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Keep Only Limited Control Over Independently Contracted Telemarketers to Avoid Liability

Litigation Law Alert Sarah R. Anchors

Generally, a company is not liable for independently contracted telemarketers who allegedly violate the Telephone Consumer Protection Act (TCPA). However, liability is very dependent on the facts of the relationship: how much control did the company have and exert over the telemarketer? The Ninth Circuit recently examined the relationship between defendant Royal Administration Services, Inc. (Royal) and its vendor (AAAP) to find that the plaintiffs could not hold Royal liable for AAAP’s alleged autodialed calls to plaintiffs’ cell phones. See Jones v. Royal Admin. Servs., Inc.

Royal sold contracts for vehicle service plans through AAAP and other telemarketers.  AAAP employees would call consumers to introduce the idea of a vehicle service plan, and then, pitch a particular plan, such as Royal’s plans. Royal’s contract with AAAP barred it from using methods that violated state or federal law, including “robo-calling.” The TCPA bars business from making marketing calls to cell phones using an automatic dialer, or prerecorded message or artificial voice, without the called party's prior express consent. The two plaintiffs alleged that AAAP’s calls violated the TCPA and they sought to hold Royal liable.

A company can be held vicariously liable for its agent’s acts; but a company is not vicariously liable for the actions of its independent contractor if it does not exert “sufficient” control over that contractor. Courts consider 10 factors to examine the degree of control and decide whether it is a principal-agency relationship or an independent-contractor relationship. Companies should keep these ten factors in mind when structuring their agreements and relationships with telemarketers.

  1. Does the company exert control over the telemarketer in how it makes the calls?  Royal gave AAAP scripts to use for selling Royal plans, but until the telemarketer got to the point of making that pitch, Royal had no control over the script for the call. There was no evidence that AAAP ever even pitched a Royal plan during any of the calls to the plaintiffs.
  2. Are the company and the telemarketer separate, independent businesses? Royal and AAAP were separate, and AAAP’s business was distinct in that it sold service plans for a multitude of providers.
  3. Does the company normally supervise the telemarketer’s work? Royal’s employee provided training on selling Royal plans to AAAP telemarketers, and visited the call centers a dozen times over three years. But Royal did not directly supervise the AAAP employees making calls.
  4. Does the job require specific skills (greater skill required implies independent-contractor relationship)? This was not a factor in the Royal case.  
  5. Does the company supply the telemarketer with tools, instrumentalities, and place of work? Royal provided some of the tools for the job, such as the plans to be sold, access to an on-line “contract quote manager”, and training on selling Royal plans. But AAAP provided the most tools for the job: office space and furniture, computers, phones, and any sales brochures.
  6. How long is the relationship (a longer relationship indicates an employee rather than independent contractor)? Royal worked with AAAP for three years. But each contract was only for a year, showing a contemplated end to the relationship. 
  7. Is payment for the time worked or for the job completed? Royal paid AAAP a commission for each sale, rather than paying the hourly rate for each AAAP employee; a “strong indicator that the telemarketers were independent contractors.”
  8. Is telemarketing within the company’s regular business? Although Royal sold plans, it contracted out all of its direct sales to vendors rather than using its own employees to make sales, weighing in favor of an independent-contractor relationship.
  9. Do the company and telemarketer intend an independent-contractor relationship? The fact that AAAP sold plans for multiple companies indicated that it intended to be an independent contractor.
  10. Is the company a business (as opposed to an individual)? Royal was a business, which favored an agency relationship.

After evaluating these factors, the Ninth Circuit held that AAAP telemarketers were not Royal’s agents when they made the telephone calls at issue and therefore Royal could not be held liable under the TCPA for those telephone calls. The Royal ruling counsels companies to examine their relationship with marketing vendors, and be careful to not cross the line and exercise significant control over telemarketers’ work.

For questions, please contact Sarah Anchors at (602) 229-5788/[email protected].