatively assumed control, 3 interfered with or actively directed any details of the work being performed” by Hennighan. 4 McDonald, 44 Cal. 2d at 789. 5 Hennighan has pointed to almost “nothing about the manner in which [Insphere] want[s] or 6 expect[s]” him to sell policies, “nor the manner in which he should satisfy” any expectations they 7 have. Beaumont-Jacques, 217 Cal. App. 4th at 1146. 8 C. Application Of Law: Borello Factors 9 In addition to the element of control, California courts also look to the Borello factors. They are instructive here because each weighs strongly in favor of Insphere except for two, which 11 United States District Court Northern District of California 10 are essentially neutral. 12 13 1. Distinct Occupation “If a worker is engaged in a distinct occupation or business, then that would suggest that 14 the worker is an independent contractor rather than an employee.” Harris, 656 F. Supp. 2d at 15 1138-38. In other words, there must be evidence that the plaintiff “held herself out as a separate 16 occupation or business.” Id. 17 Hennighan was engaged in insurance sales, which required state licenses. Pl. Dep. 35:7- 18 24, 146:4-22. This requirement suggests a distinct occupation. Arnold, 202 Cal. App. 4th at 589 19 (finding that the plaintiff “was engaged in a distinct occupation requiring a license from the 20 Department of Insurance”). Furthermore, Hennighan was affiliated with and sold insurance for 21 other companies, including a separate insurance agency, First Authority Insurance. The fact that 22 Hennighan sold insurance on behalf of other companies supports his classification as an 23 independent contractor. Id. (finding that the plaintiff’s relationship “was nonexclusive, and she in 24 fact solicited for other insurance companies during her appointment”). Indeed, Hennighan 25 continued selling insurance after the termination of his contract with Insphere. Pl. Dep. 108:20- 26 24. Hennighan also identified himself as self-employed in his tax returns, thereby weighing in 27 favor of a independent-contractor relationship. 28 Hennighan offered testimony that Insphere’s sales agents were at least discouraged, if not 19 1 forbidden, from working for other insurance companies. Pl. Opp’n 3-4 (citing Mancuso Opp’n 2 Decl. Ex. F, O’Connell Dep. 21:22-23:20, 24:16-26:13, 26:24-29:5, 33:12-25). In his declaration, 3 Hennighan claims that (1) he was instructed that he could only sell Insphere products; (2) he could 4 not sell products Insphere did not offer; (3) he could not solicit for insurance companies that were 5 not approved by Insphere; (4) he needed approval for any marketing materials he used; and (5) any 6 soliciting by phone had to be based on an Insphere-approved script. Hennighan Mot. Decl. ¶¶ 3- 7 10. Greg and Shirley Umamoto also declare that Insphere requires its sales agents to only sell 8 Insphere products; otherwise, they would be terminated. Greg Umamoto Decl. ¶¶ 3-4; Shirley 9 Umamoto Mot. Decl. ¶ 9. But the evidence nonetheless shows that Hennighan held himself out as a separate 11 United States District Court Northern District of California 10 business. He sold insurance products outside of Insphere. He stated on his tax returns that he was 12 self-employed. That Hennighan apparently continued selling insurance after his termination by 13 Insphere also suggests an independent-contractor status. Ruiz v. Affinity Logistics Corp., 887 F. 14 Supp. 2d 1034, 1045 (S.D. Cal. 2012). Hennighan provided conclusory testimony that Insphere 15 either discouraged or prohibited outside work and his counsel stated at the hearing that Hennighan 16 was doing something he should not have done. But as Hennighan has noted, “realities, not 17 contractual labels, determine employment status.” Pl. Mot. 12. Here, the reality is that Hennighan 18 acted as a separate business. This factor weighs in Insphere’s favor. 19 20 2. Supervision “If the type of work performed is usually done under an employer’s direction, it suggests 21 an employer-employee relationship; if the work is usually done by a specialist without 22 supervision, it suggests an independent contractor relationship.” Ruiz, 887 F. Supp. 2d at 1045. 23 Where a special license is needed, that suggests a lack of supervision and thus an independent- 24 contractor relationship. See id. at 1045-46. And where a plaintiff can “determin[e] her own day- 25 to-day hours, including her vacations” and “on most days, fix[ ] the time for her arrival and 26 departure at her office and elsewhere, including lunch and breaks,” that suggests an independent- 27 contractor status. Beaumont-Jacques, 217 Cal. App. 4th at 1144. One court noted, “this factor is 28 largely duplicative of the control factor.” Harris, 656 F. Supp. 2d at 1139. 20 1 The evidence shows that Hennighan set his own schedule, found his own leads, made his 2 own appointments, decided what products to recommend, decided where to work, and furnished 3 all means for his work. His work also requires state licenses and continuing education. 4 Importantly, there is no evidence that Insphere supervised, dictated, critiqued, or even stayed 5 informed about the means by which Hennighan performed his work. While agents had goals set 6 out for them and had to report their sales, and they would sometimes work in the San Jose office, 7 “it is not necessarily unusual for sales employees to work under minimal supervision.” Harris, 8 656 F. Supp. 2d at 1139. This factor weighs strongly in favor of Insphere. 9 10 United States District Court Northern District of California 11 12 3. Skill “Where no special skill is required of a worker, that fact supports a conclusion that the worker is an employee instead of an independent contractor.” Harris, 656 F. Supp. 2d at 1139. The sale of insurance requires a certain degree of skill and expertise, as evidenced by the 13 fact that agents must past a licensing test and have continuing education and relicensing 14 requirements. Indeed, Hennighan admitted that sales agents had to learn many new regulations, 15 particularly due to new federal healthcare laws. Pl. Dep. 239:17-240:4. This factor weighs in 16 Insphere’s favor. 17 18 4. Instrumentalities Where the defendant “did not furnish the majority of the tools and instrumentalities” nor “a 19 place to work,” this fact weighs in favor of finding an independent-contractor relationship. Ruiz, 20 887 F. Supp. 2d at 1047. Where a plaintiff “used his own car, purchas[ed] its gas . . . and liability 21 insurance,” and “received no standard employee benefits,” he is likely an independent contractor.” 22 Beaumont-Jacques, 217 Cal. App. 4th at 1144. 23 Here, Hennighan was responsible for providing his own equipment, including his car, cell 24 phone, and laptop. Hennighan paid for his car’s gas and insurance even when he used it for work. 25 Hennighan was not given an office and he worked out of his own residence, clients’ homes, or 26 public places. He also paid his own licensing fees and purchased his own leads. Hennighan also 27 took tax deductions for his business expenses. See Beaumont-Jacques, 217 Cal. App. 4th at 1145 28 (finding business deductions to be evidence of an independent-contractor relationship). Insphere 21 1 provided him with no benefits, such as health insurance or vacation pay. Although Hennighan 2 notes that Insphere controls advertising materials and that Insphere “supplies” an office for agents, 3 he does not explain why those facts mean that it “furnishes” the necessary instrumentalities of his 4 job. The furnishing of a shared office space, which agents need not use, for occasional client 5 meetings is not significant. This factor weighs in Insphere’s favor. 6 5. Length of Time 7 “Where a worker is employed for a lengthy period of time, the relationship with the 8 employer looks more like an employer-employee relationship.” Harris, 656 F. Supp. 2d at 1140. 9 Where there does not appear to be a contemplated end to the relationship, that weighs in favor of 10 United States District Court Northern District of California 11 12 13 14 an employment relationship. Ruiz, 887 F. Supp. 2d at 1048. The relationship between Insphere and Hennighan lasted only two years. Their contract was terminable at will by either side. This factor is neutral. 6. Method of Payment “Where the worker is paid by the hour, it typically suggests an employment relationship; 15 where the worker is paid by the job, it points toward independent contractor.” Ruiz, 887 F. Supp. 16 2d at 1048. Hennighan was paid by commission only. He did not receive 401(k) or other benefits 17 that certain Insphere employees received. Schooler Opp’n Decl. ¶ 5. This factor weighs in 18 Insphere’s favor. 19 20 7. Part of Regular Business “When the work being done is an ‘integral part’ of the regular business of the purported 21 employer, this serves as a ‘strong indicator’ that the worker is an employee.” Ruiz, 887 F. Supp. 22 2d at 1048 (citing Borello, 769 P.2d at 408). Obviously, the work done by Hennighan is part of 23 Insphere’s regular business. But in any direct sales business, what a sales representative does is a 24 regular part of the company’s business. Harris, 656 F. Supp. 2d at 1140. This factor is neutral. 25 8. Parties’ Belief 26 A court must look to “the parties’ belief as to their relationship status.” Ruiz, 887 F. Supp. 27 2d at 1049. Mere labels set out in an agreement do not establish the existence or non-existence of 28 an employer-employee relationship. See Estrada, 154 Cal. App. 4th at 10 (Ct. App. 2007). 22 1 However, “a lawful agreement between the parties expressly stating that the relationship created is 2 that of independent contractor should not be lightly disregarded . . . .” Missions Ins. Co., 123 Cal. 3 App. 3d at 226; see also Arnold, 202 Cal. App. 4th at 584-85. 4 The contract explicitly states that Hennighan is an independent contractor. Hennighan 5 admits that he read the contract before signing it. Hennighan also identified himself as self- 6 employed on his tax returns and deducted business expenses. A plaintiff who “deduct[s] costs as a 7 business expense in her personal tax returns[,] and, identif[ies] herself as self-employed in those 8 returns,” is likely an independent contractor. Beaumont-Jacques, 217 Cal. App. 4th at 1145. 9 Hennighan argues that the fact that several sales agents filed complaints with the California Labor Commissioner about misclassification suggests that they believed they were actually 11 United States District Court Northern District of California 10 employees. Pl. Mot. 20. That argument is not compelling, particularly since the contract was not 12 for form only—as described above, the parties acted consistent with an independent-contractor 13 relationship. This factor weighs in Insphere’s favor. 14 15 9. Termination A mutual termination clause is evidence of an independent-contractor relationship. See 16 Beaumont-Jacques, 217 Cal. App. 4th at 1147; see also Desimone, 2000 WL 1811385, at *15 (“A 17 mutual termination provision is consistent either with an employment-at-will relationship or 18 parties in a continuing contractual relationship.”) (quotation marks and citation omitted); Arnold v. 19 Mut. of Omaha Ins. Co., 202 Cal. App. 4th 580, 589 (Ct. App. 2011) (“a termination at-will clause 20 for both parties may properly be included in an independent contractor agreement, and is not by 21 itself a basis for changing that relationship to one of an employee”). Since there was a mutual 22 termination clause here, this factor weighs in favor of Insphere. 23 D. Hennighan’s Arguments 24 Hennighan cites Hopkins v. Cornerstone America, 545 F.3d 338 (5th Cir. 2008), as support 25 for his position and says that “Defendant has already lost this issue [of whether Hennighan is an 26 employee or not] with regards to Sales Leaders.” Pl. Mot. 8. He states that “the Fifth Circuit 27 ruled that Cornerstone—which later became Insphere—improperly classified Sales Leaders as 28 independent contractors instead of employees.” Pl. Mot. 8-9. This case is inapposite for two 23 1 reasons. First, sales leaders are not the same position as sales agents and their responsibilities are 2 completely different—as the court recognized, sales leaders are “primarily responsible for 3 recruiting, training, and managing a team of subordinate sales agents.” Id. at 342. Second, 4 Hopkins was brought under the Fair Labor Standards Act and the court assessed, “as a matter of 5 economic reality, [whether] the worker is economically dependent upon the alleged employer or is 6 instead in business for himself.” Id. at 343. This analysis is quite different than the test under 7 California law for whether an independent-contractor relationship exists. Hopkins does not apply. 8 9 Hennighan also cites another case in support, Cutter v. HealthMarkets, Inc., No. 10-cv11488 (D. Mass. 2011). Pl. Mot. 11. Hennighan submits several documents in the case as exhibits, but only one of them appears to be an actual order. Mancuso Mot. Decl. Ex. H. The 11 United States District Court Northern District of California 10 order is simply an adopted proposed order certifying a class of “[a]ll persons who worked as 12 agents or district sales leaders in Massachusetts selling insurance products on behalf of 13 HealthMarkets, Inc. . . .” Ignoring the fact that HealthMarkets is no longer a party to this case, 14 and that Cutter dealt with Massachusetts law, an adopted proposed order which says little more 15 than what is quoted above is not a “ruling that Sales Agents and Sales Leaders did in fact hold 16 common positions and perform common services,” as Hennighan asserts. Pl. Mot. 11. 17 Finally, Hennighan cites Toyota Motor Sales U.S.A., Inc. v. Superior Court, 220 Cal. App. 18 3d 864, 877 (Ct. App. 1990), for the proposition that the mere fact that he deducted certain 19 business expenses on his tax returns “cannot be used to prove independent contractor status.” Def. 20 Opp’n 18. His counsel pointed to Toyota again at the motion hearing as strongly supportive of 21 Hennighan. 22 In Toyota, the plaintiff was injured in a car accident when he was rear-ended by a pizza 23 deliveryman. The plaintiff sued his own car’s manufacturer (for having allegedly defective 24 seatbelts), the pizza company, and the deliveryman himself. After the pizza company and 25 deliveryman settled with the plaintiff and the trial court found the settlements to be in good faith, 26 the trial court dismissed Toyota’s cross-complaint against the pizza company for comparative 27 equitable indemnity based on its conclusion that the deliveryman was an independent contractor 28 and, accordingly, the pizza company was not liable under respondeat superior. Toyota appealed. 24 1 The Court of Appeals vacated the trial court’s order, reasoning that the deliveryman was subject to 2 the total control of the pizza company except for perhaps which route he could take or how fast he 3 could drive. Hennighan’s counsel argues that Hennighan is similarly limited in his discretion. 4 Toyota is distinguishable. Insurance sales agents, who are licensed independently by the 5 State of California, are not comparable to pizza deliverers. The Court of Appeals observed that 6 the pizza company “directed and controlled (1) the number, nature and type of pizzas to be 7 delivered, (2) the time when such deliveries would take place, (3) the persons and locations to 8 whom they would be delivered and (4) the price to be charged for each pizza and the total amount 9 of money to be collected from each customer. In short, [the pizza company] determined what would be delivered, when and to whom and what price would be charged.” Id. at 875-76. Here, 11 United States District Court Northern District of California 10 there is no evidence that Insphere directed the number, nature, or type of insurance policies 12 Hennighan must sell. Nor is there evidence that Hennighan had to work certain hours, had to sell 13 to certain persons, or had to charge a particular price. The court also noted that “the only evidence 14 offered in support of the claim that [the deliveryman] was an independent contractor was that he 15 provided his own car, expenses and insurance.” Id. at 876. Here, in addition to paying for his 16 own car and its insurance, there is significantly more evidence showing that Hennighan is an 17 independent contractor. 18 In Toyota, the pizza company required the deliveryman to pay his own taxes. The court 19 correctly observed, “An employer cannot change the status of an employee to one of independent 20 contractor by illegally requiring him to assume burdens which the law imposes directly on the 21 employer.” Id. at 877. The issue here is whether Hennighan was an independent contractor in the 22 first place who was legally obligated to pay his own taxes. He was. Toyota does not apply. 23 E. Exemption 24 The California Labor Code expressly does “not include any individual employed as an 25 outside salesman.” CAL. LAB. CODE § 1171. “Outside salesperson” is defined as any person “who 26 customarily and regularly works more than half the working time away from the employer’s place 27 of business selling tangible or intangible items or obtaining orders or contracts for products, 28 services or use of facilities.” CAL. CODE REGS. tit. 8, § 11070. “Working time” includes time 25 1 spent on “other related activities [related to “selling”] such as preparation, travel time, and 2 paperwork.” Ramirez v. Yosemite Water Co., Inc., 20 Cal. 4th 785, 801 (1999). Hennighan admitted that he spent more than 50 percent of his time outside of the office. 3 4 Pl. Dep. 237:15-240:7. He sold Insphere-approved insurance products through direct client 5 contact and stated that “[a] lot” of his work was done at either clients’ houses or in public settings 6 away from the office. Pl. Dep. 119:17-19. Insphere argues that Hennighan “does not dispute, and, 7 therefore concedes, that, if he were an employee, he would be classified under the outside sales 8 exemption and would not be entitled to overtime, or meal and rest breaks.” Pl. Reply (Dkt. No. 9 87) 1. With respect to this issue, without deciding or relying on it, Insphere seems to have the 10 United States District Court Northern District of California 11 better argument. 12 F. Conclusion 13 I am persuaded that Insphere is entitled to judgment as a matter of law that Hennighan is 14 an independent contractor. Any control Insphere exercised over Hennighan was generally 15 unrelated to the manner and means by which Hennighan accomplished his work and was directed 16 more towards the results. An analysis of the amount of control exerted by Insphere and the 17 Borello factors showed that all the factors were either in Insphere’s favor or neutral. “Even if one 18 or two of the individual factors might suggest an employment relationship, summary judgment is 19 nevertheless proper when, as here, all the factors weighed and considered as a whole establish that 20 [Hennighan] was an independent contractor and not an employee . . . .” Arnold, 202 Cal. App. 4th 21 at 590. Hennighan did not successfully point to any genuine dispute of material fact sufficient to 22 prevent summary judgment. 23 III. 24 WHETHER THE CAUSES OF ACTION FAIL AS A MATTER OF LAW At the motion hearing, I asked Hennighan’s counsel whether Hennighan’s causes of action 25 would all fail as a matter of law if I determined that Hennighan was an independent contractor. 26 He conceded that all of them would except for the First and Second Causes of Action for 27 retaliation. However, California law does not afford independent contractors a right to relief for 28 wrongful termination. See Sistare-Meyer v. Young Men’s Christian Ass’n, 58 Cal. App. 4th 10, 18 26 1 (1997) (holding that independent contractors cannot bring wrongful termination claims based on 2 public policy predicated on racial discrimination); see also Ali v. L.A. Focus Publ’n, 112 Cal. App. 3 4th 1477, 1484 (2003) (“Several appellate courts . . . have held that, because independent 4 contractors are not employees, they lack standing to assert a claim for wrongful termination in 5 violation of public policy.”), disapproved of on other grounds by Reid v. Google, Inc., 50 Cal. 4th 6 512 (2010). Accordingly, all of Hennighan’s causes of action fail as a matter of law and summary 7 judgment should be granted to Insphere on all of them. See Taylor v. Waddell & Reed Inc., No. 8 09-cv-02909, 2013 WL 435907, at *7 (S.D. Cal. Feb. 1, 2013) (“the Court need not address 9 Jaeger’s additional state law claims . . . as these claims are conditioned upon Jaeger being properly 10 classified as an employee”). CONCLUSION United States District Court Northern District of California 11 12 Because there is no genuine dispute of material fact and the evidence shows that 13 Hennighan is an independent contractor as a matter of law, Insphere’s motion for summary 14 judgment is GRANTED and Hennighan’s motion for partial summary judgment is DENIED. 15 The Clerk is directed to enter judgment accordingly and close the file. 16 IT IS SO ORDERED. 17 18 19 Dated: April 21, 2014 ______________________________________ WILLIAM H. ORRICK United States District Judge 20 21 22 23 24 25 26 27 28 27

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