S. G. Borello & Sons, Inc. v. Department of Industrial Relations ( 1989 )

KAUFMAN, J.

I dissent.

This court’s sua sponte grant of review¹ and the resulting majority opinion, substantially departing from long and well established statutory and case law, constitute one of the sadder episodes in the history of this court— a wholly unnecessary and inappropriate intermeddling in the affairs of and curtailment of the liberties of California’s residents. It requires little foresight to predict that this unfortunate decision declaring illegal a practice followed almost universally in the area for many years, insisted on by the only cucumber purchaser in the area and satisfactory to all concerned, will end up harming the very persons it is paternalistically intended to help. Will Rogers is reported to have articulated the folk wisdom: “If it ain’t broke, don’t fix it.” That is sound advice for any branch of government; it should be adhered to religiously by the judiciary.

At the time we granted review in this case, there was considerable curiosity why no petition for review had been filed by any party. At oral argument the parties told us why; they rather frankly indicated their mutual recognition that the record in this case was entirely insufficient to furnish the basis for a decision of major significance. The entire hearing transcript including exhibits consists of only 60 pages; the department presented no witnesses; not a single sharefarmer testified; the only witnesses were 2 members of the Borello family active in the business. Having ascertained this it would have been quite appropriate for this court to vacate the order granting review as improvidently granted (see Cal. Rules of Court, rule 29.4(c)), but apparently too embarrassed to dismiss following its sua sponte grant of review, the majority now proceed to render a decision distorting independent contractor law and, in the process, rely on a number of facts and assumptions wholly unsupported by the record.

There are really two cases being decided today, the one decided by the majority and the one presented by the record before the court. The picture painted by the majority is one of a nefarious subterfuge invented by S.G. Borello & Sons, Inc. (Borello) to evade its responsibilities under the workers’ compensation laws and to exploit vulnerable and disadvantaged immigrant farm workers.² The uncontroverted evidence in the record establishes an altogether different picture. Neither the Division of Labor Standards (the Division) nor the superior court found a subterfuge,³ and there is no evidence whatever that Borello originated this arrangement, much less that it concocted it to evade its obligations under the workers’ compensation laws. Indeed, unless the sharefarmers are employees under the Workers’ Compensation Act (Act), Borello has no obligations thereunder. The reasoning of the majority in this regard is a classic example of begging the question. The same is true of the majority’s appeal to “liberal construction” as provided for in Labor Code section 3202.⁴ Liberal construction is for the benefit only of persons covered by the Act, employees. Moreover, as section 3202.5 reminds, liberal construction is no substitute for substantial evidence.⁵

The record establishes that Borello has a sizable farming operation employing numerous farm laborers who work with numerous other types of crops. Borello covers all such employees by workers’ compensation insurance and they are paid on an hourly or other basis regardless of the success or failure of the crop or the marketing of the crop, consistent with their status as employees. Only the pickle cucumber crop is produced and marketed by the use of the sharefarmer arrangement which involves 14 families. This arrangement and its details are dictated by the sole pickle cucumber purchaser in the area, Vlasic Pickle Company. Vlasic drafted and supplies the sharefarmer contract form and insists on its use by every farmer who furnishes cucumbers to it. Vlasic unilaterally sets the price it will pay for cucumbers each year before the sharefarmer agreements are signed.

The sharefarmer arrangement has been in virtually universal use in the Gilroy area for at least the 10 years Borello has been growing pickle cucumbers. According to the uncontradicted testimony of both witnesses at the hearing, this arrangement is preferred by the sharefarmer families because it aifords them an opportunity to make much more money than they would as hourly workers. (See discussion, infra.) During the ten years Borello has been growing pickle cucumbers, many of the sharefarmer families have returned several years, and at least one family has returned each year for nine years. Experienced sharefarmer families often bring with them and recommend to Borello new families who want to work on and harvest the cucumbers under the sharefarmer arrangement.

The majority states (maj. opn., ante, p. 345) that caring for and harvesting cucumbers are nothing more than manual labor and that Borello “retains all necessary control over a job which can be done only one way.” All the evidence in the record is to the contrary. Richard Borello testified without contradiction that experienced sharefarmers will make more than inexperienced ones and that considerable skill was required in caring for and harvesting the cucumbers during the time the sharefarmers are responsible for the crop. Specifically he testified: “He [the sharefarmer] comes in, he pulls the weeds, and he does, he does put the, at that time the vines are just starting to fall into the furrow, and he does take those vines and he slips them under the plant so that way they grow along the row line. That way they’re not in furrow, so people don’t step on them and you could do a lot of damage by letting the vines grow into the furrows and then as they walk through they step on them. That is you could lose 20% of your cucumbers that way. And it’s their responsibility to take care of that plant and put the vines under the plants and pull the weeds.” He further testified that from the time they execute their contracts, the sharefarmers “are totally responsible for the harvest and the care of the plants. If that involves weeding or hoeing, then they’re responsible for that. They take care of that.” “[T]here is irrigation and the sharefarmer takes care of his rows and the irregation [s/c]. The only thing I do is I provide the water. Which means I press the button and start the pump.” Asked who would decide when to irrigate, Richard Borello testified: “The sharecroppers work together. They understand that the field cannot be watered so many rows at a time, so they work together as sharefarmers. They all come to an agreement when they’re going to pick [s/c: irrigate?]. I don’t have nothnig [s/c] to do with it.” Asked what he would do if he thought a sharefarmer was damaging the crop through improper irrigation, he responded: “I lose, then I lose. There’s nothing I can do about it. But it doesn’t work that way though because they lose also. They would lose also. Why would they want to damage their crop?”

As an indication of the individual skill needed to train the vines and care for the cucumber crop, Richard Borello testified that “If they [the share-farmers] abandon the field then I lose. . . . [T]hen it’s hard to or for another sharecropper to come in a [sic ] take those rows ’cause they may not like the way the person handled the plants, and if he didn’t have the plants right, then the crop is lost.” It is also difficult to take over the crop because “It’s very important to keep the vine clean of large cucumbers because it stresses the plant. . . .”

As to the time at which the sharefarmers were to do their work Richard Borello testified: “They’re experienced cucumber pickers. And they realize that starting too early in the morning is not good for the plants. And they want to keep them [sic ] plants as healthy and produce as much as possible. It’s in their best interest. So they start later on in the day and, many times, some sharecroppers won’t show up. Some will start, say at 8:00 and others will come in at 10:00 depending on [s/c] some people don’t care quite as much about the plants. Some people say, ‘well I want to get it over with.’ And they go in in the morning and they pick it even when the plant is wet which hurts the plant. But I have no say over that. Others come in at 10:00 when the plant is dry which is better for the plant, and others will come in at 6:00 at night and pick only in the evening. So I have no say over the times or the hours.” As to which persons were to do the work he testified: “No, I have no control at all. It, the sharefarmer furnishes, the sharefarmer, it says in the contract here, that they only use family members. It’s even underlined in the contract. And being a sharefarmer or a contractor I have no control over who they put in the field other than they should agree with this document that they have only their family members.”⁶

Asked whether there was “any type of quality control involved by either Vlasic or Borello,” Richard Borello testified: “There is no quality control other than, ya [y/c] know, self motivation of making the most, by picking the smallest cucumber and taking care of the plants, that is the motivation. That is the quality control. . . . That’s right. If they pick big cucumbers, they make less, and I make less. If they pick small cucumbers, then they make good, and I make good.”

Again, the majority’s assertion that “in no practical sense are the ‘share-farmers’ entrepreneurs” is an unsupported conclusion. Two essential facts established by the uncontradicted evidence demonstrate that these share-farmers are entrepreneurs: One, they cannot be terminated or discharged without cause during the term of the contract or even, according to the testimony, for inadequate performance; second, if the crop fails, is destroyed or for any reason cannot be marketed, the sharefarmers will not be compensated for their labors, no matter how many hours they have worked.

These facts also demonstrate the majority’s error in stating that the sharefarmers make no investment in the enterprise. They invest the value of their labor. That may be insignificant to the majority but it is no doubt significant to the sharefarmers, as it is to me. The value of one’s labor is ultimately the source of all capital. Many generations of American immigrants have become successful entrepreneurs doing just that—investing the only asset at their command, the value of their labor.

Borello too incurs real and substantial risks and obtains real benefits from the sharefarmer arrangement. Borello saves the cost of hiring supervisors to control the manner and quality of the work. On the other hand, it gives up its right to control the manner in which and the time at which the work is performed. As Richard Borello explained, Borello retains no control over the work and if the sharefarmers lose because of improper care or harvesting of the crop, Borello also loses.

The majority’s conclusion that the “record fails to demonstrate that the harvesters voluntarily undertake an ‘independent’ and unprotected status” (maj. opn., ante, p. 359) is not based on any finding of the Division or the superior court (see fn. 3, ante) and again is simply contrary to the uncontradicted evidence of record. The written agreement expressly provides that the sharefarmer is an independent contractor and discloses that Borello will not withhold taxes or carry workers’ compensation insurance covering the sharefarmers or their families. It is written in plain language, both in Spanish and English, and was explained to the sharefarmers in Spanish where appropriate before it was signed. Contrary to the implication in the majority opinion, there is no law establishing that a person’s decision to enter into a transaction is involuntary unless he or she has been oifered alternative arrangements. And the uncontradicted testimony of both Richard and Johnny Borello, the only witnesses, was that the sharefarmers like the sharefarmer arrangement because, for one reason, they can make much more under this arrangement than as hourly laborers.⁷ (See further discussion, infra.) The Borellos’ testimony was verified by the fact that families often return year after year and even recommend the arrangement to other families who they bring with them to join in.

The statement by the majority that there is no evidence “that nonsignatory members of the sharefarmer’s family have accepted Borello’s disclaimer of employment responsibilities” (maj. opn., ante, p. 359) is amazing. The head of the family obviously enters into the sharefarmer agreement for himself and the rest of the family as their authorized agent. There is simply no evidence to the contrary nor is there any other reasonable inference. Significantly, not a single sharefarmer nor any other witness was called by the department to contradict the testimony of the Borellos.

Even more astonishing is the majority’s attempt to discredit the uncontradicted evidence that the harvesters are able to earn considerably more as sharefarmers than they could as hourly employees. (Maj. opn., ante, p. 359, fn. 15.) Richard Borello was asked: “Why is that they like to typically go on a sharefarmer basis, then [s/c] let’s say, paying them an hourly wage?” He responded: “Well they make a lot more money on the sharefarmer basis.” Later he was asked: “Now, if they were working on an hourly basis, what would be their typical hourly rate?” He responded: “Probably they’d be $4.00 an hour, that’s the going rate in Gilroy right now.” He was next asked: “Is it fair to say then, that the amount of money they make under this arrangement is typically substantially greater than . . . .” He answered: “Oh yes, it’s at least $7-8 an hour if you were to break it down.”

Johnny Borello’s testimony was to the same effect. His testimony germane to the question is as follows: “Q: Now, are you aware of any farmers in the Gilroy area that are not using the sharefarmer arrangement?

“A: There’s a few.

“Q: Do you have any reason, do you know why, that, why they may not be using that particular sharefarmer arrangement?

“A: Well, [if] they use this system, the workers make more. . . .

“Q: Based on your experience in having been on the farm there for a while, does it appear that the sharefarmers that come in are happy with that arrangement and that they want to share the sharecropping arrangement?

“A: They want to do it. They’re happier, that way.

“Q: In your opinion would they make more money that way?

“A: Way more.”

It is true that Richard Borello testified that whatever proceeds of sale were paid each week would be divided among the family members, but no inference can be drawn from that obvious fact that the amount earned would be less than that earned by an hourly employee. The amount of the proceeds of sale would naturally depend on the number and kind of cucumbers harvested and sold during a particular week, and the weekly amounts referred to by the majority do not indicate either the number of hours worked nor the number of persons who picked the cucumbers sold that week. It is thus impossible to draw from the weekly amounts any rational inference as to what average hourly wage would have been equivalent. What is left is the uncontradicted and uncontroverted testimony of Richard and Johnny Borello.

And so I come at last to the law. The controlling law is clear and simple though not always so easy to apply as it is here. On the evidence in the record before us, the unanimous Court of Appeal decision correctly determined that the Division’s finding these sharefarmers were employees was incorrect as a matter of law.

As the majority correctly observes: “The Workers’ Compensation Act (Act) extends only to injuries suffered by an ‘employee,’ which arise out of and in the course of his ‘employment.’ (§§ 3600, 3700; see Cal. Const., art. XIV, § 4 (former art. XX, § 21).) 'Employee[s]’ include most persons ‘in the service of an employer under any . . . contract of hire’ (§ 3351), but do not include independent contractors.” (Maj. opn. ante, p. 349.) (§§ 3353, 3357.)

The meaning and content of the statutory control test has been clear since at least 1947 when this court explained: “An independent contractor is one ‘who renders service for a specified recompense for a specified result, under the control of his principal as to the result of his work only and not as to the means by which such result is accomplished.’ (Lab. Code, § 3353.) The distinction between the status of an independent contractor and that of an employee rests upon several important considerations. A material and often conclusive factor is the right of an employer to exercise complete and authoritative control of the mode and manner in which the work is performed. The existence of such right of control, and not the extent of its exercise, gives rise to the employer-employee relationship. (S. A. Gerrard Co. v. Industrial Acc. Com., supra, 17 Cal.2d 411, 413-414 [110 P.2d 377]; Riskin v. Industrial Acc. Com., supra, 23 Cal.2d 248, 253 [144 P.2d 16]; Industrial Indemnity Exchange v. Industrial Acc. Com., 26 Cal.2d 130, 135 [156 P.2d 926].) Strong evidentiary support of the employment relationship is ‘the right of the employer to end the service whenever he sees fit to do so.’ (Press Publishing Co. v. Industrial Acc. Com., 190 Cal. 114, 120 [210 P. 820]; see, also, Hillen v. Industrial Acc. Com., 199 Cal. 577, 582 [250 P. 570]; Riskin v. Industrial Acc. Com., supra, 23 Cal.2d 248, 253; California Employment Com. v. Los Angeles etc. News Corp., 24 Cal.2d 421, 425 [150 P.2d 186]; Yucaipa Farmers etc. Assn. v. Industrial Acc. Com., supra, 55 Cal.App.2d 234, 237.) ‘An employee may quit, but an independent contractor is legally obligated to complete his contract.’ (Baugh v. Rogers, supra, 24 Cal.2d 200, 206-207 [148 P.2d 633, 152 A.L.R. 1043]; Los Flores School Dist. v. Industrial Acc. Com., 13 Cal.App.2d 180, 183 [56 P.2d 581].) There are ‘other factors to be taken into consideration,’ as stated in Empire Star Mines Co. v. California Employment Commission [1946] 28 Cal.2d 33, at page 43 [168 P.2d 686]: ‘(a) whether or not the one performing services is engaged in a distinct occupation or business; (b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; (c) the skill required in the particular occupation; (d) whether the principal or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work; (e) the length of time for which the services are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is a part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee. (Rest., Agency, § 220 [Rest.2d Agency, §§ 2, 220]; Cal.Ann., § 220.)’ ” (Perguica v. Ind. Acc. Com. (1947) 29 Cal.2d 857, 859-860 [179 P.2d 812]; accord, Tieberg v. Unemployment Ins. App. Bd. (1970) 2 Cal.3d 943, 949-953 [88 Cal.Rptr. 175, 471 P.2d 975]; Empire Star Mines Co. v. Cal. Emp. Com. (1946) 28 Cal.2d 33, 43-44 [168 P.2d 686].)

“Generally speaking, it is a question of fact to be determined by the commission, from the evidence adduced, whether the essential employer-employee relationship exists (Riskin v. Industrial Acc. Com., 23 Cal.2d 248, 255 [144 P.2d 16]), and the commission’s finding on that issue will not be disturbed where it is supported by substantial evidence. (S. A. Gerrard Co. v. Industrial Acc. Com., 17 Cal.2d 411, 414 [110 P.2d 377].) But ‘if from all the facts only a single inference and one conclusion may be drawn, whether one be an employee or an independent contractor is a question of law.’ (Baugh v. Rogers, 24 Cal.2d 200, 206 [148 P.2d 633, 152 A.L.R. 1043]; Yucaipa Farmers etc. Assn. v. Industrial Acc. Com., 55 Cal.App.2d 234, 238 [130 P.2d 146]; see, also, Burlingham v. Gray, 22 Cal.2d 87, 100 [137 P.2d 9].)” (Perguica v. Ind. Acc. Com., supra, 29 Cal.2d at p. 859.)

The law as set down in the statute and explicated by this court has been uniformly followed both by this court and the Courts of Appeal throughout the years, and the Court of Appeal in this case correctly applied that law to the facts established by the record. In its opinion authored by Justice Capaccioli, it reasoned: “Here, the work to be performed was the care and harvest of the cucumber plants. Borello & Sons did not retain or exercise control over the manner in which those responsibilities were discharged by the share farmers once they were contractually undertaken except to require the share farmers to use their own families to perform the work. The share farmers were free to utilize their own methods and set their own hours. Although the Vlasic’s pricing schedule was an economic incentive to pick the cucumbers while they were small, the share farmers were free to pick them at any stage of maturity. The share farmers determined when the cucumber crops would be irrigated.

“The following factors are also indicative of an independent contractor relationship. First, there was no evidence that Borello had the authority to terminate the share farmers at will. Second, the share farmers were required to furnish their own tools and equipment necessary to care for and harvest the cucumber plants. Third, the share farmers worked for a limited time period. Fourth, the share farmers were paid based on the result produced rather than upon the time devoted. Fifth, the parties evidently believed they were creating an independent contractor relationship.. . .

“We do not find the fact that Borello & Sons retained responsibility for the application of pesticides and fertilizer significant since those activities involve different skills and knowledge and were separable from the manual labor which the share farmers had contracted to perform. ‘[I]n weighing the control exercised we must carefully distinguish between authoritative control and . . . necessary co-operation where the work furnished is part of a larger undertaking. [Citation.]’ (Western Indemnity Co. v. Pillsbury (1916) 172 Cal. 807, 813 [159 P. 721].)”

Departing from the statutorily provided and long established standard, the majority opinion makes a strenuous effort to justify its result. First, it discusses at some length the history of the development of the control test in an attempt to demonstrate that it is not as meaningful today as once it was. The answer is that it is statutorily prescribed (§§ 3353 and 3357) and that until today it was as meaningful as ever.

Next, the majority finds comfort in a number of federal decisions in other contexts and not involving our statutory standard and a number of out-of-state decisions of little consequence to us in view of the rather clear law of this state on the subject. Next reliance is placed on section 2750.5 relating to unlicensed contractors. The meaning of this statutory provision has itself been the subject of considerable dispute. (See State Compensation Ins. Fund v. Workers’ Comp. Appeals Bd. (1985) 40 Cal.3d 5 [219 Cal.Rptr. 13, 706 P.2d 1146].)⁸ But the simple answer here is that no claim has been made that the sharefarmers are required to be licensed, so section 2750.5 has nothing to do with this case.

I conclude that the majority opinion is incorrect on the facts and the law. If there is some problem with the sharefarmer arrangement that threatens the social policies of the state, which is not established by the record in this case, the Legislature is undoubtedly competent to remedy it. There is no need for this court to render a decision distorting the law and which, to boot, ignores the facts established by the record.

I would either dismiss the review as improvidently granted or affirm the judgment of the Court of Appeal.

Panelli, J., concurred.

1 No party nor any other person assertedly aggrieved by the Court of Appeal decision sought review. Review was granted on this court’s own motion.

2 The majority makes the gratuitous assumptions that the sharefarmers do not obtain insurance coverage for themselves and would not be able to afford it in any event. The truth is that there is not one iota of evidence in the record supporting these assumptions. For all the record shows, the sharefarmers may be fully covered by health and/or accident insurance. Indeed, it is noteworthy that this is not a workers’ compensation proceeding instituted by an injured sharefarmer, nor is there any evidence that any sharefarmer has ever been injured or disabled. It was specifically observed at the hearing that there was no known workers’ compensation case arising out of this relationship.

3 As the majority states, “ . . . the Division concluded that because of Borello’s predominant control over the cultivation, harvest, and sale of its cucumbers, and the workers’ lack of investment in the crop, they [the sharefarmers] cannot be deemed ‘sharecroppers in the true sense.’ Hence, it ruled, they are employees rather than independent contractors. . . . [T]he trial court found the Division’s finding supported by the evidence and denied the writ.” (Maj. opn., ante, p. 348, fn. omitted.)

4 All statutory references are to the Labor Code unless otherwise indicated.

5 Section 3202.5 reads: “Nothing contained in Section 3202 shall be construed as relieving a party from meeting the evidentiary burden of proof by a preponderance of the evidence. ‘Preponderance of the evidence’ means such evidence as, when weighed with that opposed to it, has more convincing force and the greater probability of truth. When weighing the evidence, the test is not the relative number of witnesses, but the relative convincing force of the evidence.”

6 The majority find significant that the contract allows for work only by family members, but the reason for that requirement is quite apparent. Otherwise, the head of the family might be illegally acting as a labor contractor. (See § 1140.4, § 1682 et seq.)

7 Though there was no testimony on the point, it is also apparent from the evidence that, except perhaps for the time when picking is at its peak, the full time of all family members would not be required by the sharefarming arrangement, and, conceivably, some members of the family could be simultaneously employed elsewhere on a part-time basis.

8 That decision had the unique effect of rewarding misdemeanor contracting without a license by extending to the unlicensed contractor workers’ compensation benefits that would not have been available to him if he had obtained the proper license.