In a recent decision, the National Labor Relations Board (NLRB) found that independent contractor drivers who leased their trucks from a shipping company were actually employees. The NLRB determined that the drivers were employees because they had a lack of entrepreneurial opportunity and limited control of work. This decision could have a major impact on independent contractor versus employee status, under the National Labor Relations Act (NLRA), and on shippers who lease trucks to drivers.
Background
This decision by the NLRB is the first decision related to truck drivers and independent contractor status since the NLRB issued its decision in SuperShuttle. The SuperShuttle decision reversed an Obama-era decision that increased findings in favor of unions and employees. SuperShuttle returned the NLRB precedent to that which had been long standing before the Obama Administration.
When determining independent contractor versus employee status, the NLRB will now look at a variety of factors, including: extent of control by the employer, with greater control over the manner and means by which the individual does business indicating employee status; method of payment, as, contrary to independent contractors, employers do not typically share the opportunity for profit or loss with employees; instrumentalities, tools, and place of work, as those are typically provided by employers to employees but not to independent contractors; supervision, as independent contractors are not generally supervised like employees; the relationship the parties believed they created; engagement in a distinct business/work as part of the employer’s regular business and the principal’s business, since the more integrated the worker’s services are into the employer’s business, the more likely the worker is an employee; length of employment, with a longer relationship indicating employee status; and skills required, with specialized skills or training indicating independent contractor status.
In this case, the employer operates a logistics, drayage, and container storage business servicing select ports in Southern California. Its work involves transporting, by truck, goods contained in shipping containers. Some of the employer’s drivers own their own trucks, while other drivers lease trucks from the employer. The drivers filed a charge against the employer under the NLRA.
NLRB’s Decision
The NLRB began by noting that it was now operating under the precedent it re-established in SuperShuttle, which the board described as the common law agency test viewed through the prism of “entrepreneurial opportunity.”
First, the board found that the drivers had little opportunity for economic gain or, conversely, risk of loss because the drivers had limited discretion to determine when they worked, less discretion to decide what loads to haul, and no discretion to decide to work beyond the end of their shift. While the drivers were able to choose which days to work and what time to start, the employer assigned them to either the day or night shift based on the availability of trucks for lease from the employer and the drivers did not have their own routes, let alone a proprietary interest in routes that they could sell or transfer, nor could they hire employees to work in their stead.
Next, the board looked at the employer’s method for compensating the drivers and determined that it did not afford the drivers entrepreneurial opportunity. The drivers are paid a per-load rate, a fuel surcharge, and a clean truck assistance payment each week, yet each amount is determined by the employer with no input from the driver. This amount was offset by the daily lease rate for the trucks— again, set by the employer, not negotiated with the drivers—and by the cost of the fuel used by the drivers, which was deducted from their weekly check. The board found it significant that the employer, in its sole discretion, could reduce the daily lease rate on days when a driver’s work assignments were insufficient to cover the regular lease amount. Ultimately, the board determined that because the employer controls the drivers’ compensation and expenses as well as their assignments, the drivers lack “the independence to engage in entrepreneurial opportunities.”
Continuing through the rest of the factors, the board noted that the drivers’ entrepreneurial opportunity is further limited by the fact that the principal instrumentality of their work—the truck—is provided by the employer, not owned or controlled by the driver, the drivers cannot use the vehicles to perform other work when they are not working for the employer, and the employer only requires the drivers to pay for the use of its trucks on the days that they choose to drive. “Therefore, the drivers do not have to make a significant initial investment or take on a serious risk of loss to enter into a relationship with the [employer].”
Lastly, the board noted that most of the drivers had been with the employer over 6 years, suggesting that they were a permanent workforce. The board also noted that the fact that the drivers signed various documents stating that they were independent contractors did not support a finding of independent-contractor status. On these bases, the board determined that the drivers were actually employees of the employers.
On a positive note, however, in conclusion, the board did state that misclassification of employee drivers as independent contractors was not a stand-alone violation of the National Labor Relations Act.
Takeaway
As noted above, this decision has potential to have a major impact under the NLRA on independent contractor versus employee status, and on shippers or carriers who lease trucks to drivers. This case underscores once again the importance of ensuring that independent contractors have entrepreneurial opportunities and that the employer does not exercise too much control over the independent contractor’s work. Of course, proper attention to the other factors considered by the NLRB are also very important. This area of the law continues to evolve not only with the NLRB but also with other state and federal agencies and related legislation. When faced with questions regarding such operations, it remains advisable to consult with experienced legal counsel to ensure that independent contractors and employees are classified appropriately.
R. Eddie Wayland is a partner with the law firm of King & Ballow. You may reach Mr. Wayland at (615) 726-5430 or at [email protected]. The foregoing materials, discussion and comments have been abridged from laws, court decisions, and administrative rulings and should not be construed as legal advice on specific situations or subjects.