Employment Law Report
NLRB Returns to Traditional Common-Law Test For Independent Contractors
On January 25, 2019, in SuperShuttle DFW, Inc. and Amalgamated Transit Union Local 1338, Case 16–RC–010963, the National Labor Relations Board (“NLRB”) overruled its prior decision in FedEx Home Delivery, 361 NLRB 610 (2014), and returned to the common-law test that it previously used to determine whether workers were employees or independent contractors. The NLRB’s decision clarifies the role that “entrepreneurial opportunity” plays in deciding whether workers are employees or independent contractors. The significance is that employees can unionize under the National Labor Relations Act (“NLRA”). Independent contractors cannot.
The NLRB criticized the FedEx decision because it “significantly limited the importance of entrepreneurial opportunity.” In SuperShuttle, the NLRB considered whether franchisees who operated shared-ride vans for SuperShuttle Dallas-Fort Worth were employees covered under the NLRA or independent contractors. The franchisees were required to purchase or lease their own vans (that met franchise specifications), and they paid SuperShuttle Dallas-Fort Worth a franchise fee and a flat weekly fee for the right to use the SuperShuttle brand and its reservation apparatus. Franchisees paid for their own gas and van maintenance. The franchisees were not required to work any set schedule or any particular number of hours or days per week. Franchisees collected the money they earned for completing the assignments that they chose. They could also hire relief drivers to operate their vans. SuperShuttle performed criminal background checks, a driving history background check, and drug and alcohol screening in accordance with Department of Transportation standards on the franchisees.
Emphasizing the significant investment required of franchisees, their “nearly unfettered opportunity” to meet or exceed their weekly overhead, and the franchisees’ total control over their own schedules, the NLRB held that the SuperShuttle franchisees were independent contractors who had significant entrepreneurial opportunity for economic gain. In addition, the absence of supervision and the parties’ contractual understanding that the franchisees were independent contractors weighed in favor of independent contractor status.
SuperShuttle returns to the familiar test used to determine independent contractor or employee status and should help employers and franchisors structure their contractual arrangements with workers. The worker’s entrepreneurial opportunity for economic gain will be viewed as an important factor in finding independent contractor status.