NLRB Reverts to Common Law Test for Independent Contractors
In a recent decision, the National Labor Relations Board (“NLRB”) ruled that shuttle van drivers for the company SuperShuttle are independent contractors and not employees. In doing so the NLRB has revised its test for determining whether independent contractors are exempt from coverage under the National Labor Relations Act (“NLRA”) and overruled the Obama-era NLRB’s FedEx Home Delivery decision, which focused on whether the worker was economically dependent on an employer.
SuperShuttle treats its drivers as franchisees. The drivers are required to buy a franchise from the company, provide their own vehicle, pay a decal fee, and a flat weekly fee for use of the SuperShuttle brand and its dispatch system. When a driver wants to start work and pick up an assignment, he or she turns to the dispatch system to receive job “bids” from the SuperShuttle dispatchers. The drivers collect 100% of all fares collected yet are required to accept SuperShuttle vouchers and coupons.
In determining whether drivers for SuperShuttle are independent contractors, the NLRB reverts to the prior “common law” test which includes a list of ten non-exhaustive factors to consider. Under the common law test, the NLRB considers factor such as: the extent of the entity’s right to exercise control over the details of the work; whether the worker is engaged in a distinct business; the skill required in the particular occupation; the length of time for which the person is working for the entity; and several other factors. Going forward, the Board states that these common-law factors should be evaluated by looking at the “entrepreneurial opportunity” for economic gain.
Ultimately the Board held that SuperShuttle drivers are independent contractors because drivers (1) make a significant initial investment in the business by buying or leasing a van and entering into the franchise agreements; (2) have nearly limitless ability to meet or exceed their weekly overhead because they have complete control over their schedule and when how often to work; (3) keep all their fares and thus, the amount of money they can make is determined by how much they work; and (4) have discretion over the bids they choose to accept. In weighing these factors, the Board held that such facts demonstrate that the drivers have significant entrepreneurial opportunity and control over their earnings and are thus independent contractors.
What This Means for Employers:
This decision is most helpful to companies using contract labor. While employers must still be mindful that the determination of independent contractor status turns on the unique facts of each employment arrangement, this decision returns the NLRB to its more employer-friendly, pre-Obama-era, independent contractor standard. Employers should also note that this decision only affects the NLRB and California’s Agricultural Labor Relations Board. This decision does not replace California’s new “ABC test” for independent contractor status for purposes of the Wage Orders. If you have questions or concerns about how your workers should be classified, please contact Barsamian & Moody at (559) 248-2360.
The goal of this article is to provide employers with current labor and employment law information. The contents should neither be interpreted as, nor construed as legal advice or opinion. The reader should consult with Barsamian & Moody at (559) 248-2360 for individual responses to questions or concerns regarding any given situation.