New NLRB overrules Obama era NLRB independent contractor precedent
Editor’s note: Many ONMA members have independent contractor relationships with vendors whose sole engagement may be with you. Because of that, we recommend that you read and share this column by legal expert Michael Zinser.
By L. Michael Zinser
On January 25, 2019, the National Labor Relations Board, in a 3 to 1 Decision, ruled that Super Shuttle drivers at the Dallas Fort Worth Airport were independent contractors and not employees. In making this ruling, the NLRB reversed the NLRB’s FedEx Decision. The FedEx Decision had engaged in legal adventurism, dramatically diminishing the importance of entrepreneurial opportunity, making it easier to find employee status. This writer opined at the time that the FedEx Decision was inconsistent with U.S. Supreme Court precedent and the intention of Congress after it’s 1947 amendments to the National Labor Relations Act.
The new Super Shuttle Decision decided just that. NLRB Chairman Ring and Members Kaplan and Emanuel (all Trump appointees with management backgrounds) voted for independent contractor status. Member McFerran (Obama appointee with union background) dissented.
The National Labor Relations Act, Supreme Court Precedent, and the intent of Congress is that the common law agency test should apply in determining whether one is an employee or an independent contractor. In overruling FedEx on January 25, 2019, the NLRB found that the NLRB in FedEx had overreached. The Board held that the FedEx majority limited the importance of entrepreneur opportunity by creating a new factor and then making entrepreneurial opportunity merely one aspect of that factor. The FedEx Board had found that “entrepreneurial opportunity represents merely one aspect of a relevant factor that asks whether the evidence tends to show that the putative contractor is, in fact, rendering services as part of an independent business.”
To state the matter more simply, the NLRB in FedEx was not going to recognize that a contractor had entrepreneurial opportunity unless that contractor was actually performing services for more than one entity. That is inconsistent with the common law, the 1947 amendments to the National Labor Relations Act, and U.S. Supreme Court Precedent. The independent contractor has the right to engage in entrepreneurial activity. It is up to the independent contractor to decide how much entrepreneurial activity he/she decides to engage in. The new case returns to the traditional common law test applied before FedEx.
This case is especially good news for the newspaper industry. The Board in the new Super Shuttle case specifically referenced its Decision in St. Joseph News-Press, a 2005 Decision. In that Decision, the NLRB found that Home Delivery Carriers, Single Copy Carriers, and Bundle Haulers were all independent contractors. In this new case, the NLRB stated:
In St. Joseph News-Press, the Board found that the conditions “enabled carriers to take economic risk and reap a corresponding opportunity to profit from working smarter, not just harder” where the carriers can hire full-time substitutes, over whom they have complete control, hold contracts on multiple routes, deliver other products (including for competitors) while making deliveries for the employer and solicit new customers.
Then, in analyzing the facts of the Super Shuttle case, the NLRB placed great reliance upon 3 factors:
(1) The extent of control by the employer,
(2) the method of contract compensation, and
(3) vehicle ownership.
In finding the absence of control, the NLRB specifically noted the presence of an indemnification clause in the written contract. It noted that the presence of such a cause lessens the Company’s motivation to control a driver since the Company is not liable for the driver’s negligent or intentionally harmful acts.
With respect to the vehicle, the NLRB noted that the vehicle is a significant investment of the independent contractor. Additionally, the drivers pay for their own gas, road tolls, repairs and any other costs associated with operating the vehicles.
The NLRB placed strong emphasis on the intention of the parties. The NLRB noted that the Written Agreement provided, in bold, capital letters: FRANCHISEE IS NOT AN EMPLOYEE OF EITHER SUPER SHUTTLE OR THE CITY LICENSEE … IT IS ACKNOWLEDGED THAT THE FRANCHISEE IS THE INDEPENDENT OWNER OF ITS BUSINESS. Another factor supporting the intention of the parties was the fact that the Company did not provide the drivers with any benefits, sick leave, vacation time, or holiday pay. Significantly, the Company did not withhold taxes or make any other payroll deductions from the driver’s contract compensation.
In looking at the duration of the relationship, the NLRB noted that the driver signed a one-year Agreement, a specific term. However, the Board did note that most drivers renew their Agreements yearly. Under that circumstance, the NLRB said this was a neutral factor.
This is a very significant Decision, reinstating the vitality of the St. Joseph News-Press case for the newspaper industry.
Note: Michael Zinser was the Lead Counsel for St. Joseph News-Press in its 2005 independent contractor victory.