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NLRB Changes the Definition of the Independent Contractor.

NLRB Changes the Definition of the Independent Contractor

March 6, 2019

On January 25, 2019, the National Labor Relations Board (NLRB) overruled an Obama-era NLRB decision on determining when workers would be classified as independent contractors rather than employees and restored entrepreneurship as a key element in the test.  In this new decision, the NLRB ruled that shuttle-van-driver franchisees of SuperShuttle at Dallas-Fort Worth Airport are not statutory employees under the National Labor Relations Act, but rather independent contractors excluded from the NLRA’s coverage.

SuperShuttle DFW franchisees transported passengers to and from Dallas area airports when they petitioned to unionize.  The company against which the organizing petition was filed argued that the franchisees could not do so because they were independent contractors.  In 2005, the company switched to a franchise model, requiring drivers to sign a franchise agreement that designated them as nonemployee franchisees who operate independent businesses.  The franchisees purchased their own shuttle vans, paid a flat weekly fee for the right to use the SuperShuttle brand and its dispatch equipment, were entitled to all fares they collected, could make their own schedule, and were not supervised by SuperShuttle.

In reaching this decision, the NLRB considered factors including the franchisees’ leasing or ownership of their work vans, method of compensation, control over their daily work schedules and working conditions, absence of supervision, and the parties’ mutual understanding that the franchisees were independent contractors.  The NLRB determined that these factors provided the franchisees with significant “entrepreneurial opportunity for economic gain.”  The finding in this case overruled the NLRB’s 2014 decision regarding FedEx Home Delivery, which altered the common law agency test by limiting the significance of a worker’s entrepreneurial opportunity for financial gain.

The Super Shuttle decision is a victory for the franchise community as well as to businesses who engage workers to provide temporary or short-term services and to rideshare companies such as Lyft and Uber, which are currently engaged in litigation with the Board over this issue.  This decision seems to mark a renewed focus on entrepreneurship, giving businesses and workers greater flexibility in their relationships.

A key takeaway for those businesses that rely on independent contractors is that the relationships must be structured carefully to pass legal muster.  This case only assesses status under the National Labor Relations Act and there are several other laws implicated, each of which has its own test or nuances that must be considered in structuring these relationships.

For more information on this subject, please contact Peter Bennett (pbennett@thebennettlawfirm.com) or Rick Finberg (rfinberg@thebennettlawfirm.com) of The Bennett Law Firm.

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