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In Ruiz v. Affinity Logistics, 667 F.3d 1318 (9th Cir. 2012), the Ninth Circuit Court of Appeals has refused to enforce a choice of law provision designating Georgia law to govern an independent contractor agreement between a company incorporated and headquartered in Georgia and its California-based drivers completing deliveries in California.  Ruiz and other drivers filed a class action against Affinity alleging they were misclassified as independent contractors and sought damages for violations of federal and state wage and hour laws, including failure to pay overtime.  The drivers had signed agreements with Affinity stating that they were independent contractors and that Georgia law would govern any dispute arising under the agreements.  Under Georgia law, a contract provision defining an independent contractor relationship is presumed true and the party claiming an employment relationship bears the burden to rebut this presumption by showing an employer exercised control as to the manner and means of performing the work.  In contrast, under California law, services provided to an employer are presumed to create an employment relationship and the employer bears the burden to rebut this presumption.
 
Notwithstanding the choice of law provision, the Ninth Circuit concluded that California law applies to the independent contractor determination.  The Ninth Circuit found that the district court had improperly limited its analysis to whether Georgia has a substantial relationship to the parties in holding that Georgia law applied because Affinity was incorporated in Georgia and had its principal office in Georgia.  The Ninth Circuit found that the district court should have also analyzed two additional factors:  (1) whether applying Georgia law would undermine a fundamental California public policy; and (2) whether California has a materially greater interest in the resolution of the dispute.  Applying these factors, the Ninth Circuit found that Georgia law directly conflicts with the California law presumption that drivers are independent contractors and a fundamental California policy that seeks to protect its workers.  The Ninth Circuit further found that California has a materially greater interest than Georgia in the outcome of the case because the drivers entered into the contract with Affinity in California, performed the services in California and resided in California.  The Ninth Circuit therefore held that the parties’ choice of law provision is unenforceable in California.
 
The Ruiz decision follows a memorandum of understanding between the federal Department of Labor’s Wage and Hour Division and California’s Labor and Workforce Development Agency to target independent contractor misclassification and to permit the sharing of information between the agencies.   The case also follows recent California legislation increasing penalties for willful misclassification of employees as independent contractors.  Other recent California federal and state cases have likewise found California law applies to wage and hour claims.  See, e.g., Narayan v. EGL, Inc., 616 F.3d 895 (9th Cir. 2010) (California law applies to claims for benefits under California Labor Code despite Texas choice of law provision because claims depended upon interpretation of Labor Code provisions defining “employee”); Sullivan v. Oracle Corp., 541 Cal.4th 1191 (2011) (California overtime laws apply to nonresident employees of California-based employer who work in California). 
 
In light of these recent decisions and increased federal and state enforcement efforts, all employers with workers in California should evaluate their compliance with California wage and hour laws and their independent contractor and employment agreements with individuals performing services in California.

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