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What Does the Cambria Decision Mean for Your Agency?

Contracting for services and the treatment of independent contractors as employees by CalPERS has received renewed attention in local government circles, due to a recent CalPERS proposal. On July 25, 2018, the CalPERS Board of Administration adopted a decision involving a determination that an independent contractor providing temporary services was a common law employee of Cambria Community Services District (District or CCSD). On March 15 of this year, CalPERS sent a notice to interested parties that its Board was considering making the decision precedential. The CalPERS Board ultimately opted not to designate the decision as precedential.

At issue in the underlying case (In the Matter of the Appeal of Membership of Tracy C. Fuller and Cambria Community Services District (Case No. 2016-1277)) was the employment status of Tracy Fuller. In 2014, when the District’s Finance Manager gave notice, the District turned to Regional Government Services (RGS) for temporary assistance. RGS is a joint powers authority that provides project-based support for other local government agencies; it provides its employees with a 401a retirement benefit. RGS hired Ms. Fuller and assigned her to support the District’s Finance Department on a temporary basis. Ms. Fuller was a member of CalPERS from prior employment but was not an annuitant and never claimed to be an employee of CCSD entitled to enrollment. When CCSD hired a replacement Finance Manager in the fall of 2014, it terminated the contract with RGS. RGS assigned Ms. Fuller to provide services to other RGS clients.

During an audit of CCSD, CalPERS became aware of the work that Ms. Fuller had performed. The audit concluded that Ms. Fuller was a common law employee of the District and should have been enrolled. The District and Ms. Fuller appealed the determination. The administrative law judge issued—and the CalPERS Board ultimately adopted—a decision upholding the determination that Ms. Fuller was a common law employee of the District.

Although there are critiques that one could make of the decision, it did not announce a new standard or apply existing standards in a novel way. It applied existing law regarding the common law employment test, which primarily asks who has the right to control the manner and means of achieving the desired result of the services provided. (Metropolitan Water Dist. v. Superior Court and Tieberg v. Unemployment Insurance Appeals Board.) The decision also relied upon secondary factors, some of which appear in the Internal Revenue Service’s so-called Twenty-Factor Test (IRS Independent Contractor Guidelines).

Since the decision did not break new legal ground, nothing different is required of local government agencies. They should continue to exercise caution when contracting for services, particularly when contracting for temporary services to address operational needs that would have been met by an employee if the position were not vacant. It is essential for local governments to make informed decisions for themselves as to how best to meet their operational needs and provide services to constituents.

RGS continuously strives to apply best practices in providing contract services. It developed a standard services agreement it recommends to potential partner agencies to address common law employment issues. RGS also proactively manages its staff in the scoping and delivery of services. To learn more about the RGS approach, follow this link: (Risk Management/Best Practices When Using Independent Contractors).

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