Signing an Independent Contractor Agreement Does Not Necessarily Mean You Are Not an Employee

In a recent case, Narayan v. EGL, Inc. (9th Cir., July 30, 2010), the court considered an interesting issue: can an out-of-state employer get around the California labor laws by making its California workers (drivers) sign independent contractor agreement and thus properly classify them as contractors, rather than employees. To make their case very compelling, the employer also included a choice of law clause in the agreement, stating that any disputes arising out of the signed contract should be decided in the employer's home state - Texas. 

The Ninth Circuit made a critical holding: because Texas law did not apply to claims outside the signed contract, and because the claimed misclassification of employees as contractors is based on California labor code, the employer cannot get around the California statutes by agreeing with its employees on terms that violate those statutes. In other words, if the workers were deemed to be employees under California law, the fact that they signed an agreement that they will only bring claims against the employer in some other state outside of California, doesn't deprive them of the rights protected by California labor code, if they are employed on the territory of this state. 

Thus, the class of misclassified drivers were allowed to proceed forward with their class action against the employer.