Facts

This class action was brought by more than 5,000 current and former newspaper carriers who delivered the Orange County Register newspaper and other publications for Freedom Communications Inc., dba The Orange County Register ("The Register") between July 1999 and August 2008.

The Orange County Register required each carrier to sign an agreement, which characterized the carrier as an "independent contractor." In doing so, The Register required its carriers to pay all of their own expenses, including gas, vehicle maintenance and supplies. In addition, The Register required that each carrier purchase a bond in favor of The Register and to pay for their own accident insurance.

The key determining factor as to whether a newspaper carrier is an employee rather than an independent contractor is whether the newspaper controls the manner and means by which the newspaper carriers delivered the newspapers.

PLAINTIFFS' CONTENTIONS:
The plaintiffs contended that The Register controlled virtually every aspect of the delivery process, including giving detailed routes for the carrier to follow, detailed instructions for delivery of the newspaper and imposing financial penalties for non-compliance.

As such, the plaintiffs contended that the carriers were at all times "employees" of The Register and that The Register intentionally mischaracterized the carriers as independent contractors so as to avoid significant liabilities, including reimbursement of employee expenses, payment of workers compensation benefits, payment of overtime, and to avoid potential liability to third parties. According to plaintiffs' experts, if the carriers were characterized as employees, The Register would have been required to reimburse its employees for these expenses.

DEFENDANT'S CONTENTIONS:
The defendant claimed that the contract between The Register and the carriers expressly provides that the carriers are independent contractors and that the carriers were free to choose the method of delivery, so long as the newspapers were delivered before a specified deadline.

Settlement Discussions

Pre-trial settlement demand was $106,000,000.

Result

The case settled after nearly two months of trial for $42 million. The carriers will remain independent contractors. According to plaintiffs' counsel, The Orange County Register agreed to pay $36 million in past damages, attorneys fees and additional economic benefits to the class and future carriers valued at an estimated $6 million. According to defense counsel, The Orange County Register will set aside up to $22,000,000 for whatever claims are made, pay reasonable attorneys' fees per the court, and make changes to the independent contractor agreement that will support and enhance the carriers' status as independent contractors.

Other Information

According to plaintiffs' counsel, this class action settlement is believed to be the first of its kind in the United States and could impact newspapers nationwide that characterize their newspaper carriers as independent contractors rather than employees.