Entrepreneurial opportunity is not a separate factor in the independent contractor analysis or a mere aspect of a separate factor; instead, it “is a principle by which to evaluate the overall effect of the common-law factors to a putative contractor’s independence to pursue economic gain.”
Drivers who leased trucks from a container shipping company were employees, not independent contractors, ruled the NLRB. The Board found that the drivers had little opportunity for economic gain because they had limited discretion to determine when they work, less discretion to decide what loads to haul, and no discretion to decide to work beyond the end of their shift. Moreover, the drivers did not have their own routes. Here, the record established that the drivers performed the work of hauling shipping containers for the company’s customers as assigned and not on routes in which they had a proprietary interest. However, the misclassification of the drivers as independent contractors was not a “per se” violation of the NLRA under the Board’s recent decision in Velox Express, Inc., the Board determined (Intermodal Bridge Transport, March 3, 2020).
The company operates a logistics and container storage business servicing the ports of Los Angeles and Long Beach, California. Its work involves transporting goods contained in shipping containers by truck. Some of its drivers own their own trucks while other drivers lease trucks from the company. This case involves only those drivers who lease trucks.
Drivers were employees. Section 2(3) excludes independent contractors from the definition of “employee” and thus from the Act’s protections. To determine whether a worker is an employee or an independent contractor, the Board applies the common-law agency test, and the non-exclusive common-law factors set forth in the Restatement (Second) of Agency §220.
Applying FedEx Home Delivery, an administrative law judge (ALJ) found that the drivers were employees under Section 2(3), not independent contractors, and that the company violated Section 8(a)(1) by misclassifying the drivers as independent contractors.
After the ALJ issued his ruling, the Board issued its decision in SuperShuttle DWF, Inc. In that case, the Board overruled FedEx to the extent that the decision had “revised or altered the Board’s independent-contractor test” by holding that “entrepreneurial opportunity represents merely ‘one aspect of a relevant factor that asks whether the evidence tends to show that the putative contractor is, in fact, rendering services as part of an independent business.’” Applying SuperShuttle, the Board reached the same conclusion as the ALJ: the drivers are employees.
Entrepreneurial opportunity. The ALJ applied the common-law factors to the facts of this case; where a qualitative evaluation of common-law factors shows significant opportunity for economic gain, the Board is likely to find an independent contractor. Citing FedEx, he considered whether the drivers were rendering services as part of an independent business.
However, the Board has rejected FedEx’s addition of the “independent business” factor to the common-law test. The Board found that FedEx improperly “limited the importance of entrepreneurial opportunity by creating a new factor, and then making entrepreneurial opportunity merely ‘one aspect’ of that factor.” Entrepreneurial opportunity is not a separate factor in the independent contractor analysis or a mere aspect of a separate factor; instead, it “is a principle by which to evaluate the overall effect of the common-law factors to a putative contractor’s independence to pursue economic gain.”
Common-law test per SuperShuttle. Applying the traditional common-law test as restated in SuperShuttle, the Board determined that the company failed to sustain its burden of establishing that the drivers were independent contractors. Viewing the common-law factors through the prism of entrepreneurial opportunity, the Board found that drivers had little opportunity for economic gain or, conversely, risk of loss. The drivers had limited discretion to determine when they work, less discretion to decide what loads to haul, and no discretion to decide to work beyond the end of their shift.
Control of work. The drivers had little control over when they worked, the loads they hauled, or the customers they serviced. They did not have their own routes. While the drivers were able to choose which days to work and what time to start, the company assigned them to either the day or night shift based on the availability of trucks for lease. When drivers report to work, they must choose from between two and four delivery assignments determined by the company’s dispatchers in their sole discretion. The dispatchers then control the flow of the drivers’ work for the remainder of the shift by providing assignments and controlling their contacts with customers. Moreover, the company controlled the details of their work through a variety of policies and procedures, enforced through a progressive discipline policy.
No profit, no loss. In addition, their method of compensation did not afford them entrepreneurial opportunity. The company set the drivers’ rate of compensation and the costs of operation, so the only opportunity they had to increase their income was to work more hours. Drivers were paid a per-load rate, set based on the company’s negotiations with its customers, not with the drivers. The drivers, in turn, pay a daily lease rate, fuel surcharge and clean truck assistance payments, set by the company.
Moreover, the drivers leased the truck for just a half-day at a time, so it can be leased to another driver for the next shift. The drivers cannot use the trucks to perform other work when not working for the company. Because the drivers pay to use the trucks on the days they drive, they do not have a significant investment in entering the relationship with the company. Thus, the drivers did not have any meaningful opportunity for economic gain through their own efforts and initiative.
Other common-law factors. Other factors also supported a finding of employee status. The ALJ correctly found that the drivers were not engaged in a distinct occupation or business, but were a regular part of the company’s business. The company provided the drivers with almost all of their instrumentalities and tools. Although driving a commercial truck requires specialized skills, the drivers’ skills were inherent to the performance of driving duties in furtherance of the company’s business, consistent with the common-law definition of an employee. More telling was that more than 80 percent of the drivers had been with the company for at least six years, suggesting that they functioned as a permanent workforce. Moreover, the fact that the drivers signed various documents stating that they were independent contractors did not undermine a finding of employee status.
Thus, the Board found that the company decisively failed to meet its burden of demonstrating that the drivers were independent contractors.
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