On Jan. 25, 2019, the National Labor Relations Board (NLRB) addressed its independent contractor test in a case involving airport shuttle drivers for the franchise, SuperShuttle. The SuperShuttle DFW, Inc. decision overruled the NLRB’s 2014 decision in FedEx Home Delivery, which the Board criticized as incorrectly limiting the significance of a worker’s entrepreneurial opportunity for economic gain in determining independent contractor status.

Pursuant to two separate licensing agreements, SuperShuttle DFW operated shuttle vans to transport airline passengers at and between Dallas-area airports. In 2005, SuperShuttle converted from a model in which it employed shuttle drivers to a franchise model under which its drivers are required to sign a one-year Unit Franchise Agreement (UFA) that expressly characterized them as nonemployee franchisees who operate independent businesses. Franchisees are required to supply their own shuttle vans and pay SuperShuttle DFW an initial franchise fee and a flat weekly fee for the right to utilize the SuperShuttle brand and its dispatch and reservation apparatus. Franchisees worked no set schedule or number of hours or days per week; they worked as much as they chose, whenever they chose. Franchisees were then entitled to all the money they earned for completing the assignments that they selected. Individual franchisees also were permitted to hire and employ relief drivers to operate their vans. Franchisees paid their own expenses, which included insurance, gas, tolls, licensing fees and vehicle maintenance.

Amalgamated Transit Union Local 1338 attempted to organize and represent a unit of the drivers. In urging the Board to find that the franchisees were really employers, the Union emphasized certain facts, including that the franchisees performed a regular and essential part of the company’s business, that the company unilaterally set various rules and policies contained in the UFA that regulated aspects of how the franchisees operate their vehicles and provided grounds for discipline of the franchisees, and that the franchisees were not permitted to permitted to work for any of the company’s competitors.

The Board disagreed with the Union and in doing so overturned the FedEx Home Delivery independent contractor test, which it argued “greatly diminishes the significance of entrepreneurial opportunity and selectively overemphasizes the significance of ‘right to control’ factors relevant to perceived economic dependency.” Instead, the Board reverted to what it called a “traditional common law factor test” for determining independent contractor status. These factors – none of which are dispositive or necessarily applicable in each case — include:

  • The extent of control which, by the agreement, the master may exercise over the details of the work.
  • Whether or not the one employed is engaged in a distinct occupation or business.
  • The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision.
  • The skill required in the particular occupation.
  • Whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work.
  • The length of time for which the person is employed.
  • The method of payment, whether by the time or by the job.
  • Whether or not the parties believe they are creating the relation of master and servant.
  • Whether the principal is or is not in business.

Applying the Board’s traditional common-law factor test to the facts of this case, the Board found that the SuperShuttle franchisees were independent contractors. In reaching this conclusion, the Board emphasized the importance of the drivers’ entrepreneurial opportunities in assessing the common law factors. Specifically, the Board stated:Whether or not the work is part of the regular business of the employer.

Like most entrepreneurs or small business owners, SuperShuttle franchisees make a significant initial investment in their business by purchasing or leasing a van and entering into a Unit Franchise Agreement that requires certain payments, including an initial fee and a weekly flat fee. Like small business owners, franchisees have nearly unfettered opportunity to meet and exceed their weekly overhead: with total control over their schedule, they work as much as they choose, when they choose; they keep all fares they collect, so the more they work, the more money they make; and they have discretion over the bids they choose to accept, so they can weigh the cost of a particular trip (in terms of time spent, gas, and tolls) against the fare received…. [T]hese factors (i.e., extent of control by employer, method of compensation, and ownership of principal instrumentality), which demonstrate that the franchisees have significant opportunity for economic gain and significant risk of loss, strongly support finding independent-contractor status, and they are not outweighed by any countervailing factors supporting employee status.

Takeaways

The NLRB as currently constituted has strongly demonstrated that it will not shy away from overturning Obama-era decisions that it believes to be wrongly decided. Many of those Obama-era decisions were geared towards enhancing labor organizations’ opportunities to expand their representation in the new gig economy. The SuperShuttle decision is particularly significant therefore because its result directly opposes that objective. Employers are encouraged to read this decision in its entirety for ideas on how they might successfully roll out successful independent contractor business models. Employers, however, should recognize that the various other different federal and state agency tests for independent contractor status may cause different results depending on the context in which the analysis is undertaken.