NLRB Reverts to Long-Standing Independent Contractor Standard

On January 25, 2019, the National Labor Relations Board (the “Board”) issued its decision in SuperShuttle DFW, Inc.[1] In doing so, the Board specifically overturned a 2014 decision, FedEx Home Delivery[2], and restored its long-standing independent contractor standard. Under the standard returned to on January 25, 2019, the Board clarified the role entrepreneurial opportunity plays in its determination of independent contractor status.

In SuperShuttle DFW, Inc. the Amalgamated Transit Union sought to unionize a group of shuttle-van-driver franchisees (the “shuttle drivers”) at Dallas-Fort Worth Airport. The Board was thus tasked with determining whether or not the shuttle drivers were employees of SuperShuttle DFW, Inc. or independent contractors under the National Labor Relations Act (the “Act”). This determination is critical because independent contractors are specifically excluded from the Act’s protections. Therefore, if the Board determined that the shuttle drivers were in fact independent contractors, they would not be permitted to unionize.

The Board’s Analysis

The Board in SuperShuttle DFW, Inc. began its analysis by explaining that in order to determine if a worker is an employee or an independent contractor, the Board applies the common-law agency test. This inquiry involves application of the non-exhaustive common-law factors set forth in the Restatement (Second) of Agency §220 (1958):

(a) The extent of control which, by the agreement, the master may exercise over the details of the work.

(b) Whether or not the one employed is engaged in a distinct occupation or business.

(c) 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.

(d) The skill required in the particular occupation

(e) Whether the employer or the workman supplies the instrumentalities, tools and the place of work for the person doing the work.

(f) The length of time for which the person is employed.

(g) The method of payment, whether by the time or by the job.

(h) Whether or not the work is part of the regular business of the employer.

(i) Whether or not the parties believe they are creating the relation of master and servant.

(j) Whether the principal is or is not in business.

In applying these factors, the Board noted that the United States Supreme Court has instructed that there is no “shorthand formula” and “all the incidents of the relationship must be assessed and weighed with no one factor being decisive.”[3] Of critical importance, the Board explained that entrepreneurial opportunity is not an individual factor in the test but rather, entrepreneurial opportunity, like employer control, is a principle to help evaluate the overall significance of the other factors. Accordingly, the Board explained that generally speaking, factors that support a worker’s entrepreneurial opportunity indicate independent contractor status; factors that support employer control indicate employee status.

The SuperShuttle DFW, Inc. Board next explained that the Board in FedEx Home Delivery improperly altered the common-law test by decreasing the significance of entrepreneurial opportunity. Specifically, the Board criticized the holding in FedEx Home Delivery in its attempt to create a new common-law factor and constrain entrepreneurial opportunity to this newly created factor. The Board explained that entrepreneurial opportunity is not and should not be regarded as simply an individual factor in the analysis. Instead, properly understood entrepreneurial opportunity is a principle or “prism” by which to evaluate the common-law factors. Accordingly, by confining the evaluation of entrepreneurial opportunity to a single newly created factor, the Board in FedEx Home Delivery severely diminished the significance of entrepreneurial opportunity to the analysis.

Applying the Standard

Having reset the stage on the proper standard to be utilized, the Board next applied this standard to the facts of the case at bar. The Board determined that the shuttle drivers at Dallas-Fort Worth Airport were properly categorized as independent contractors. The Board relied on the fact that the shared-ride industry is an extension of the taxicab industry, and that in taxicab cases, the Board has particularly focused on the company’s “control over the manner and means by which the drivers conduct business” and “the relationship between the company’s compensation and the amounts of fares collected.” The Board found that the shuttle drivers have nearly unfettered control over the daily work schedules, could decide which passengers and routes they wanted to accept and could determine where they wished to work on a given day. Furthermore, the Board noted that the company’s compensation was not related at all to the amounts of fares collected by the shuttle drivers. The Board concluded that these facts provide shuttle drivers with significant entrepreneurial opportunity and strongly point toward independent contractor status. Accordingly, the Board found that the shuttle drivers were independent contractors and thus ineligible to unionize.

Takeaways for Companies

The Board’s holding can be seen as a win for companies that are seeking to classify workers as independent contractors. This is especially true in the ride-share industry. Companies should, however, remain wary of classifying workers as independent contractors without careful consideration. The Board reiterated in its decision that the burden of proof for establishing independent contractor status remains on the party attempting to assert it.

Under the Act, a determination that a worker is an independent contractor and not an employee means the worker is prohibited from both unionizing as well as ineligible for any of the protections of Section 7 of the Act. However, it is important for companies to remember that just because a worker is classified as an independent contractor under the Act, does not necessarily mean that the worker will be classified as an independent contractor under all state and federal employment laws as many state and federal laws have different standards.

Companies that are unsure as to the proper classification of its workers should consult Daniel SobolBrandon Shemtob or the Stevens & Lee attorney with whom they regularly work.

This News Alert has been prepared for informational purposes only and should not be construed as, and does not constitute, legal advice on any specific matter. For more information, please see the disclaimer