The NLRB Takes Another Bite at Workers’ Rights: Common Law Test for Determining Independent Contract
On January 25, 2019, in SuperShuttle DFW, the National Labor Relations Board (Board) reversed FedEx Home Delivery and returned to its traditional common law test for determining employee vs independent contractor status under the National Labor Relations Act (NLRA).
SuperShuttle DFW, Inc. concerned airport shuttle drivers who transported passengers to and from the Dallas-Fort Worth airport. The drivers signed a one-year franchise agreement with SuperShuttle, under which each driver supplied its own van, paid a flat one-time initial fee, and then a flat weekly fee for the right to use the company’s brand name and its dispatch and reservation systems. However, SuperShuttle retained the right to screen franchisees/drivers for drugs and alcohol, provide training, perform criminal background checks, and mandate uniform requirements under the shared-ride contract it entered into with the Airport.
The Amalgamated Transit Union tried to organize the shuttle drivers, but SuperShuttle took the position that the shuttle drivers could not unionize because they were independent contractors with “unfettered entrepreneurial freedom.” The Board agreed with SuperShuttle and found that the driver-franchisees were independent contractors, as they were essentially small business owners who made a significant investment and demonstrated autonomy in their businesses by purchasing or leasing a van and choosing when and where to drive.
By way of background, the Board has traditionally used the common law employee classification test, which applies a non-exhaustive list of factors, including, among other things: (1) the degree to which the company exerts control over the worker; (2) whether or not the worker is engaged in a distinct occupation or business; (3) whether the type of work usually is done without supervision; (4) who supplies the tools and place to perform the work; and (5) whether the work is part of the regular business of the company. In FedEx Home Delivery, the NLRB changed its approach and declined to adopt the traditional common-law employee classification test, instead concluding that the appropriate test is “whether the evidence tends to show that the putative contractor is, in fact, rendering services as part of an independent business.” It was within this new factor that the majority placed entrepreneurial opportunity as a possible element for consideration and found that it would give weight to actual, and not merely theoretical, “entrepreneurial opportunity” for gain or loss. Furthermore, in applying this new factor, the Board considered whether there were any constraints imposed by the employer on an individual’s ability to render services as part of an independent business, such as evidence of any limitations placed by the employer on the individual’s ability to work for other companies or restrictions on the individual’s control over important business decisions.
In considering so, the FedEx Board shifted focus away from a test of “entrepreneurial opportunity,” which focuses on whether a worker has the ability to choose its own assignment and manage costs in determining independent contractor status, to a test of “economic dependency,” which focuses on whether a worker believes they are economically controlled by the putative employer, essentially giving more weight to employer’s right to control factor.
The current Board in SuperShuttle rejected the analysis in the FedEx decision, and found that the Board in FedEx “impermissibly altered the Board’s traditional common-law test for independent contractors by severely limiting the significance of entrepreneurial opportunity”. Instead, the Board reasoned that the “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.” Therefore, unlike the FedEx Board, which confined entrepreneurial opportunity to one factor, the SuperShuttle Board held that under the new standard, all common law factors will be evaluated “through the prism of entrepreneurial opportunity” available to workers; meaning, that all ten factors would be weighed equally to determine whether the scale tips more towards employer control and an employer-employee relationship or towards entrepreneurial opportunity and independent contractor status.
Applying this new analysis, the Board concluded that the SuperShuttle van drivers/franchisees were independent contractors and not employees under this agency test. The Board noted that the drivers/franchisees have “total control over their schedules,” their earnings were determined by how much work they chose and when they chose, and “they ke[pt] all the fares they collect[ed].” Collectively, the Board determined that these factors - “extent of control by employer, method of compensation, and ownership of principal instrumentality” - show that the driver-franchisees “have significant opportunity for economic gain and significant risk of loss" and therefore “strongly support finding independent-contractor status.”
In sum, under SuperShuttle, companies are more likely to claim that workers are independent contractors by providing them with entrepreneurial opportunities and freedom that demonstrate, despite any control that the company remains over the workers’, the workers’ own opportunity and efforts resulted in their economic gain or loss, rather than a wage. Additionally, it is important to note that the test articulated applies only to claims under the NLRA and does not affect the independent contractor analysis under other laws, such as the Fair Labor Standards Act and state unemployment compensation and workers’ compensation statutes.