Court Finds Sacramento Bee Misclassified Employees as Independent Contractors

SANTA ANA, Calif., Sept. 26, 2014 /PRNewswire/ -- The Superior Court for the County of Sacramento held that the Sacramento Bee owned by the McClatchy Company misclassified its newspaper carriers as independent contractors when in fact they were employees.  This decision arose in a class action entitled Sawin v. The McClatchy Company, Case Number 34-2009-00033950.  This decision issued on September 22, 2014 followed a trial that commenced on February 3, 2014 before the Honorable Gerrit W. Wood in Department 36 of the Sacramento Superior Court.  The Court rendered its comprehensive ruling after hearing live testimony and reviewing documentary evidence and arguments of counsel. 

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The Court found that under the recent Ayala California Supreme Court decision (Ayala v. Antelope Valley Newspapers, Inc. (2014) 59 Cal.4th 522 The McClatchy Company dba The Sacramento Bee had "the right to control" the manner and means of the carriers' performance of their duties, therefore the carriers were clearly employees as a matter of law. 

This ruling is consistent with a growing trend in California.  By example, in 2004 a class of newspaper carriers sued the Orange County Register also alleging misclassification.  After seven weeks of trial, the Orange County Register settled the dispute with the carrier class for $38 million.  In 2009, the carriers for the San Diego Union Tribune sued claiming that the carriers were being improperly classified as independent contractors and not employees.  The Trial Court in San Diego entered its judgment against the San Diego Union Tribune for damages and attorneys' fees of approximately $10 million.  The San Diego Union Tribune's appeal is pending.

Subsequent to the San Diego Union Tribune trial and appeal, the California Supreme Court decided the Ayala v. Antelope Valley Newspapers case cited above which dealt with a class action brought by newspaper carriers against the Antelope Valley Press.  In Ayala, the Court stated the law governing newspaper carriers and the relationship with the newspaper for which they served.  The California Supreme Court held that the newspaper carriers were employees so long as the newspaper retained any right to control the manner or means in which the carriers performed their service "regardless of whether or not that right to control was actually exercised."  The Supreme Court in Ayala relied on the same factors as the courts in San Diego and Sacramento in rendering judgment against the newspaper companies. 

Callahan & Blaine of Santa Ana, California led by Daniel J. Callahan, Michael J. Sachs, Kathleen L. Dunham and Scott D. Nelson were the prevailing attorneys on behalf of the class of newspaper carriers in each of the cases mentioned, i.e., the Orange County Register, San Diego Union Tribune, Antelope Valley Press and The Sacramento Bee.  They are also counsel for the class of carriers suing another McClatchy Company, The Fresno Bee, which is set for trial on November 3, 2014.

Yet to be determined in the class action against the Sacramento Bee is the amount of damage.  The Court will set a trial date for Phase 2 in the near future to establish that amount plus the amount of attorneys' fees to be awarded.

"It is an industry practice to misclassify newspaper carriers as independent contractors so the newspaper can avoid paying the taxes and other employee benefits associated with their being an employee," said Daniel J. Callahan of Callahan & Blaine. "The newspaper industry make the carriers, as a condition for their hire, purchase insurance which can substitute for otherwise employer-purchased workers= compensation."

The Sacramento Bee is represented by John Poulos of Lewis, Brisbois, Bisgaard & Smith of Sacramento and Sue Stott of Perkins Coie of San Francisco.  Sue Stott was the losing counsel on both the Sacramento Bee and the Ayala decisions.  John Poulos was the losing counsel in the Sacramento Bee and is presently counsel for the Fresno Bee. 

A Tentative Statement of Decision was released on Monday, September 22, 2014 and will become final although either party may request the Court to augment the Decision.  Any augmentation of the Decision will not change the actual finding that the carriers were misclassified as independent contractors when actually they were employees.

The misclassification problem is a rampant problem affecting all states throughout the United States because it not only deprives the government agencies of their rightful taxes, but it also gives the offending company an unfair competitive advantage by allowing them to reduce their costs unfairly against its competition. 

An article entitled, "Misclassified Contract to Cheat" appearing in the dozens of McClatchy newspapers throughout the U.S., including The Fresno Bee, described this unlawful practice and its harmful effects.  It states in part, "The practice, known as misclassification, can save an employer 30% to 50% on payroll costs, the same as an employer who pays in cash.   That allows the company to underbid a job by 25% and still make a profit.  At the same time, state and federal governments lost billions of dollars in tax revenue needed to pay for critical social service programs.  Law-abiding businesses are forced to pay higher taxes and expenses while being at a disadvantage in competing for jobs."

About Callahan & Blaine

Since 1984, the highly sophisticated litigators and trial attorneys of Callahan & Blaine have specialized in complex business and insurance litigation and catastrophic personal injury matters. The firm has won countless trials and accomplished record-breaking jury verdicts and settlements. Visit www.Callahan-Law.com for more information.

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SOURCE Callahan & Blaine