Executive Summary
“On review from a decision by the Acting Regional Director, the National Labor Relations Board issued an order that considered whether franchisees who operated shared-ride vans for SuperShuttle were employees covered under the National Labor Relations Act. Overruling precedent set by the Board in a case involving FedEx in 2014, the Board found that the shared ride drivers were independent contractors excluded from coverage because relying primarily on the control over which the franchisees–not the franchisor–exerted over their own success.
Relevant Background:
Before 2005, SuperShuttle designed its drivers as employees and its drivers earned hourly wages for regularly scheduled shifts picking up customers in company-owned shuttle vans. In 2005, SuperShuttle converted to a franchise model where drivers paid certain lump sum fees (i.e., initial franchise fees to SuperShuttle, weekly fees to SuperShuttle, decal fees and registration fees to agencies, etc.) but would now own their own vans, select their own assignments, work as much or as little as they choose, and retain all of the money they earn from each assignment.
Amalgamated Transit Union Local 1338 (the “Union”) organized a group of approximately 90 drivers who operated in the Dallas area. Section 2(3) of the National Labor Relations Act (the “Act”) excludes from the definition of a covered employee “any individual having the status of an independent contractor.” 29 U.S.C. § 152(3). Bearing the burden of proof, SuperShuttle argued and the Acting Regional Director found the franchisees initial investment in their business and control over their schedule and income merited a finding that the franchisees were independent contractors. The Union sought review from the Board.
Decision:
The Board’s decision was divided by political ideology and competing views of which test should be applied to the determination of employee status. Specifically, a conservative leaning majority rejected a progressive leaning majority’s 2014 decision in FedEx Home Delivery, 361 NLRB 610 (2014) that altered the common-law test to more clearly resemble the emerging economic realities test. While the majority ultimately agreed with the Acting Regional Director’s decision and rationale, the Board had several findings that will have forward looking consequences:
● The Board agreed that in the 50 years since the Supreme Court’s decision in NLRB v. United Insurance Co. of America, 390 U.S. 254, 256 (1968), the common-law independent contractor analysis has shifted the emphasis from control to whether putative independent contractors have significant entrepreneurial opportunity for gain or loss. However, the majority placed emphasis on opportunity–not whether such opportunity was actually taken–and simply stated that “common-law factors that support a worker’s entrepreneurial opportunity indicate independent contractor status; factors that support employer control indicate employee status.”
● The Board agreed with the Acting Regional Directors analogizing of the SuperShuttle franchisees to the taxicab industry and gave significant weight to two factors: “‘the lack of any relationship between the company’s compensation and the amount of fares collected,’ and ‘the company’s lack of control over the manner and means by which the drivers conduct business after leaving the [company’s] garage.’” Citing AAA Cab Services, 341 NLRB 462, 465 (2004). Taking its analysis of the extent of control SuperShuttle drivers have over their own success one step further, the Board stated, “We agree with the Acting Regional Director’s finding that the shared-ride industry is an extension of the taxicab industry and that this factor should be afforded significant weight.”
● The Board explicitly found that the 2014 FedEx decision as well as the dissent would violate the well-settled principle that the Board should not and cannot make new law. In relevant part, the Board stated, “Indeed, while courts afford the Board substantial deference in matters requiring application of special expertise when interpreting the Act, ‘a determination of pure agency law involve[s] no special administrative expertise that a court does not possess.’ … As the D.C. Circuit pointedly remarked in FedEx II when rejected the Board’s deference argument in support of the FedEx majority standard at issue here, ‘We do not accord the Board such breathing room when it comes to new formulations of the legal test to be applied.’”
Looking Forward:
While this decision returns the Board to the common-law independent contractor analysis, the conservative majority’s decision should not be seen as resolving this question. Even with unambiguous statements by the Board that the same analysis that has existed for almost 50 years should continue to be applied, that the shared-ride drivers are independent contractors, and that the Board should not make new law, if and when the Board becomes controlled by a progressive majority, these findings and the application of the restrained common-law independent contractor analysis will almost certainly be reversed. California’s pursuit of AB5 plainly proves this point. Thus, while there are many approaches that employers could take with how to handle this issue, it simply is not an issue that employers can ignore hoping that the political pendulum is swinging in their favor should they ever be confronted with it.”
This article was originally published on the California Franchise Network.
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Thomas O’Connell – Tom O’Connell is a Shareholder at Buchalter APC, where he serves as Chair of the firm’s Franchise Law Practice and Chair of Litigation for the firm’s San Diego office.
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