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Workers of the Underground Economy

"The provisions of Labor Code
Sections 551 and 552…shall not be
construed to prevent an
accumulation of days of rest when
the nature of the employment
reasonably requires the employee
to work seven or more consecutive
days; provided, however, that in
each calendar month, the employee
shall receive the equivalent of one
day's rest in seven." (Industrial
Welfare Commission Wage Order 1-


Supreme Court decisions generally define an employee as "an individual

in a service relationship who is dependent as a matter of economic reality
upon the business to which he renders service and not upon his own business
as an independent contractor," intending that workers who are economically
dependent upon the entity for whom they perform services should be treated
as employees.

Congress intended the common-law rules to be applied realistically, not

restrictively. By applying a broad interpretation, more borderline cases would
be decided in favor of employment rather than self-employment and would
be more consistent with the purpose of the Social Security Act.

Businesses sometimes hire contingent workers to save the effort and

expense of withholding (taxes) and to be relieved of responsibility to the
worker under labor and employment laws. Unfortunately, this reduces the
number of workers with access to protections and benefits such as pensions,
disability insurance, unemployment insurance, and such.
Problems arise when a firm hires not another business but several
individuals to do work, and then wishes to treat those individuals as
independent contractors instead of employees.


Very few goods are delivered for less than the cost of one having to
relocate oneself to acquire such. Delivery fees (often called “shipping and
handing”) are invariably added to or included in the overall cost not only to
ensure laborers of fair compensation but also for the business’ profit.
Ordering a pizza to be home delivered generally costs more than a person
going out to purchase one. Contrarily, ordering a newspaper to be home
delivered is less costly than purchasing one at a stand.

The following proposal contains examples of my actual experience. I

encourage the reader to be discerning while considering my perspective and
to thoroughly research my references for accuracy.

I worked for a manufacturing company, engaged in printing and

publishing, 7 days a week for almost 2 years straight, for which I provided the
service of assembling and delivering products as per specifications. The
business had already sold the products along with the promise of future
delivery. Ultimately, the firm also took credit for my labor.

 I received payment for performing recurring services in a

continuing relationship with the business.

 I performed services that are an integral part of the firm's

regular business.

 I was required to follow instructions about when, where, and how

to work.

 I was required to comply with daily instructions about the way

service was to be performed.

 I was required to follow established routines and schedules of

the business.

 I received training from an experienced “employee” that does

the same type work.

 I did not make my services available to the general public or

have a business license.

 The business has a right to discharge an individual at will and

without liability.

 The firm has the right to control the manner by which services
are performed, as an incident to the firm's right to protect its
business interests.

 The factual relationship between the worker and the firm is

different than in the written agreement.

In one example, Section 3 of the firm’s written agreement reads, "Upon
the request of the Sentinel, Contractor shall deliver billing notices to
subscribers in return for which Contractor shall receive payment in the
amounts provided for in paragraph F of the appendix to this Agreement."
However, their 'employment' ad in the classifieds states, "no collection or
billing responsibilities." And, in practice, the manager in charge told me at
the time of the signing of the agreement the Sentinel would never require
me to deliver a billing notice. He summed up the contract very quickly and
ended with, "Oh, it's all standard. Just sign here if you want the job!"

H E A LT H R I S K I N P O T E N T I A L ' 3 0 0 -TO - 1 ' D AY W O R K-T O - R E S T R AT I O

The most unusual work schedule is probably that of the commonly

disregarded but ultimately imperative newspaper carrier working 7 days a
week and most often well over 14, 28, and even 90 days in a row.

These unique permanently fixed night shifts are 7 days per week on a
yearly rotation schedule, and since there are only 3 or 4 days off per year
(Thanksgiving, Christmas, and New Year's Day plus an optional Memorial or
Veteran's Day) it's possible for a worker to go for over 10 months without
even one day's rest.

During the two-month period when the three separate days of rest occur,
there is inevitably extra work to do for the winter holiday specials and/or
weather hazards to be taken into consideration.

How tired a worker is depends greatly on how many days in a row s/he
works. Night workers usually get the least amount of quality sleep as they are
forced to sleep during the day when their body (circadian) rhythm tells them
to be awake. Day sleep is shorter, lighter, and less satisfying than night
sleep. Over several days (need I add months or years) fatigue can
accumulate to unsafe levels.

Driving is a key concern. Sleepiness affects our ability to concentrate and

driving requires our attention at all times. If a person is sleepy, it is easier to
have an accident. It is possible for a person to have very brief periods of
sleep that last only a few seconds and for them to not even realize that this is
happening. During those few seconds when they are not paying attention at
all, the worker could get seriously hurt.

Added to that anxiety, many errands and chores (like getting the car
repaired) must be done during the day and many social events take place in
the evening. Because shift workers are on the job in the evening or on
weekends, and because they sleep much of the day, they often miss out on
social and family activities. If this happens too often, it can be even more


Specifically regarding the right of the firm to control performance of the

"timeliness of delivery," in this case meaning "delivery by a certain hour," in
relationship to the actual time the publications are printed by the firm every
day (significant because the time of printing determines the earliest time that
carriers are able to pick up their materials in order to actually start the
process of assembly and delivery).

Each day is unique in that anything could (and I might add, many things
usually do) go awry during the course of each 'press run' including, but not
limited to, the malfunction of the firm's machinery, special "zoning"
considerations (when certain advertisements go only to specific areas of the
county and exclude other areas), the actual number of inserts in each edition,
special bagging requirements from advertisers, the extra work involved in the
assembly of the Sunday edition, the (often unpredictable and sometimes
hazardous) weather conditions, etc.

According to the firm's web page, "Motor route carriers can pick up their
papers…between 1:30 and 2 a.m." From inquiry and experience, I know that
the average motor route has approximately 250 to 350 subscribers, may be
20 to 30 miles, takes about 2-1/2 hours to complete (adding at least an extra
hour on Sundays), and usually pays between $500 and $600 (plus "tips" and
"bonuses") every two weeks.

For various (usually economic) reasons carriers often take on the

responsibility of an additional route, and, hence, twice the amount of work
and twice the amount of time for completion (plus additional driving time for
traveling in between routes). Considering the amount of time it takes to
complete the average motor route safely yet efficiently from start to finish,
and the firm's requirements for the conditions of service, it seems almost
unbelievable that a person should be able to handle more than one. However,
it is quite common and such was my case.

As a person who managed to handle the responsibility of more than one

route, I can testify that the average double-route/six-hour day is so
concentrated in terms of physical and mental activity, it is at least
comparable to the average eight-hour workday of a person who works a
common day shift (with regularly allowed shift breaks plus a designated meal
time), as time constraints are such that there is usually little or no time for

rest or meal breaks; only such minimal time as it may take to stop and re-fuel
the delivery vehicle.


It is critical to keep in mind that during the actual course of delivery the
specific bodily and mechanical actions involved in driving a motor vehicle
safely are compromised by the fact that the driver must be concurrently
and/or alternately gripping the steering wheel; grabbing for papers to fold
(with the same set of hands that are supposed to be driving); rapidly and
repetitively wrapping papers with rubber bands and/or plastic bags; tossing
the final assembled products out of both sides of a moving vehicle; while
maintaining proper speed by using repetitive foot and ankle movements for
acceleration and deceleration; with the majority of the time spent driving on
the "wrong" side of the road for ease of delivery to "boxes" or driveways on
the left hand side of the route (which is generally a one-way course, with the
exception of occasional side roads off the main route or in the case of long
private driveways and such); with no safety belt requirement while on route
(as per California Vehicle Code Section 27315); while driving during the
earliest hours of the day when the sale of alcohol is temporarily prohibited
(after local bars close for the “evening”) to further ensure public safety.


The Santa Cruz Sentinel's 'Circulation' web page is misleading and

intentionally deceptive. Under 'Home Delivery' it states, "Delivery deadline is
6:30 a.m. weekdays and 7:00 am weekends." But under 'Route Delivery: Your
Road to Riches' it says,

"Delivery deadline is 5:30 am on motor routes, 6:30 am on bike routes."

Lastly in this section, "Average route size is about 60 deliveries and delivery
time about half hour." In actuality, delivery deadline on motor routes is 5:30
am daily except on Sundays it's 6:30 am. In actuality, the average motor
route is 300 deliveries and delivery time takes about 2-1/2 hours. If the
average bike route is 60 deliveries and takes about half an hour to deliver.
Why are bike route carriers allowed 20% more time to deliver about 80% less
papers? What does the Sentinel have to obfuscate? How many workers are
being exploited?

The Sentinel's 'Circulation Statement' is an "invoice" that better describes

their accounting practices and avoidance of the responsibility owed to
workers under employment, labor, and tax laws. The 'Motor Contractors'
paycheck comes as a description of the firm's "charges" and included on the

invoice are the misleading phrases "We thank you for paying your bill
promptly," "Accounts are due and payable upon receipt of statement," and
"Please return top portion with your payment." 'Tips' (as advertised in their
classifieds under 'Employment') given in exchange for service are disguised
as 'Gratuities' in their accounts to avoid the responsibility of wage reporting
and taxation. Any 'Bonus' paid, as expressed in contract, is listed as
'Promotions' on the circulation invoice. Additionally, almost every statement
includes a 'Misc. Credit' of about a couple or a few handfuls of dollars. Could
these few dollars be my state employment taxes inconspicuously routed back
to me?


During the record rainy season of November and December of 2002 (of
which the governor later declared a state of emergency to repair such
extensive road damage among many counties, including that which
encompassed my route territories), I had some trouble delivering the last
dozen or so of my approximately seven hundred papers, along the often-
flooded (floods, by contract, supposedly disallow termination for incapacity to
work under these conditions) rural back roads of Ben Lomond. Occasionally I
would be half an hour to an hour late or so. One week during this period I had
two minor car accidents (with none before ever in my life), fortunately with
no injury to myself but unfortunately with much damage to my car. Unable
able to fix a half-broken axle on the pay I received from the Sentinel, I was
forced to borrow a friend's very old car for my driving; although it did not go
much faster (than 35mph), it was at least safer.) Nevertheless, I began to
receive regular customer complaints for the first time since I began delivering
papers for the Sentinel in August of 2001. (In fact, I had received bonuses
almost every single month up until that point.) I received a note from my
manager, Sharon Rohrs, in mid-December stating, "If service doesn't improve
immediately…I will be forced to terminate your contract…in order to insure
satisfactory service to all of the Sentinel's customers." And although she also
said that she would be monitoring my service results "over the next couple of
weeks," I received no such courtesy and my route was "pulled" from me,
without notice, just a few days later (described in the following section).


The first breach of contract occurred one day when the Sentinel,
unbeknownst to me, completely failed to deliver my newspaper bundles for
both routes to my usual pick up location. Instead of being financially
penalized for being a little late a few weeks in a row (as allowed for in the
contract), I was promptly terminated without 30 days notice (“in order to
insure satisfactory service to all of the Sentinel's customers”).


A similar fate was to befall me when I filed for workers' compensation (in
March 2003) for injuries including, but not limited to, both hands and wrists,
neck and back, feet, etc. due to the cumulative trauma of repetitive
maneuvering and the crooked posture obtained by assembling, tossing, and
driving about 3 to 5 hours a day at length, 7 days a week. I received a
doctor's off work order and, unexpectedly, two months later received a letter
in the mail from the Sentinel indicating that my contract had already been
terminated (retroactively; during my recovery period), contrary to the fact
that my manager had informed me a month earlier, "As a courtesy, we will
keep your contract in force while your long term prognosis is being
developed." Again in this instance I never received 30 days, or any prior,
notice. This is clearly an act of 'discrimination' and a violation of Labor Code.


The incompetent, inhumane and often careless decisions made by my

manager, including three separate actions of immediate termination without
notice (and due to my 'economic dependence' upon the business for which I
performed services), effectively rendered my personal (and delivery) vehicle
tentatively un-repairable and resulted in me being evicted from my home of
almost 2 years. On top of these unfortunate incidents, I found that after filing
for workers' compensation and its claim status in delay for several months, I
was ineligible for almost every state and federal benefit to help assist me
during my recovery including, but not limited to, State Disability Insurance
(SDI), Unemployment Insurance (UI), and Social Security Disability Insurance
(SSDI), because payments were reported on IRS forms 1099-MISC instead of
forms W-2.


Many workers are blatantly misclassified as independent contractors for

tax and liability purposes. Concern is being raised about the common
misinterpretation of the term "newspaper carrier" leading to many workers
being categorized as "self-employed" "direct sellers" (statutory
nonemployees) when they should be considered "common law" or probably
"statutory" employees.

Certain types of services are considered a "trade or business" even if
performed by 'employees' (Social Security Handbook section 404.1068,
'Employees who are considered self-employed.').

A) "Newspaper vendors" described in Section 404.1030(b) of the Social

Security Handbook refer to the 'Delivery and distribution or sale of
newspapers, shopping news, and magazines' if there is an arrangement
under which “services are performed in connection with and at the time of
the sale of newspapers to consumers” and:

1) Selling is at a fixed price, and

2) Compensation for labor is the difference between the fixed selling price
and the amount charged for the newspapers or magazines.

B) As a "Direct seller" one must meet three conditions (Social Security

Handbook 404.1069):

1) Worker must be engaged in the trade or business of selling (or

soliciting sales); and

2) Earnings are related to sales rather than the number of hours worked;

3) Services are performed under a written contract that states the worker
will not be treated as an employee with respect to these services for
Federal tax purposes.

C) Some workers are employees even if the common-law test is not met.
Social Security Handbook section 826 lists four types of 'statutory employees'
along with three initial requirements:

1) The work contract states that the individual will do mostly all the work,

2) The worker has no substantial investment in the facilities used to do

the work, and

3) There is an on-going work relationship with the person for whom work
is performed.

D) Social Security Handbook Section 830 lists four additional requirements

in order to specifically be considered a 'Homeworker':

1) Work must be performed away from the employer's place of business,

2) Work must be performed in accordance with employer's guidelines,


3) Work must be performed on materials or goods provided by the

employer, and

4) The finished product must be returned to the employer or to whom the

employer designates.


'Carriers' effecting delivery of newspapers are not

necessarily 'Newspaper Carriers'

California Code of Regulations Title 22 Section 4304-6, "Application to

Newspaper Distribution Industry," defines a 'Carrier' (pointedly not the term
'Newspaper Carrier') as "a person who effects physical delivery of the
newspaper" and is an agent of a "publisher" or a "newspaper distributor" and
"may be either an employee or an independent contractor." (CCR Title 22
Section 4304-6(b)(2), CCR Title 22 Section 4304-6(b)(3), CCR Title 22 Section
4304-6(b)(5)). For example:

 I worked for a 'manufacturing company' engaged in 'printing and


 I was not a "newspaper carrier or distributor" nor a "newspaper

vendor." (Rather, I was an agent of a newspaper distributor (CCR
Title 22 Section 4304-6(b)(5)).

 I did not perform services in and at the time of the sale of


 I did not buy at fixed prices and retain receipts from sales (CUIC
634.5 and CUIC 649).

 I did not do any selling; I was not a "salesperson," nor a "direct

seller" (CUIC 650).

 I was not a "self-employed" owner of a 'newspaper delivery

service' business.

It’s important to note that CCR Title 22 Section 4304-6 does
not define, nor even use, the specific term 'Newspaper carrier.' It is a
term often used to describe the common newspaper delivery person,
yet it means something very exclusive.

A 'Newspaper carrier' performs services specifically in connection with and

at the time of the sale of newspapers. However, this does not describe the
duties of all newspaper 'Carriers.'

A 'Carrier' of newspapers, on the other hand, performs services under the

direction of a 'Principle' that has already sold the newspapers along with the
promise of future delivery. The status of a worker of this nature is not
necessarily that of a self-employed salesperson. In this instance, the
'Principle' has the right to control the manner by which services are
performed to ensure satisfactory service to all of the firm's customers and in
order to protect its own business interests.


‘Homeworkers’ may include more than just 'home workers'

Social Security policy was specifically designed to include workers who

cannot qualify under common-law rules but work under conditions so similar
to those who do that Congress provided for their coverage as employees
rather than as self-employed persons (SSA POMS sections RS 02101.128, RS,
02101.300, RS 02101.310, RS 02101.450 and RS 02101.455).

 Work is performed under a contract or service agreement.

 The contract states that the work is to be performed personally

by the individual.

 The worker has no substantial investment in the facilities.

 Services are performed in a continuing relationship.

 Product assembly is away from the employer's place of business.

 Work is in accordance with specifications given by the employer.

 The employer furnished the materials on which the work was to

be done.

 The finished product was returned to persons designated by the

employer. (It is immaterial that the worker delivers the goods.)

 The nature of the business makes fixed hours impractical. The
business requires that service be accomplished by a certain time
of day.

 Training is received from an experienced employee that does the

same type of work.

 The employer gives renewed daily instructions to the worker.

 The workers' services are closely integrated into the business of

that employs the worker.

 The worker is required to change work plans and the order of

services when requested.

 The firm checks the finished product and has the right to direct
the method of operation if the completed article is not

Notice that only examples, not specific indications, of the physical

requirements for the materials upon which the work is to be
performed are described in any state or federal code.

In this example, a manufacturing business engaged in printing, publishing,

and distributing newspapers and advertisements hires workers to pick up and
assemble the firm's materials, then travel along a pre-assigned route
delivering pre-sold products already promised to pre-designated customers.
Workers perform services under the following conditions:

 The worker performs services that are an integral part of regular


 The business hired the workers through advertisements in the

newspaper's own classifieds "Employment" section.

 Requirements for the position include: a Social Security Number;

a valid state driver's license; a reliable vehicle with proof of auto
insurance; a signed service agreement.

 The workers pick up their materials and updates of daily

instruction ("top sheets") at the firm's premises.

 The workers assemble the product away from the business,

usually at a home or another type of 'workshop'.

 The worker performs substantially all of the services personally.

 The workers must deliver finished product to customers in an
assigned territory.

 The business may impose financially penalties (in the form of

charges deducted from a final paycheck) for unsatisfactory or
incomplete work.

 The worker is assigned a route, with customers pre-designated

by the business, and required to cover it at regular intervals.

 The worker is expected to adjust complaints.

 The worker is not a salesperson, does not retain receipts, and

does not sell merchandise for resale.

 The worker is covered by workers' compensation.

 The worker may be allowed to hire and pay helpers or use

substitutes, upon approval of the business.

 The business has employees that do the same type of work. For
instance, to handle an extra workload or replace a worker in the
event of an emergency.

 The worker is given mandatory "orientation" training (including

use of a company vehicle, under supervision); and further
specific instructions, exclusive of training.

 The business requires that the worker be controlled in the

performance of service.

 The worker performs recurring services in a continuing

relationship with the business. The relationship is considered
permanent, even if the person works only for a short time.

 The worker is paid on a piece rate basis; biweekly; with charges

deducted for various types of complaints (wet delivery, failure to
stop, etc.); bonuses for complaints not exceeding a certain
amount based on number of customers; and tips for service
obtained directly or indirectly from customers.

 The worker is required to comply with instructions when

(generally no earlier than 12am to 2am), where (exclusive route
territory), and how (according to customer specifications) to

 The worker was given instructions about the way service was to
be performed.

 The nature of the occupation makes fixed hours impractical. The
business requires that accomplishment of the service be
completed by a specific time of day.

 The worker must follow established routines and schedules of

the business (daily time of printing; weekly "zoning" for
advertisements, "four-part" Sunday issues or holiday
promotions, etc.).

 The business furnishes equipment for convenience such as carts

and flats, to be used on premises, to transport papers to

 The business supplies materials such as rubber bands and

plastic bags, "usually at cost" to the worker.

 The worker may contact the business (by telephone or in

writing) as needed to go over complaints, missed papers, etc.
Additionally, written reports ("manifests") may be required to be
submitted for proof of work completed.

 The business has a right to discharge an individual at will and

without liability.

 The work does not require a permit or license.

 The worker does not have a substantial investment in the

facilities used, other than for transportation.

 The worker is not allowed to represent the firm directly (using

the business' name); however, s/he is also not necessarily in
business for him/herself ("self-employed").

 The main, if not only, aspect of control the worker has during the
course of the job is that of actual physical transportation. The
final service accomplishment is still subject to approval of the

 The 'commissioner' (business) obtains 'ownership' of the

'specifically ordered work' (service and/or product).


It can be argued the common
newspaper delivery person performs
work more like that of a “homeworker”
and not of a “salesperson” or “direct
seller.” This type of worker should be
classified as a “statutory employee”
rather than a “statutory nonemployee.”
Otherwise, the working relationship
might come under the description of
general common law employment.


1) CCR (California Code of Regulations) Title 22 Social Security, Sections

4304-1, 4304-6

2) LC (California Labor Code) Sections 551-553, 98.7, 200, 230, 516,

6300, 6425(e), 6409.1, 6410, 6431

3) CUIC (California Unemployment Insurance Code) Sections 306, 317,
323, 601, 621(b), 621(c)(1)(B), 621(c)(1)(C), 634.5(a), 634.5(h), 649(a),
649(b), 650, 926, 930, 1252, 1279, 13004, 13004.1, 13009,
13009(g)(2), 13009.5, 13029, 13055

4) EDD: "Independent Contractor Or Common Law Employee For Use By

State Agencies"

5) EDD: "Employment Determination Guide" (DE 38)

6) EDD: "California Employer's Guide 2003" (DE 44)

7) EDD: "Request For Preliminary Worker Classification Assessment Or

Audit Lead Referral" (Form DE 230)

8) EDD Information Sheets: DE 231 ("Employment"), DE 231H

("Manufacturing Industry"), DE 231N ("Salespersons"), DE 231SE
("Statutory Employees")

9) EDD: "Avoid Unplanned Tax Liabilities" (DE 573)

10) EDD: "Determination of Employment Work Status for Purposes of State

California Employment Taxes and Personal Income Tax Withholding"
(Form DE 1870)

11) Industrial Welfare Commission (IWC) Wage Order 1-2000

12) IRS Publication 15 Circular E, "Employer's Tax Guide"

13) IRS Publication 15-A, "Employer's Supplemental Tax Guide"

14) IRS Publication 533, "Self-Employment"

15) IRS Publication 911, "Direct Sellers"

16) IRS Form SS-8, "Determination of Employee Work Status for Purposes
of Federal Employment Taxes and Income Tax Withholding"

17) National Institute for Occupational Safety and Health Publication No.
97-145, "Plain Language About Shiftwork," by Roger R. Rosa and
Michael J. Colligan (July 1997), U.S. Dept. of Health and Human

18) Santa Cruz Sentinel Online @

19) Social Security Administration Policy Information Site Program

Operations Manual System @

20) Social Security Handbook @


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