NLRB Returns to Traditional Common-Law Test For Independent Contractors

By Michelle D. Wyrick

On January 25, 2019, in SuperShuttle DFW, Inc. and Amalgamated Transit Union Local 1338, Case 16–RC–010963, the National Labor Relations Board (“NLRB”) overruled its prior decision in FedEx Home Delivery, 361 NLRB 610 (2014), and returned to the common-law test that it previously used to determine whether workers were employees or independent contractors.  The NLRB’s decision clarifies the role that “entrepreneurial opportunity” plays in deciding whether workers are employees or independent contractors.  The significance is that employees can unionize under the National Labor Relations Act (“NLRA”).  Independent contractors cannot.

The NLRB criticized the FedEx decision because it “significantly limited the importance of entrepreneurial opportunity.”  In SuperShuttle, the NLRB considered whether franchisees who operated shared-ride vans for SuperShuttle Dallas-Fort Worth were employees covered under the NLRA or independent contractors.  The franchisees were required to purchase or lease their own vans (that met franchise specifications), and they paid SuperShuttle Dallas-Fort Worth a franchise fee and a flat weekly fee for the right to use the SuperShuttle brand and its reservation apparatus.  Franchisees paid for their own gas and van maintenance.  The franchisees were not

DOL Issues Guidance on FLSA’s “Suffer or Permit” Standard for Independent Contractors

By Courtney Ross Samford

Yesterday, the DOL released new guidance on the FLSA’s “suffer or permit” standard that governs the distinction between employees and independent contractors. According to the DOL, the goal of the guidance is to reduce the increasing number of employees who are misclassified as independent contractors.

The FLSA defines “employee” as “any individual employed by an employer.” 29 U.S.C. 203(e)(1). The term “[e]mploy includes to suffer or permit to work.” 29 U.S.C. 203(g). The phrase “suffer or permit” is determined by the economic realities test, which includes the following factors: (1) the extent to which the work performed is an integral part of the employer’s business; (2) the worker’s opportunity for profit or loss depending on his or her managerial skill; (3) the extent of the relative investments of the employer and the worker; (4) whether the work performed requires special skills and initiative; (5) the permanency of the relationship; and (6) the degree of control exercised or retained by the employer. The guidance goes on to discuss each factor in greater detail. Significantly, the DOL opined in the guidance that “applying the economic realities test in view of the expansive definition of ‘employ’ under the [FLSA], most workers are employees under the FLSA.” (Emphasis added).

In light of the DOL’s emphasis on misclassified workers, all employers should carefully evaluate each independent contractor to ensure that he or she is properly classified pursuant to the economic realities test. The full guidance is located here.

NLRB Finds FedEx Drivers to be Employees–Not Independent Contractors

By Edwin S. Hopson

In FedEx Home Delivery, 361 NLRB No. 55 (2014) decided September 30, 2013, the National Labor Relations Board found certain FedEx drivers based in Hartford, Connecticut to be employees of FedEx Home Delivery. The National Labor Relations Act covers “employees” as defined in the NLRA, but does not offer protection to “independent contractors.”

In analyzing the factors as to who are employees and who are independent contractors, the NLRB relied upon the Restatement (Second) of Agency § 220 (1958), as mandated by a number of Supreme Court decisions.

Previously, the U.S. Court of Appeals for the District of Columbia had on similar facts held that the FedEx employees in the case before them were independent contractors and therefore could not unionize under the protections and rights of the NLRA. However, the Board in FedEx Home Delivery, refused to follow that decision, and noted that the U.S. Court of Appeals for the Ninth Circuit had reached an opposite conclusion in a FedEx case.

The FedEx Home Delivery Board majority followed Roadway Package System, 326 NLRB 842 (1998) (Roadway III), which had rejected as the predominant factor the “right to control” test, i.e., did the person in question control the manner and means of performing the work. It concluded that “the great majority of the traditional common-law factors, as incorporated in the Restatement (Second) of Agency, point toward employee status” for the drivers in question, namely that:

-FedEx exercised control over the drivers’ work;

-the drivers were not engaged in a distinct business;

-the work of the drivers was done under FedEx’s direction;

-the drivers were not required to have special skills;

-drivers had a permanent working relationship with FedEx;

-FedEx established, regulated, and controeds the rate of drivers’ compensation and financial assistance to them;

-the work of the drivers was part of the regular business of FedEx; and

-FedEx was in the same business as the drivers.

The Board also noted that “[t]wo of the traditional factors—who supplies the instrumentalities of work, and whether the parties believed they have created an independent-contractor relationship—we view as inconclusive, but they would in any case not outweigh the remaining factors.” However, the Board did find that what the driver was selling was created by FedEx, and remained under FedEx’s control, as did the configuration of the route, the route volume, the customer base, recruitment and pricing.

The three Democrat Members signed onto the decision, while one Republican Member dissented; the other Republican Member recused himself from the case.