Court of Appeals for the District of Columbia Circuit held that Massachusetts drivers who voted for representation by the International Brotherhood of Teamsters were independent contractors who were not covered by the National Labor Relations Act (FedEx Home Delivery v. NLRB, D.C. Cir., No. 07-1391, 4/21/09). In a 2-1 decision, Judges Janice Rogers Brown and Stephen F. Williams set aside a National Labor Relations Board decision that the company unlawfully failed to bargain with Teamsters Local 25 after the union was certified as the bargaining agent for drivers at two FedEx Home terminals, finding that the board improperly classified the drivers as employees under the NLRA.

FedEx acquired Roadway Package Systems in 1998 and changed its name to FedEx Ground Package System Inc. The present company consists of a ground division that delivers packages primarily to and from businesses, and the home division, known as FedEx Home, that delivers packages primarily serving residential customers. FedEx Home entered into independent contractor agreements with about 4,000 drivers who are responsible for more than 5,000 delivery routes across the United States.

In July 2006, Local 25 filed representation petitions with NLRB, requesting elections at two small terminals in Wilmington, MA. An NLRB regional director determined that the drivers at both facilities were employees under the NLRA and directed that elections be held on the issue of union representation. The NLRB declined to review the director’s decision, and the union won both elections. FedEx filed objections and refused to bargain with the union on the basis that the drivers were independent contractors rather than employees. The NLRB found that the company had violated Sections 8(a)(1) and 8(a)(5) of the NLRA. FedEx petitioned for review of the board order in the D.C. Circuit, and the NLRB filed a cross-petition for enforcement.

The majority of the D.C. Circuit vacated the Board’s decision and refused to enforce the bargaining order. Writing for the majority, Judge Brown said the Board and the courts apply the traditional common law agency test in resolving independent contractor issues, but the test is not amenable to a “bright-line rule.” She called uncertainty about independent contractor status “particularly problematic” under the NLRA, because the Act gives NLRB jurisdiction over statutory employees but “no authority whatsoever over independent contractors.” Stating that the court is responsible for ensuring that the Board only exercises the power granted by the Act, the D.C. Circuit said it would not defer to NLRB decisions on independent contractor status. Instead, it said, the court would uphold the Board’s decision if it reflected that the agency made a choice between “two fairly conflicting views.”

The appeals court said the FedEx Home drivers appeared to share many “characteristics of entrepreneurial potential.” The NLRB regional director found that the Massachusetts drivers sought by Local 25 had signed operating agreements that specified they were not employees of the company for any purposes, and that the contractor retained control over the “manner and means of reaching mutual business objectives.” They provided their own vehicles, and bore the costs of operating and maintaining them. The court noted that NLRB also heard evidence that the drivers under contract with FedEx Home were free to use their trucks for any personal or commercial purpose, as long as they removed or covered company logos and markings when the equipment was not in service for FedEx Home. Contractors were free to serve multiple routes for FedEx Home, and had complete authority to hire and fire their own drivers. According to the decision, “contractors do not need to show up at work every day (or ever, for that matter); instead, at their discretion, they can take a day, a week, a month, or more off, so long as they hire another to be there.”

The court noted that the NLRB regional director, in a decision upheld by the Board, found that the FedEx Home drivers were employees in part because the company required the contractors to wear uniforms, conform to grooming standards, complete a driving course, and be audited or observed twice a year. The director noted that the company also controlled the display of its logo on trucks, required contractors to have drivers available Tuesday through Saturday, and could reconfigure route assignments if a contractor’s service was not adequate. The court found that “those distinctions, though not irrelevant, reflect differences in the type of service the contractors are providing rather than differences in the employment relationship.”

The company requires drivers to wear uniforms to give customers a sense of security, not to control the drivers, it observed. “FedEx has an interest in making sure her conduct reflects favorably on that logo [once a driver is wearing it], for instance by her being a safe and insured driver—which is required by [Department of Transportation] regulations in any event,” the court added.

The court observed that in finding the drivers to be employees under the NLRA, the Board’s regional director emphasized that the drivers were performing a function that is a regular and essential part of the company’s operations and that few took advantage of the entrepreneurial opportunity to hire other drivers. But the court was not persuaded by the analysis. “While the essential nature of a worker’s role is a legitimate consideration, it is not determinative in the face of more compelling countervailing factors,” the court said, adding that whether drivers took advantage of particular opportunities “is beside the point.” Citing a prior decision, it said a worker’s retention of the right to engage in entrepreneurial activity is more important than the regular exercise of that right.

“Though evidence can be marshaled and debater’s points scored on both sides, the evidence supporting independent contractor status is more compelling under our precedent,” the court said, granting the company’s petition for review, vacating the board’s order and denying enforcement of the order that FedEx Home bargain with Local 25.