A Sacramento Superior Court judge ruled that the Sacramento Bee misclassified its newspaper carriers as independent contractors when they were, in fact, employees. Judge Gerrit Wood found the newspaper had the right to control the manner and means of how the carriers performed their duties, making them employees under the law.

According to the story in Bizjournal, the Sacramento Bee plans to contest the ruling. Publisher and president Cheryl Dell called it a “bewildering” and “a failure of justice. The Bee is extremely disappointed in the decision and strongly believes that the individual newspaper carriers were properly classified as independent contractors,” Dell said in a statement. “Our classification of carriers as independent contractors is in full compliance with regulations issued directly to the newspaper industry by the state of California.”

Whether workers are employees or independent contractors is a hot issue in California and nationwide because it affects the cost of doing business and protections for workers. Employers do not pay unemployment, state disability and or workers’ compensation taxes for independent contractors, which means significantly lower payroll taxes and, potentially, a competitive edge when bidding for work.

Misclassification means payback time that can run in the millions. When litigation is protracted – as it is in this five-year-old class action – attorneys’ fees and court costs get cranked up, too.

The fight in this case was narrowed over time to whether carriers who worked for the Sacramento Bee any time between 2005 and 2009 should be reimbursed for mileage expanses because they were incorrectly classified as independent contractors. The decision follows a nine-week trial in Sacramento Superior Court earlier this year. With more than 5,100 people in the class, the mileage tab could be more than $21 million Callahan said.

How much The McClatchy Co., parent company to The Sacramento Bee, has paid lawyers to defend the case is unknown. But plaintiffs’ attorneys costs so far are more than $12 million – and McClatchy often had four or more lawyers in court, Callahan said.

“We got the decision,” said John Poulos, the Sacramento attorney who represents the newspaper. “In our view, it’s problematic and lowers the state of California regulations that govern newspaper carriers relative to employment or independent contractor status. Our evidence at trial showed the Bee complied.” If the tentative decision holds, plaintiffs’ attorneys will have to provide records that document the mileage expenses, Poulos said. Then the newspaper can file an appeal. An appeal cannot be filed until the decision is finalized. If there is not an appeal, the case moves to the damages phase.

Filed in 2009, the cases goes back to 2005 because there is a four-year statute of limitations. The issue doesn’t apply after 2009 because the newspaper gradually shifted to a third-party distribution channel. Distribution was mixed during the time period of the lawsuit.