Part 1: Liability Based on Control Over Independent Contractors’ Employees

This three-part series examines efforts by the plaintiffs’ bar to hold companies liable for the torts of their independent contractors’ employees.  This post addresses the “control test” that many jurisdictions use to determine whether a company can be held vicariously liable for the conduct of its independent contractor’s employees.  The next two posts consider (1) cases where the independent contractor disclaims responsibility for its employee’s actions, and (2) allegations that the company and the independent contractor were engaged in a joint venture giving rise to vicarious liability.

Reliance on independent contractors is a fundamental part of how many companies operate.  Specialized services like transportation or security—that are not part of a company’s core business—may be prohibitively expensive or impractical to operate, so outsourcing these jobs often makes good business sense.  But as independent contractors become more integrated into a company’s business, there is increased potential for exposure to liability based on the conduct of the contractor’s employees.1         

Liability Under the Control Test

The general rule is typically that a company is not liable for the negligence of its independent contractor’s employees.  See, e.g., Daly v. Aspen Ctr. for Women’s Health, Inc., 134 P.3d 450, 452 (Colo. App. 2005); Blackwell v. Vasilas, 244 Cal.App.4th 160, 168 (2016); McCrosky v. Carson Tahoe Reg’l Med. Ctr., 408 P.3d 149, 153 (Nev. 2017).  But that rule is subject to an exception based on the public policy that a company with “the right to control the [worker’s] activities . . . [is] in the best position to . . . reduce the risk that these activities will injure others,” and should therefore be liable when those activities result in injuries.  Marsh v. Tilley Steel Co., 26 Cal.3d 486, 494 (1980).  As a result, many jurisdictions hold a company vicariously liable for the actions of a worker subject to the company’s control even if he or she was vetted, hired, trained, paid, and literally employed by an independent contractor.

The so-called “control” test usually includes, among other things, three components.  First, it focuses on the hiring company’s right to control the actions of the worker, regardless of whether that right is actually exercised.  See, e.g., Alexander v. FedEx Ground Package Sys., Inc., 765 F.3d 981, 994 (9th Cir. 2014) (“Whether FedEx ever exercises its right . . . is irrelevant.”).  Plaintiffs’ lawyers often attempt to satisfy this element by asking the independent contractor’s employees whether they would or would not do something if asked by someone at the hiring company.  Such questions will naturally elicit affirmative responses given that the hiring company is, by definition, a client or customer who the worker has been assigned to service. 

Second, the control test distinguishes between (1) control over the detailed manner and means of the work, and (2) the mere ability to specify the result.  See Jackson v. AEG Live, LLC, 233 Cal.App.4th 1156, 1179 (2015) (“A worker is an independent contractor when he or she follows the employer’s desires only in the result of the work, and not the means by which it is achieved.”).  This is an important distinction, and one that plaintiffs’ lawyers often attempt to elide.  The hiring company always controls the “result,” which is another way of saying the company decides what it wants the independent contractor and its workers to do.  It would be a strange business relationship indeed if, for example, an independently contracted transportation company decided where to deliver a company’s product rather than delivering the product to whatever destination the company specified. 

Third, the control test places significant weight on whether the hiring company has the ability to fire the worker.  Importantly, this factor is to be distinguished from the ability to simply ask the contractor to assign a different employee.  See, e.g., Kowalski v. Shell Oil Co., 23 Cal.3d 168, 177 (1979) (“Anyone who has the employees of an independent contractor working on his premises could, if dissatisfied with an employee, have the employee removed.”).

Considerations for Companies Who Use Independent Contractors and their Workers

So what should a company that relies on independent contractors be thinking about from a risk management perspective?  Not surprisingly, a thoughtful agreement with the independent contractor is a good first line of defense.  The language should reflect the law in the jurisdiction(s) where the independent contractor’s services might subject the company to liability, but companies will likely want to specify that the contractor (1) controls the details of work performed by its own workers, and (2) retains exclusive power to fire them. 

Unfortunately, even a good contract may not insulate a company from liability when an independent contractor’s employee is involved in an accident.  For example, if the agreement provides that the contractor will control the details of the work, but the company actually micromanages it in practice, the parties’ actual conduct will be determinative.  See S. G. Borello & Sons, Inc. v. Dep’t of Indus. Relations, 48 Cal. 3d 341, 349 (1989) (“The label placed by the parties on their relationship is not dispositive.”).  If the business realities are such that the company needs to exercise more significant control over a contractor’s workers, it may be worth trying to shift or manage risk through a more robust indemnification arrangement and/or requiring contractors to carry additional insurance coverage.  Finally, if a company’s business needs require particularly close oversight of a contractor’s employees that might be a basis for vicarious liability, the company may want to require additional assurances that the contractor has adequate safety and/or risk management controls to reduce the risk of accidents happening at all.  

Andrew Orr routinely defends companies against vicarious liability claims based on the alleged torts of independent contractors’ employees. 

1 For the sake of clarity, this post will refer to the entities hiring independent contractors as “companies,” and to individuals employed by independent contractors as either “workers” or “independent contractor’s employees.”