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D.C. Circuit Reverses NLRB On FedEx Independent Contractors

Published by on May 29, 2009

In FedEx Home Delivery v. NLRB, the D.C. Circuit held that the correct standard for determining whether a worker is an independent contractor or an employee is the “entrepreneurial test” announced in a previous decision by the court.  The court applied this test and determined that FedEx drivers are independent contractors and not employees, thus […]

In FedEx Home Delivery v. NLRB, the D.C. Circuit held that the correct standard for determining whether a worker is an independent contractor or an employee is the “entrepreneurial test” announced in a previous decision by the court.  The court applied this test and determined that FedEx drivers are independent contractors and not employees, thus reversing the determination of the National Labor Relations Board (“Board”).  More after the break.

The International Brotherhood of Teamsters (“Teamsters”) was certified as the collective bargaining representative for two FedEx locations.  FedEx refused to bargain with the Teamsters on the grounds that its single-route drivers were not “employees” under the National Labor Relations Act (“Act”).  The Board found that the drivers were employees and that FedEx was in violation of the Act for refusing to bargain with the Teamsters.

On appeal, the D.C. Circuit began by pointing out the flaws with the common-law agency test previously used for determining independent contractor status.  The court stated that this “non-exhaustive ten-factor test is not especially amenable to any sort of bright-line rule.”  The court observed that since the Board has no authority over independent contractors, the agency test is “particularly problematic.”  The court noted that past decisions focused on the extent of control exercised over the workers, but those decisions had failed to capture exactly what was meant by “control.”  The court determined that its decision in Corporate Express Delivery Systems v. NLRB more accurately captured the correct interpretation of “control” by focusing the inquiry on whether the workers have “significant entrepreneurial opportunity for gain or loss.”  The court commented that application of this test, while not making the inquiry purely mechanical, will at least make line drawing easier.

In determining that the FedEx drivers at issue in the case where actually independent contractors, the court focused on the fact that the drivers could set their own hours, they provided their own vehicles and could use them for personal purposes, and that they could hire their own employees.  The court also found the fact that the drivers could also hire replacement drivers without FedEx’s consent was especially relevant to the “entrepreneurial opportunity” inquiry.  The court likewise found significant the fact that FedEx drivers could assign their contractual rights to their routes without FedEx’s consent, and may even make a profit from the sale.  The court rejected the notion that wearing a FedEx uniform is evidence of an employment relationship.  The court stated that such requirements are more akin to safety measures, and not a way for FedEx to exercise control over the drivers.  Likewise, the failure of some drivers to take advantage of the entrepreneurial opportunities available to them is irrelevant to the inquiry of whether they can be termed “employees.”

Although seemingly abandoning the common-law agency test, the court reiterated that it is merely shifting emphasis to entrepreneurialism as a mechanism by which to evaluate the common-law factors.  The court concluded that taking into account all of the factors, a finding of independent contractor status was warranted.

Contributed by Claudia L. Guzman

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