APPEAL from a judgment of the Superior Court of San Diego County, Richard E.L. Strauss, Judge. Affirmed; request for judicial notice denied. (Super. Ct. No. 37-2007-00069217-CU-MC-CTL).
The opinion of the court was delivered by: Huffman, Acting P. J.
CERTIFIED FOR PUBLICATION
We review a trial court judgment denying declaratory relief to plaintiffs and appellants Messenger Courier Association of the Americas and California Delivery Association (plaintiff). Plaintiff sought declaratory relief that would have invalidated a precedential decision by the California Unemployment Insurance Appeals Board (the Board). Plaintiff argued the Board erroneously assessed unemployment insurance employer contributions and penalties against a particular employer (a courier service that is not a party to this action), and should not have designated its decision as precedent. (NCM Direct Delivery v. Employment Development Department, Precedent Tax Decision No. P-T-495 (2007) (NCM); Unemp. Ins. Code, § 1127.)*fn1 Section 409.2 allows interested parties such as plaintiff, a nonprofit professional association of similar employers (not a party to the original administrative proceeding), to file an action for declaratory relief to obtain a judicial declaration regarding the validity of the Board's administrative precedential decision.
The superior court denied plaintiff's request for a declaration that NCM, the precedential tax decision, was invalid. The court ruled it was not contrary to law, nor an incorrect application of Supreme Court authority, S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 (Borello). The court ruled in favor of the Board's interpretation of the governing law, in particular, section 621, subdivision (b), and plaintiff appeals.*fn2
Among other arguments, plaintiff continues to contend that a recent authority reaching similar conclusions to those of the Board here, Air Couriers Internat. v. Employment Development Dept. (2007) 150 Cal.App.4th 923, 936 (Air Couriers), was erroneously decided. In Air Couriers, the appellate court upheld the trial court's decision that sufficient evidence supported a finding that certain messenger drivers did not operate as independent contractors, for purposes of assessing employment taxes against the business owner, Air Couriers. The appellate court interpreted the legal standard under the Unemployment Insurance Code, for determination of an employment relationship, to be the same as set forth in Borello, supra, 48 Cal.3d 341 (a workers' compensation case), which expressly applied common law analysis of the critical issue of control of the purported employees' work, and further relied on the "secondary factors" identified in the Restatement Second of Agency and in prior case law that had applied those rules in the context of the Unemployment Insurance Code. (Empire Star Mines Co. v. California Employment Commission (1946) 28 Cal.2d 33, 43-44 (Empire Star), overruled on another ground in People v. Sims (1982) 32 Cal.3d 468, 480 (Sims); Tieberg v. Unemployment Ins. App. Bd. (1970) 2 Cal.3d 943, 949 (Tieberg).)
In light of these authorities, on de novo review, we conclude that the Board's decision applies the proper legal standards and is entitled to precedential effect. We uphold the judgment denying plaintiff's request for declaratory relief that it should not.
FACTUAL AND PROCEDURAL BACKGROUND
A. Administrative Proceedings
The individual adjudication and resolution of factual issues set forth in this precedent tax decision are not subject to direct attack in this appeal. (Pacific Legal Foundation v. Unemployment Ins. Appeals Bd. (1981) 29 Cal.3d 101, 109 (Pacific Legal Foundation).) Those underlying facts were that the employer before the Board in this case had hired an association to assist in its conversion and handling of newly designated independent contractor drivers (National Independent Contractors Association). The employer then categorized its drivers as independent contractors, while they were performing the identical work they had carried out when they were previously known as employees. This led to an audit being performed by the Employment Development Department (the Department), and assessment of penalties under section 1127.*fn3 The employer filed an administrative appeal, which was denied. The employer appealed to the Board and sought reassessment. The Board denied the reassessment request and held the employer liable for penalties under section 1127.
We next outline the basic analytical approach of the Board's decision and the statutory interpretations it made in drawing its conclusions. The Board framed the issue presented as whether the employer had correctly treated its messengers as independent contractors, rather than common law employees, for purposes of payment of unemployment insurance contributions for them under the code. (§§ 976, 984, 976.6, 13020.) In the Board's decision, it first construed section 601 and section 621, subdivision (b) for the purposes of determining whether the delivery drivers who performed work for the employer were independent contractors or employees.*fn4 The Board initially applied to its record the primary common law test for determining whether service was rendered in employment, by analyzing whether the alleged employer had the right to control the manner and means of accomplishing the desired result. (Empire Star, supra, 28 Cal.2d at p. 43.)*fn5
The Board's decision then emphasized that the Supreme Court in Borello, supra, 48 Cal.3d 341, had applied the common law test of Empire Star, supra, 28 Cal.2d 33, "control of details," and stated in a footnote that the Board took this opportunity to resolve an ambiguity created in Borello, supra, 48 Cal.3d 341, i.e., whether its reasoning applied to unemployment law as well as the legal context in which Borello arose, workers' compensation law. The Board stated that although there were some differences between the two bodies of law, Borello "has strong applicability to cases arising under the Unemployment Insurance Code" and its reasoning provides important guidance in such cases, as already recognized by the appellate courts in Santa Cruz Transportation, Inc. v. Unemployment Ins. Appeals Bd. (1991) 235 Cal.App.3d 1363, 1370-1371 (Santa Cruz Transportation) and Metric Man, Inc. v. Unemployment Ins. Appeals Bd. (1997) 59 Cal.App.4th 1041, 1049.
Next, the Board applied to the facts of its case regarding employment status the secondary factors identified in Tieberg, supra, 2 Cal.3d 943, 950, as also set forth in Borello, supra, 48 Cal.3d at pages 350 to 351. If the primary test of control is not dispositive, these "secondary" factors may be applied to determine the correct nature of a service relationship. For example, the right to discharge at will, without cause, is probative, as stated in Tieberg, supra, 2 Cal.3d at p. 949, citing Empire Star, supra, 28 Cal.2d at page 43.*fn6 Other fact-intensive secondary factors were also discussed in the Board's decision and found to show employee status, including the uncomplicated nature of the work (driving), the integral nature of the function performed compared to the business of the employer, and the fact that the same work had previously been performed by the same persons when they were designated as employees, rather than independent contractors. (Tieberg, supra, at p. 950.)
Further, the Board's decision examined the nature of the independent contractor agreements, and noted that the decisions in Borello, supra, 48 Cal.3d 341 and Santa Cruz Transportation, supra, 235 Cal.App.3d 1363, were instructive. The Board concluded that the drivers in the case before it, as in those authorities, had been given no real choice about signing the independent contractor agreements. Here, as in Santa Cruz Transportation, "[t]he substance of the relationship looked exactly like employment." The Board accordingly relied on both the primary and secondary tests set forth in Borello to rule that the NCM drivers were employees, not independent contractors. The Board expressly found that the drivers performed an essential function that was integral to the employer's business, and did so in a dependent role. Therefore, the administrative law judge's findings of employment and assessment of penalties were upheld. Pursuant to section 409, the Board designated its decision as precedential May 8, 2007.
B. Superior Court Proceedings, Appeal
On June 27, 2007, plaintiff filed this action in superior court to seek a declaratory judgment that the Board, in the NCM precedential opinion summarized above, had applied an incorrect legal standard and had erroneously interpreted the terms of section 621, subdivision (b).*fn7 In particular, plaintiff attacked the Board's conclusion that the reasoning set forth in Borello, supra, 48 Cal.3d 341, and its secondary criteria were applicable in the context of assessments for unemployment insurance taxes. Plaintiff argued that Empire Star, supra, 28 Cal.2d 33, supported a reading that taxation provisions must be treated differently from protective social legislation, for purposes of employment status determinations. (Id. at p. 43.)
Plaintiff therefore requested declaratory relief that the precedential decision should be decertified as contrary to law and to the Board's employment regulations (§ 621, subd. (b); Cal. Code Regs., tit. 22, § 4304-1.)*fn8 The matter was fully briefed and opposed. In support of its position, plaintiff sought judicial notice of state and federal legislative history materials pertaining to employment law, including the history of section 621, subdivision (b). Additionally, plaintiff sought to have the trial court take notice of several other precedential decisions by the Board that dealt with similar issues, as well as a 2004 copy of the field operations manual that the Board may consult in the process of drafting its opinions. (Evid. Code, §§ 451, 452.) The Board objected to these requests and the superior court declined to make a ruling on the requests or the objections.*fn9
At argument before the superior court in February 2008, plaintiff appeared to concede (based on the 2007 filing of Air Couriers, supra, 150 Cal.App.4th 923) that the distinction between taxing and benefit provisions was not essential to its arguments. Plaintiff nevertheless contended that it was difficult for taxpayers to know what the boundaries of the common law are, since Borello, supra, 48 Cal.3d 341, had gone beyond them. Plaintiff's view was that Air Couriers was wrongly decided, so that plaintiff was entitled to seek a different ruling in a different appellate district.
In opposition, counsel for the Board stated that the reason for inquiring whether individuals were employees or independent contractors must be taken into account for purposes of examining the independent contractor agreements and for choosing the correct tests in a given factual context. Specifically, the Board has a duty to seek to implement the proper purposes of the relevant code provisions, i.e., worker protection legislation. Counsel argued that the Board had correctly applied Borello, supra, 48 Cal.3d 341, to utilize both common law and multifactor tests that had been developed to supplement the common law, because the facts before the Board required such a comprehensive approach. The Board therefore had not deviated from statutory law, as plaintiff argued.
In its statement of decision, the superior court declined to accept plaintiff's position that the challenged Board decision was incorrectly designated as precedent. The court ruled that the decision in Air Couriers, supra, 150 Cal.App.4th 923, was on point. The Board obtained a judgment of dismissal pursuant to the legal rulings and plaintiff appeals. ...