NLRB Restores Common Law Agency Test for Independent Contractor/Employee Status Under NLRA
- In SuperShuttle DFW, Inc., a National Labor Relations Board (NLRB, or Board) majority overruled its 2014 decision in FedEx Home Delivery and held that shuttle-van-driver franchisees of SuperShuttle at Dallas Fort Worth International Airport were independent contractors, not employees.
- As such, the franchisees were excluded from the National Labor Relations Act's (NLRA) coverage and not entitled to seek union representation for purposes of collective bargaining.
- In so doing, the Board emphasized entrepreneurial opportunity, rather than employer control, to evaluate the overall effect of the common law factors on a putative contractor's independence to pursue economic gain. It also definitively rejected any effort to shift the independent contractor test away from its traditional common law roots to one of "economic dependency."
In SuperShuttle DFW, Inc. (Jan. 25, 2019), a National Labor Relations Board (NLRB, or Board) majority overruled its 2014 decision in FedEx Home Delivery and held that shuttle-van-driver franchisees of SuperShuttle at Dallas Fort Worth International Airport (DFW Airport) were independent contractors, not employees. As such, they were excluded from the National Labor Relations Act's (NLRA) coverage and not entitled to seek union representation for purposes of collective bargaining. The majority decision reaffirmed the Board's adherence to the traditional common law test for determining employee/independent contractor status and gives "entrepreneurial opportunity" greater weight in the analysis.
The Common Law Test and Traditional Board Approach
Section 2(3) of the NLRA excludes from the definition of a covered "employee" "any individual having the status of an independent contractor." In SuperShuttle, the Board confirmed its commitment to apply the common law agency test to determine whether a worker is an employee or an independent contractor, which includes consideration of the following non-exhaustive factors set forth in the Restatement (Second) of Agency, §220 (1958):
- the extent of control which, by the agreement, the master may exercise over the details of the work
- whether or not the one employed is engaged in a distinct occupation or business
- the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision
- the skill required in the particular occupation
- whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work
- the length of time for which the person is employed
- the method of payment, whether by the time or by the job
- whether or not the work is part of the regular business of the employer
- whether or not the parties believe they are creating the relation of master and servant, and
- whether the principal is or is not in business
The Board noted that there is no bright-line formula for making the analysis and that the totality of the factual circumstances must be considered in the context of applicable common law agency principles. Generally, common law factors that support a worker's entrepreneurial opportunity indicate independent contractor status; factors that support employer control indicate employee status.
SuperShuttle Overrules FedEx Home Delivery
The SuperShuttle majority abandoned FedEx Home Delivery's improper shifting of the independent contractor analysis to one emphasizing "economic realities." The majority also restored the significance of "entrepreneurial opportunity," which it observed is not an independent common law factor but rather "the prism through which [the Board] evaluates the significance of the common law factors to ... a 'more accurate proxy' to 'capture the distinction between an employee and an independent contractor.'" In so doing, the Board noted that entrepreneurial opportunity, like employer control, is a principle by which to evaluate the overall effect of the common law factors on a putative contractor's independence to pursue economic gain. It also definitively rejected any effort to shift the independent contractor test away from its traditional common law roots to one of "economic dependency."
SuperShuttle Majority Finds Franchisee-Drivers Are Independent Contractors
Applying the Board's traditional common law agency test, the SuperShuttle majority found that the SuperShuttle franchisee-drivers were independent contractors, not employees. According to the SuperShuttle majority:
- The "extent of control" factor weighed heavily in favor of an independent contractor finding. SuperShuttle exercised virtually no control over the manner and means by which the franchisee-drivers conducted business. This is one of two factors given significant weight in the taxi-cab industry of which "the shared-ride industry is an extension." The franchisees had total autonomy to set their own work schedule; they decided when to work and which trips to accept. They also were largely free to choose where they worked within the Dallas-Fort Worth area. Although the franchise agreement imposed certain requirements on the franchisees – such as wearing a uniform, maintaining certain grooming standards, displaying SuperShuttle decals on their vans, etc. – the SuperShuttle majority downplayed their significance because they were imposed by the "state-run DFW Airport." As such, the requirements were not evidence of SuperShuttle's (but rather the government's) control over the manner and means of doing business.
- The "method of payment," which is the second factor to which the Board traditionally has given significant weight in the taxi-cab industry, also supported a finding that SuperShuttle's franchisee-drivers were independent contractors. The franchisees paid a flat monthly fee, which did not vary based on revenues earned. They were entitled to all of the fares they collected from customers and did not share the fares in any way with SuperShuttle. The franchisees' freedom to keep all fares they collected, coupled with their unfettered freedom to work whenever they wanted, provided them with significant entrepreneurial opportunity.
- The "instrumentalities, tools and place of work" factor also supported an independent contractor finding. The primary instrumentalities of the franchisees' work were their vans and a Nextel dispatching system. The franchisees made a significant investment by purchasing or leasing their vans and paid for the Nextel dispatching system through their monthly fee. They also paid for gas, tolls, repairs and any other costs associated with operating the vehicles. The franchisees possessed the vans full-time; they parked the vans at their homes; and there were no restrictions on the franchisees' using their vans for personal use.
- The "supervision" factor weighed in favor of an independent contractor finding as well. The franchisees generally were not supervised by SuperShuttle. The only daily communication between the franchisees and SuperShuttle was through the Nextel dispatch system. However, the franchisees had the right to accept or decline any job, and they were not given assigned routes.
- An independent contractor finding also was supported by the parties' agreement, which stated unequivocally, in bold letters, that the franchisee was not an employee of SuperShuttle and that the franchisee acknowledged that it was the independent owner of its business. In addition, SuperShuttle did not provide franchisees with any benefits, sick leave, vacation time or holiday pay, nor did it withhold taxes from the franchisees' pay or make any other payroll deductions.
- Certain other factors admittedly supported an employee finding. For example, there was no evidence that the franchisees had any particular skill or required any specialized training; driving was not considered a "distinct occupation"; and the franchisees' driving was a part of SuperShuttle's regular business. SuperShuttle clearly was involved in the business of transporting customers and its revenues came from providing that service. However, these factors were insufficient to tip the scales in favor of an employee finding, particularly when viewed through the prism of entrepreneurial opportunity.
SuperShuttle Dissent Argues That Employee Status Is Evident
The SuperShuttle decision is not without internal disagreement. One of the four Board members deciding the case wrote a vigorous dissent. The dissenting member opined that "any reasonable interpretation and application of the common law test for determining employee status," which everyone agreed was controlling, should lead to the conclusion that "the SuperShuttle drivers are, in fact, employees."
According to the dissent, the drivers perform work that is the core of SuperShuttle's business, subject to a non-negotiable franchise agreement that pervasively regulates their work. They could not possibly perform that work for SuperShuttle without being completely integrated into SuperShuttle's transportation system and its infrastructure. In addition, unlike independent businesspeople who operate in the marketplace, the franchisees are expressly prohibited from working for any SuperShuttle competitor. Therefore, applying traditional common law principles, and even taking "entrepreneurial opportunity" into account in a way that recognizes the "reality of the actual working relationship," SuperShuttle's drivers are not independent in any way. They are employees who should be permitted to organize and possibly replace the governing unit franchise agreement with a collective bargaining agreement.
The SuperShuttle decision restores the traditional independent contractor analysis and assures businesses using the franchisee model, particularly in the taxi-cab and shared-ride industries, that the independent relationships they believed they were establishing will, in fact, operate as intended. It marks a clear departure from the economic realities test that is more likely to result in a finding of employee status. However, it is important to remember that the strong dissent represents a contrary view, which could become the majority view again in the future, as it was in the past. Therefore, it is important to stay abreast of developments and keep at least one eye on the horizon.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.