A recent labor decision has further defined the differences between an employee and an independent contractor and their classification for employment purposes. For several reasons, the least of which includes potential employment-related litigation, the proper qualification of a worker as an independent contractor or an employer is crucial.
At issue in this case, involving FedEx Home Delivery and the International Brotherhood of Teamsters (34-CA-012735 and 34-RC-002205; 361 NLRB No. 55), was whether drivers who operated out of FedEx Home Delivery’s Hartford, CT terminal were employees covered under National Labor Relations Act (NLRA), §2(3) or whether they were independent contractors, and thereby excluded from coverage.
Initially, the drivers were determined to be employees and an election was held certifying Teamsters Union No. 671 as its’ representative. In response, FedEx Home Delivery refused to recognize and collectively bargain with the Union, and a complaint was filed. Typically, the analysis would have stopped there as a court would have granted the Union’s motion for summary judgment and found that FedEx violated the NLRA. However, a similar case in Washington, D.C. had just been decided (FedEx Home Delivery v. NLRB, 563 F. 3d 492) and there, the Court of Appeals held that FedEx drivers in their Wilmington office were independent contractors. As such, the National Labor Review Board (Board) decided to revisit the issue and attempt to provide some clarity.
Applying the holding in NLRB v. United Insurance Co. of America 390 U.S. 254, (1968), the Board reaffirmed the position that in evaluating the independent-contractor status, all the facets of the relationship must be assessed and weighed equally, with no one factor standing out above the rest. This was in direct contradiction to the DC court’s decision, which placed extra weight on the factor relating to the “entrepreneurial opportunity for gain or loss” that was made available to the independent contractor.
Indeed, while the U.S. Court of appeals called “entrepreneurial opportunity” an “animating principle,” the Board opined that in order to consider “entrepreneurial opportunity,” it must be actual, not merely theoretical. The Board also held that an evaluation of constraints, if any, on the worker’s ability to take advantage of those opportunities must be considered. Guided by the Supreme Court’s holding in United Insurance, which stressed that there was no shorthand formula or magic phrase in assessing whether a person is an independent contractor or an employee, the Board concluded that all evidence should be weighed against the question of whether the individual is rendering services as part of an independent business.
For the FedEx Home Delivery drivers in Hartford, Connecticut, the Board determined that they were, indeed employees covered by NLRA §2(3) and that failure to recognize and bargain with their union was a violation of the Act.
For employers, these varying opinions can pose a potential challenge. The NLRB’s decision in this case reaffirms its preference for a broad definition for “employee”. If you are a business owner and have questions about the independent contractor vs. employee analysis or any other employment or labor related issue, please contact business litigator Drew Pomerance at RPNA Law to discuss your business’s next steps.