Air Couriers International v. Employment Development Department

Different tax results flow from whether a worker is classified as an employee or an independent contractor. Plaintiffs Air Couriers International (formerly known as Sonic Couriers of Arizona, Inc.), UPS Service Parts Logistics, Inc. (formerly known as Sonic Air, Inc., and Arizona Sonic Air, Inc.), and UPS Logistics Group (collectively referred to as Sonic), employ drivers to pick up and deliver packages in a timely manner. Sonic filed a complaint for refund against defendant Director of the Employment Development Department (Department) to recover employment taxes it paid for the drivers. Sonic argued the drivers operated as independent contractors, a claim rejected by the. trial court following a court trial. Sonic appeals, contending the trial court employed the wrong standard, no substantial evidence supports the court’s finding of employment status, and the court abused its discretion in holding Sonic liable for penalties. We shall affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

In May 2003 Sonic filed suit as authorized by Unemployment Insurance Code section 1241 to recover “Contributions, Personal Income Tax, Penalties and Interest.” The Department filed an…