Executive Summary: On January 25, 2019, the National Labor Relations Board (NLRB) affirmed the Acting Regional Director’s determination that franchisees who drive for SuperShuttle are independent contractors, not statutory employees, and therefore are unable to organize or join a union. See SuperShuttle DFW, Inc., and Amalgamated Transit Union Local 1338 (Case 16-RC-010963). In reaching this decision, the Board shifted the analysis back to the common-law agency test it has long used for determining when a worker will be considered an independent contractor rather than an employee for purposes of coverage under the National Labor Relations Act (NRLA). The Board’s decision in SuperShuttle emphasizes the role of entrepreneurial opportunity and rejects the overemphasis placed on “right to control” by its 2014 decision in FedEx Home Delivery, 361 NLRB 610 (2014).
Background
The NLRA excludes from the definition of a “covered employee” any individual who is an independent contractor. The Act only provides coverage to employees and only gives employees the right to join a union and collectively bargain. In SuperShuttle, the Board addressed whether the franchisees who operated shared-ride vans for SuperShuttle at Dallas-Fort Worth and Love Field Airports were employees covered by the Act or independent contractors who would be excluded from coverage. In August 2010 the Acting Regional Director issued a Decision and Order finding in favor of SuperShuttle, basing her decision on the Board’s traditional common-law agency analysis, and the Board recently upheld her decision.
Prior to this ruling, the standard for determining the status of employee versus independent contractor status was laid out in FedEx Home Delivery, 361 NLRB 610 (2014). The Board majority in SuperShuttle stated that the decision in FedEx “fundamentally shifted the independent contractor analysis, for implicit policy-based reasons, to one of economic realities, i.e. a test that greatly diminishes the significance of entrepreneurial opportunity and selectively overemphasizes the significance of ‘right to control’ factors relevant to perceived economic dependency.”
Return to Common-Law Agency Test
The decision in SuperShuttle moved the analysis back to the common-law agency test set forth in NLRB v. United Insurance Co. of America, 390 U.S. 254 (1968), considering “entrepreneurial opportunity” and its overall effect on workers’ independence to pursue economic gain and maintain control over their income. In SuperShuttle, entrepreneurial opportunity, the ability to control how little or much one earns, as illustrated by the fact that the franchisees owned their own vans and could accept or reject work on their own terms, won the day.
Under the common-law agency test, the following 10 factors are relevant in making a determination about independent-contractor status:
- extent of control the master exercises over the details of the work;
- whether the individual performing the work is engaged in a distinct occupation or business;
- the skill required in the particular occupation;
- whether the work is usually done under the supervision of an employer;
- whether the individual supplies his own tools of the trade;
- the length of time for which the individual is contracted to perform the services;
- method of payment i.e. by time or by the job;
- whether the work is part of the regular business of the employer;
- whether the parties believe they are or are not creating the relationship of master and servant; and
- whether the principal is or is not in the business.
No single factor is considered decisive. The majority in SuperShuttle stated:
entrepreneurial opportunity, like employer control, is a principle to help evaluate the overall significance of the agency factors. Generally, common-law factors that support a worker’s entrepreneurial opportunity indicate independent-contractor status; factors that support employer control indicate employee status.
Factors Applied to SuperShuttle Franchisees
In this case, the Board found that SuperShuttle franchisees own or lease their own vehicles, at considerable expense; are responsible for all maintenance, gas, insurance and registration costs associated with owning a vehicle; and drivers are required to sign a one-year franchise agreement that expressly defines them as non-employees who operate independent businesses. Additionally, franchisees pay a flat weekly fee for the right to use the brand name and the reservation and dispatch services provided by SuperShuttle. Drivers are not required to work specific days or hours per week and can accept or reject any work that comes across the reservation and dispatch service. The franchisee receives all fares and does not share fares with SuperShuttle. If their customers have coupons or hotel vouchers the drivers are reimbursed at the standard rate for those rides. The Board rejected the union’s argument that the franchisees should be considered employees because SuperShuttle exercised substantial control over the franchisees’ daily performance such as requiring uniforms, displaying the SuperShuttle logo on their vans and prohibiting drivers from working for SuperShuttle competitors, and because it could discipline franchisees and terminate franchise agreements.
The Board held that, consistent with precedent, common-law factors should be evaluated through the eyes of entrepreneurial opportunity when the factual circumstances of the case make the evaluation appropriate and went on to say that going forward, “it will continue to consider how the evidence in a particular case, viewed (as it must be) in light of all the common-law factors, reveals whether the workers at issue do or not possess entrepreneurial opportunity.” As the Board noted, “control and entrepreneurial opportunity are two sides of the same coin; the more of one, the less of the other.” Thus, chances are where entrepreneurial opportunity exists, the employer takes a hands-off approach and exercises less control, resulting in a determination of independent contractor status and vice versa.
Effect on Employers
This is good news for companies who are faced with unionization efforts on behalf of workers they have treated as independent contractors, as long as the company can prove entrepreneurial opportunity. If you have any questions regarding this or other labor or employment related issues, please feel free to contact the author of this Alert, Michelle S. Harkavy, a partner in our New York City office, at mharkavy@fordharrison.com. You may also contact the FordHarrison attorney with whom you usually work.