By Janet A. Hendrick
January 28, 2019
Focusing on “entrepreneurial opportunity” available to shared-ride drivers, the Republican-majority National Labor Relations Board handed employers a victory on January 25, 2019 by holding that Dallas-Fort Worth area SuperShuttle drivers are independent contractors, rather than employees who may unionize. The decision, which overturns a 2014 decision that favored workers, will make it easier to classify workers as independent contractors, but has no effect on state or federal wage and hour laws.
In SuperShuttle DFW, Inc. and Amalgamated Transit Union Local 1338 (Case 16–RC–010963), by a 3-1 party-line vote, the employer-friendly Board continued with its reversal of Obama-era decisions that favored employees. The case arose when the union sought to represent a unit of shuttle drivers, including about 90 franchisees. In August 2010, the Board’s Acting Regional Director found the franchisees were independent contractors, not employees, and dismissed the union’s petition for representation. The union appealed and last week’s decision was the final nail in the coffin for the union.
The decision is a good overview of how the NLRB analyzes whether a worker is an employee, who may unionize, or an independent contractor, who may not. The Board applies a 10-factor test (which differs from other agency tests, such as the IRS 20-factor test), none of which is controlling:
- Extent of control by the company over the detail of the work;
- Whether the worker is engaged in a distinct occupation or business;
- The kind of occupation and whether the work is usually performed with or without supervision;
- Required skill in the particular worker’s occupation;
- Whether the company or the worker supplies the tools and place of work for the worker;
- The worker’s length of tenure with the company;
- Whether the worker is paid by time or by job;
- Whether the work performed by the worker is part of the regular business of the company;
- Whether the parties believe they are in an employer-employee relationship; and
- Whether the principal is or is not in the business.
There is no “bright-line rule” and no “shorthand formula” for determining whether a worker is an employee or not, and the total factual context must be assessed and weighed.
The SuperShuttle Board returned to the traditional common-law test for determining independent contractor status and overruled the Obama Board’s 2014 decision in FedEx Home Delivery (361 NLRB 610) (“FedEx II”), which the federal court of appeals for the D.C. Circuit vacated. In FedEx II, the NLRB held that FedEx drivers were employees, declining to adopt an earlier court decision that involved the same parties and held that the drivers were independent contractors. That earlier decision viewed the common-law factors “through the lens of entrepreneurial opportunity,” rather than focusing on “an employer’s right to exercise control” over the workers’ job performance. The Board in SuperShuttle found the FedEx Board “impermissibly altered the common-law test” to one of “economic dependency,” a test Congress specifically rejected.
Noting that the NLRB has long considered entrepreneurial opportunity as part of the independent contractor analysis, the SuperShuttle Board analyzed the common-law factors to find in favor of SuperShuttle, shutting down the union’s efforts to represent the drivers. The key factors in the Board’s decision were:
- The franchisees’ significant initial investment in their business by purchasing or leasing the primary instrumentalities for their work—a van (as well as gas, tolls, and repairs) and the dispatching system–and execution of an agreement with SuperShuttle (Unit Franchising Agreement), which states in bold capital letters “FRANCHISEE IS NOT AN EMPLOYEE OF EITHER SUPERSHUTTLE OR THE CITY LICENCEE”;
- The franchisees’ almost unfettered opportunity to meet or exceed their overhead, as they have total control over how much they work, when, and where and they keep all fares they collect;
- Analogy of the shuttle drivers to taxi drivers, whom Board precedent holds are independent contractors, largely because they retain all fares they collect and the cab companies lack control over the manner and means by which the drivers conduct business;
- The franchisees’ agreement to indemnify SuperShuttle against all claims relating to their actions, greatly lessening SuperShuttle’s motivation to control the franchisees’ actions;
- Although the franchisees are subject to several requirements, including dress and grooming standards and van inspections, these requirements are imposed by state-run DFW Airport, not SuperShuttle;
- The franchisees’ near-absolute autonomy in performing their work;
- SuperShuttle does not provide benefits, sick leave, vacation, or holiday pay to the franchisees, or withhold taxes or payroll deductions;
- Five of the franchisees are corporations.
Although some of the factors indicated employee status (such as no particular skill/specialized training and the fact that the drivers’ work is an integral part of SuperShuttle’s business), the NLRB found that none of these outweighed the factors supporting independent contractor status.
The SuperShuttle Board explained that entrepreneurial opportunity is not “a trump card” in the independent contractor analysis, but rather a “prism” through which to evaluate the 10 common-law factors “when the specific factual circumstances of the case make such an evaluation appropriate.” So, where a qualitative evaluation of common-law factors shows significant opportunity for economic gain and significant risk of loss, the worker is likely an independent contractor and not permitted to unionize.
Although the SuperShuttle decision is without doubt a victory for employers, employers should remember the decision is not binding on other agencies, such as the Department of Labor, which enforces federal wage and hour laws.
Janet A. Hendrick
If you have questions about this decision, contact Janet Hendrick,who represents and counsels employers on issues including proper classification, in the Dallas office of Phillips Murrah at (214) 615-6391 or at email@example.com.