[No. 63518-2-I. Division One. December 20, 2010.]
July 14, 2010, Oral Argument Martin S. Garfinkel, William J. Rutzick, and Rebecca J. Roe (of Schroeter Goldmark & Bender) and Lawrence R. Schwerin and Dmitri L. Iglitzin (of Schwerin Campbell Barnard Iglitzin & Lavitt LLP), for appellants. Kelly P. Corr, Guy P. Michelson, Kevin C. Baumgardner, and Emily J. Brubaker (of Corr Cronin Michelson Baumgardner & Preece LLP) (Chris A Hollinger of O'Melveny & Meyers LLP, of counsel), for respondents. Author: Ronald Cox, J. We concur: Stephen J. Dwyer, C.J., Mary Kay Becker, J.Ronald Cox ¶1 COX, J. -- Jury instructions are sufficient if they permit each party to argue their theory of the case, do not mislead the jury, and when read as a whole, properly inform the jury of the applicable law. ¶2 The primary issue in this case of first impression is whether the court properly instructed the jury on the legal standard for determining whether the drivers are employees or independent contractors for purposes of the MWA. Other jury instructions are also at issue. For the reasons that follow, we affirm in part, reverse in part, and remand for further proceedings. ¶3 Randy Anfinson and two other drivers sued FedEx in December 2004, seeking relief on behalf of themselves and others similarly situated. The trial court granted their motion to certify this case under CR 23 as a class action on behalf of approximately 320 FedEx drivers (collectively Anfinson). The class is defined as all persons who performed services as a pick up and delivery driver, or "contractor," for defendant during the class period (December 21, 2001 through December 31, 2005) who signed (or did so through a personal corporate entity) a FedEx operating agreement and who handled a single route at some point during the class period; excluding persons who only performed or filled one or more of the following positions during the class period: multiple route contractors, temporary drivers, line-haul drivers, or who worked for another contractor. ¶4 Anfinson seeks overtime wages under the MWA for a period commencing three years prior to December 2004, when this action was filed. The essence of this claim is that the FedEx drivers are "employees" under the MWA, not "independent contractors" as the company classifies them. Anfinson also seeks attorney fees under the MWA and other statutes. ¶5 Anfinson also seeks reimbursement for the cost of uniforms under the IWA, RCW 49.12.450. The parties stipulated that if the jury determined that the class members were employees and not independent contractors, FedEx would be liable for overtime wages under the MWA and uniform reimbursement under the IWA. ¶6 The court bifurcated the trial into two phases. The first phase was the liability phase and the second phase was to have addressed damages. ¶7 A central issue for the liability phase was how the trial court should instruct the jury on the legal standard for whether the drivers are employees of FedEx or independent contractors. The court, drawing on submissions from the parties and its own research, fashioned a preliminary and a final instruction for the jury on this question. They were worded substantially the same. These instructions are the primary issue on appeal. ¶8 After a four week trial on liability issues, the jury returned a defense verdict for FedEx. The jury decided that the class members were independent contractors, not employees. ¶9 Anfinson appeals. JURY INSTRUCTIONS ¶10 Anfinson challenges both the trial court's decisions to give certain instructions and its refusal to give others. We agree with some of these challenges and disagree with others. [1] ¶11 Jury instructions are sufficient if they permit each party to argue their theory of the case, do not mislead the jury, and when read as a whole, properly inform the jury of the applicable law. [2-4] ¶12 "On appeal, jury instructions are reviewed de novo, and an instruction that contains an erroneous statement of the applicable law is reversible error where it prejudices a party." "When the record discloses an error in an instruction given on behalf of the party in whose favor the verdict was returned, the error is presumed to have been prejudicial, and to furnish ground for reversal, unless it affirmatively appears that it was harmless. . . . "A harmless error is an error which is trivial, or formal, or merely academic, and was not prejudicial to the substantial rights of the party assigning it, and in no way affected the final outcome of the case." [5-7] ¶13 In contrast, a trial court's decision whether to give a particular instruction to the jury is a matter that we review only for abuse of discretion. [8, 9] ¶14 Refusal to give a particular instruction is an abuse of discretion only if the decision was "manifestly unreasonable, or [the court's] discretion was exercised on untenable grounds, or for untenable reasons." [10] ¶15 The fact that a proposed jury instruction includes language used by a court in the course of an opinion does not necessarily make it a proper jury instruction. Preliminary Instruction and Instruction 9 ¶16 Anfinson's primary argument is that the court's preliminary instruction, as well as instruction 9 (collectively Instruction 9), misstates the law. Specifically, the class members argue that this instruction erroneously states the legal standard for distinguishing between employees and independent contractors for purposes of the MWA. Anfinson argues Instruction 9, which focuses on whether an employer has the "right to control the details of the class members' performance of the work" is incorrect. We hold that Instruction 9 incorrectly states the law and was prejudicial to Anfinson. ¶17 In considering Anfinson's arguments, we have several preliminary observations. First, the question whether the FedEx drivers are employees or independent contractors for purposes of the MWA is a question of first impression in Washington. Second, there are a wide variety of approaches in other states that have considered the same or similar questions. [11] ¶18 That said, we focus first on the question of what legal standard should control, for purposes of the MWA, whether one is an "employee" or an "independent contractor." This is a mixed question of fact and law. ¶19 Here, the trial court's Instruction 9 states: You must decide whether the class members were employees or independent contractors when performing work for FedEx Ground. This decision requires you to determine whether FedEx Ground controlled, or had the right to control, the details of the class members' performance of the work. In deciding control or right to control, you should consider all the evidence bearing on the question, and you may consider the following factors, among others: 1. The degree of FedEx Ground's right to control the manner in which the work is to be performed; 2. The class members' opportunity for profit or loss depending upon each one's managerial skill; 3. The class members' investment in equipment or materials required for their tasks, or their employment of others; 4. Whether the service rendered requires a special skill; 5. The degree of permanence of the working relationship; 6. Whether the service rendered is an integral part of FedEx Ground's business; 7. The method of payment, whether by the time or by the job; and 8. Whether or not the class members and FedEx Ground believed they were creating an employment relationship or an independent contractor relationship. Neither the presence nor the absence of any individual factor is determinative. ¶20 The overtime wage provision of the MWA that is primarily at issue for purposes of Instruction 9 is former RCW 49.46.130 (1998). That statute states in relevant part: (1) Except as otherwise provided in this section, no employer shall employ any of his [or her] employees for a work week longer than forty hours unless such employee receives compensation for his [or her] employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he [or she] is employed. ¶21 RCW 49.46.010, the definitional section of the MWA, states: (3) "Employ" includes to permit to work; (4) "Employer" includes any individual, partnership, association, corporation, business trust, or any person or group of persons acting directly or indirectly in the interest of an employer in relation to an employee; (5) "Employee" includes any individual employed by an employer . . . . [A list of specific exclusions follows, none of which apply to this case.] [12, 13] ¶22 In interpreting statutory language, our goal is to effectuate the legislature's intent. ¶23 The above definitions provide little guidance for determining whether an employment relationship exists in any particular case for purposes of the MWA. We thus turn to the established rules of statutory construction to address that question. ¶24 In analyzing these provisions of the MWA, we are guided by our supreme court's decision in Stahl v. Delicor of Puget Sound, Inc. ¶25 The supreme court's analysis of RCW 49.46.130(3) is helpful here because RCW 49.46.130(1), a related section, is at issue in this case. In Stahl, the supreme court stated that in enacting the MWA, "the legislature broadly defined employee in RCW 49.46.010(5) to include any individual employed by an employer." ¶26 It is also significant that the supreme court noted both that the MWA is "based on the Fair Labor Standards Act of 1938 (FLSA)," and that a review of that act supported the court's conclusions regarding the MWA. ¶27 In view of the supreme court's reliance on the FLSA in analyzing the MWA in Stahl and other cases, ¶28 The legislature enacted the MWA in 1959. [14, 15] ¶29 The MWA, including its definitions, is patterned on the FLSA. [16-20] ¶30 The FLSA was enacted in 1938 for the purposes of remedying low wages and long working hours. ¶31 In contrast to the economic realities test, the common law "right to control" test for determining whether a worker is an employee or an independent contractor is derived from the common law of torts. ¶32 The purpose of the distinction between an employee and an independent contractor is thus substantially different in these two areas of law. While the common law "right to control" test was developed to define an employer's liability for injuries caused by his employee, the purpose of the MWA is to provide remedial protections to workers. ¶33 The economic realities test used by a majority of the federal circuits has six factors. (1) the permanence of the working relationship between the parties; (2) the degree of skill the work entails; (3) the extent of the worker's investment in equipment or materials; (4) the worker's opportunity for profit or loss; (5) the degree of the alleged employer's control over the worker; (6) whether the service rendered by the worker is an integral part of the alleged employer's business. ¶34 Instruction 9 includes introductory language from the common law "right to control" test for distinguishing between agents and independent contractors, which is stated in Washington Pattern Jury Instruction (WPI) 50.11.01. ¶35 The common-law and "economic realities" tests overlap to some extent. For example, the first factor of the economic realities test, the "right to control," is essentially the same as the common-law test. But the primary focus of the two tests is different. Under Washington's common-law test, the ultimate inquiry is whether the employer has the right to control the worker's performance. ¶36 With these considerations in mind, we hold that the economic realities test used by the majority of the federal circuits should be the proper legal test for determining whether a worker is an employee under the MWA. Instruction 9, while including some factors drawn from this test, defines the ultimate test for determining whether a worker is an "employee" under the MWA as the "right of control" over the worker's performance. This is legally incorrect. ¶37 Stahl and other supreme court cases make clear that Washington's MWA is patterned on the FLSA. Given this and the legislative history of the MWA, we conclude that the federal test of "economic realities" used by a majority of the federal circuit courts is most persuasive, given the parallel remedial purposes of the state and federal acts. ¶38 In Stahl, the supreme court also looked to DLI's then current interpretation of RCW 49.46.130 for guidance. ¶39 DLI has substantially adopted the six factor economic realities test used by the majority of federal circuits as the interpretive rubric through which to distinguish employees from independent contractors. ¶40 The six factors that DLI identifies for that test are: 1. The degree of control that the business has over the worker. 2. The worker's opportunity for profit or loss depending on the worker's managerial skill. 3. The worker's investment in equipment or material. 4. The degree of skill required for the job. 5. The degree of permanence of the working relationship. 6. The degree to which the services rendered by the worker are an integral part of the business. DLI's adoption of this test is an additional reason for our conclusion that the "economic realities" test is the proper test to use for purposes of the MWA. ¶41 Because this instructional error was given on behalf of the party in whose favor the verdict was returned, we presume that it was prejudicial. Therefore, we reverse. ¶42 FedEx argues that Anfinson was still able to argue effectively its theory of the case under Instruction 9 because of the presence of the six factors used by the majority of federal circuits. But Instruction 9 clearly states that the "right to control" is determinative. Thus, Anfinson could not effectively argue that the six factors of the "economic realities" test were determinative. This is particularly true in light of the presence of two additional factors in this instruction, neither of which is considered in the economic realities test. Our review of the final arguments by the parties supports our conclusion that this instruction was prejudicial to Anfinson. ¶43 FedEx relies on Ebling v. Gove's Cove ¶44 First, the court's analysis gives no indication that either party argued that any test for distinguishing employees from independent contractors other than the common law test should apply. Second, it is significant that the statutory framework in the wage and hour laws at issue in Ebling is not based on the FLSA. Thus, there was no reason for that court to consider the persuasive authority of the FLSA on that state law. ¶45 Third, Hollingbery, on which Ebling relied, sets forth the common law standard for determining whether a worker is an employee or an independent contractor in Washington in the context of tort law.