Ninth Circuit Thwarts End Run Around California Labor Code

EGL, a Texas transportation company, came up with an idea. Avoid all those pesky California wage and hour laws by making everyone an independent contractor, and inserting a choice of law clause into the agreement.

First, the court had to get by the Texas choice of law clause. The clause said only that the independent contractor agreement would be "interpreted under the law of the State of Texas." The claims, however, were not brought under the agreement, but rather were brought under the California Labor Code. So, this case is a warning to practitioners to draft choice of law clauses expansively. The court did not consider whether the Texas choice of law clause could be enforced in California.

Then, applying California law, the court reversed summary judgment. The court held that there was significant evidence of an employment relationship under California's test for independent contractor status. The court went on at length. So, you can read the opinion in Narayan v. EGL, Inc. et al. here.