The National Labor Relations Board, with one member dissenting, has issued a decision in which it “refines” the test it uses for determining whether it will find individuals performing services for an employer to be employees, who are covered by the National Labor Relations Act, or independent contractors, who are not. The case is FedEx Home Delivery, 361 NLRB No. 55 (2014). This is an important decision because of its broad application in determining the status of workers in both representation cases and in unfair labor practice cases as well.
In the decision, the NLRB found drivers for the company to be employees, not independent contractors. The overriding issue in the case involved the proper role of evidence on the issue of whether the drivers possessed the “entrepreneurial opportunity for gain or loss” that would be the hallmark of an independent business, and how that factor should be evaluated in light of the other traditional factors considered by the NLRB and the courts in such cases.
Although these types of cases are virtually always heavily fact dependent, the Board took the opportunity in this case to make some key legal points about the evidence of economic opportunity for gain or loss:
(1) The multifactor test articulated in the Restatement (Second) of Agency § 220 (1958) has traditionally been employed by the NLRB and the courts in making and reviewing employee/independent contractor determinations under the NLRA. The Board stated that it would simply consider entrepreneurial opportunity along with the Restatement factors, but would not grant it overriding “animating” importance, as it accused the DC Circuit of doing.
(2) The Board further held that any claimed entrepreneurial opportunity of the individuals in question must be real, not merely theoretical. The Board will look at employer imposed and other structural factors which act as an impediment to the genuine existence of entrepreneurial opportunity. Further, in representation cases, the Board will consider evidence regarding only the individuals in question (here, those in a requested bargaining unit), and not system wide or extra-unit evidence. (It is to be expected that a similar limitation will be imposed in unfair labor practice proceedings where no bargaining unit issue is in play.)
(3) Finally, Board said that it will look at the work being done by the individuals in question and ask whether they are truly performing it in the same way as a bona fide independent business would.
In a lengthy, detailed dissent, Member Johnson took issue with the majority on a number of legal and policy issues, perhaps best summarized by his statement that the majority decision constitutes “a sharp departure from precedent by diminishing the significance of the entrepreneurial opportunity factor to the point where it will rarely be considered as among the decisive factors in determining independent-contractor status.”
As noted, this case, like all such cases, is heavily fact bound, but the refinements in the test articulated by the NLRB purport to draw clear line in the sand between it and the DC Circuit over the issue of the proper role of and weight to be given entrepreneurial opportunity for gain or loss. The case could therefore precipitate yet another show-down between the NLRB and the one federal court of appeals with virtually nationwide jurisdiction to review NLRB decisions.