By Tiffany Tran
Seyfarth Synopsis: In another employer friendly decision, the NLRB explicitly overruled an Obama administration precedent in emphasizing the importance of entrepreneurial activity and returned to the traditional common law test to evaluate independent contractors under the NLRA.
On January 25, 2019, the NLRB returned to its pre-2014, “traditional” common law test for determining the employment relationship issued in SuperShuttle DFW, Inc., 367 NLRB No. 75 (2019). SuperShuttle DFW franchisee drivers in the Dallas-Fort Worth Dallas area sought to unionize under the National Labor Relations Act (NLRA). However, the company treated its drivers as franchisees and were classified as independent contractors. The franchisee drivers bought the franchise from the company, supplied their own vans, and paid their own business expenses. The franchisee drivers were free to set their schedules, hours of work, and which rides to accept (although they may be fined for accepting a ride and not completing the pickup). The franchisee drivers kept all revenue made from their rides and could even hire additional drivers. The company charged certain fees to cover benefits provided by the company, such as the SuperShuttle brand, marketing, and use of dispatch system.
In analyzing whether the SuperShuttle franchisee drivers were independent contractors, or employees afforded protection under the NLRA (such as the right to unionize), the NLRB focused on their “entrepreneurial opportunity” for economic gain or loss. In so doing, the Board explicitly overturned the Obama administration’s 2014 decision in FedEx Home Delivery, which severely limited the significance of a worker’s entrepreneurial opportunity for economic gain in determining the employment relationship under the NLRA. The NLRB emphasized in this decision that entrepreneurial opportunity has “always been at the core of the common-law test.”
Applying these principles, the NLRB found that franchisee drivers had significant opportunity for economic gain due to their autonomy in setting their work schedules, their discretion to own or lease vans, and other decisions that drove the amount of revenue they take in. The NLRB also noted that the company did not supervise the work of the franchisee drivers and that the parties themselves understood that the franchisees were independent contractors. As such, the Board affirmed the Acting Regional Director’s 2010 determination that the SuperShuttle drivers were independent contractors and had no right to unionize under the NLRA.
This ruling has implications for a wide range of businesses, especially those in the gig economy who use independent contractors to perform work. However, this ruling is limited to protections under the NLRA and may not have much impact on state worker classification for wage and hour purposes. For instance, California employers must still grapple with the California Supreme Court’s decision in Dynamex Operations v. Superior Court regarding worker classification for Wage Order claims (see Seyfarth’s discussion about the Dynamex case here). Please contact your favorite Seyfarth attorney to discuss how this ruling may impact your business.