Fedex Home Delivery v. National Labor Relations Board
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Full Opinion
dissenting in part:
In National Labor Relations Board v. United Insurance Co. of America, the Supreme Court held that Congress intended âthe Board and the courtsâ to âapply the common-law agency test ... in distinguishing an employee from an independent contractorâ under the National Labor Relations Act (NLRA). 390 U.S. 254, 256, 88 S.Ct. 988, 19 L.Ed.2d 1083 (1968). In this case, the National Labor Relations Board (NLRB) applied that multi-factor test and concluded that FedEx Home Deliveryâs drivers are the companyâs employees. My colleagues disagree, concluding that the drivers are independent 'contractors.
This is not merely a factual dispute. Underlying my colleaguesâ conclusion is their view that the common-law test has gradually evolved until one factorâ âwhether the position presents the opportunities and risks inherent in entrepreneurialismâ â has become the focus of the test. Op. at 497, 503. Moreover, in their view, this factor can be satisfied by showing a few examples, or even a single instance, of a driver seizing an entrepreneurial opportunity. Id. at 502.
Although I do not doubt my colleaguesâ sincerity, I detect no such evolution. To the contrary, the Board and the courts have continued to follow the Supreme Courtâs injunction that âthere is no shorthand formula or magic phrase that can be applied to find the answer, but all of the incidents of the relationship must be assessed and weighed with no one factor being decisive.â United Ins., 390 U.S. at 258, 88 S.Ct. 988. The common-law test may well be âunwieldy,â Op. at.497, but a court of appeals may not â âdisplace the Boardâs choice between two fairly conflicting views, even though the court would justifiably have made a different choice had the matter been before it de novo.â â United Ins., 390 U.S. at 260, 88 S.Ct. 988 (quoting Universal Camera Corp. v. NLRB, 340 U.S. 474, 488, 71 S.Ct. 456, 95 L.Ed. 456 (1951)). While the NLRB may have authority to alter the focus of the common-law test, see Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-43, 863-64, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), this court does not. Because âthe least that can be said for the Boardâs decision is that it made a choice between two fairly conflicting views, ... the Court of Appeals should have enforced the Boardâs order.â United Ins., 390 U.S. at 260, 88 S.Ct. 988. Accordingly, on the
I can and do, however, fault the Boardâs refusal to give FedEx a fair opportunity to make its case under the appropriate test. As the court correctly notes, the Regional Director refused to permit FedEx to introduce evidence that may be relevant to the question of whether its drivers have significant entrepreneurial opportunities. Regardless of whether one considers entrepreneurial opportunity as only one factor (as it is in the common-law test) or as the focus of the test (as my colleagues believe it to be), FedEx surely had the right to introduce the evidence necessary to make its case.
I
A
The NLRA makes it âan unfair labor practice for an employer ... to refuse to bargain collectively with the representatives of his employees.â 29 U.S.C. § 158(a)(5). Section 2(3) of the Act, as amended by the 1947 Labor Management Relations Act, provides that the term âemployeeâ âshall not include ... any individual having the status of an independent contractor.â 29 U.S.C. § 152(3). In United Insurance, the Supreme Court held that the âobvious purpose of this amendment was to have the Board and the courts apply general agency principles in distinguishing between employees and independent contractors under the Act.... Thus there is no doubt that we should apply the common-law agency test ... in distinguishing an employee from an independent contractor.â United Ins., 390 U.S. at 256, 88 S.Ct. 988.
The cases under review in United Insurance presented the question of whether certain agents of an insurance company were employees or independent contractors. The Supreme Court determined that
the decisive factors in these cases become the following: the agents ... perform functions that are an essential part of the companyâs normal operations; they need not have any prior training or experience, but are trained by company supervisory personnel; they do business in the companyâs name with considerable assistance and guidance from the company and its managerial personnel and ordinarily sell only the companyâs policies; the âAgentâs Commission Planâ that contains the terms and conditions under which they operate is promulgated and changed unilaterally by the company; the agents account to the company for the funds they collect under an elaborate and regular reporting procedure; the agents receive the benefits of the companyâs vacation plan and group insurance and pension fund; and the*506 agents have a permanent working arrangement with the company under which they may continue as long as their performance is satisfactory.
Id. at 258-59, 88 S.Ct. 988. The Court confirmed that the Board had âexamined all of these facts and found that they showed the debit agents to be employees.â Id. at 260, 88 S.Ct. 988. This finding, the Court said, âinvolved the application of law to facts â what do the facts establish under the common law of agency: employee or independent contractor?â Id. Although the Court noted that such a determination âinvolved no special administrative expertise that a court does not possess,â it nonetheless held that, â âeven as to matters not requiring expertise,â â a court of appeals may not â âdisplace the Boardâs choice between two fairly conflicting views, even though the court would justifiably have made a different choice had the matter been before it de novo.â â Id. (quoting Universal Camera Corp., 340 U.S. at 488, 71 S.Ct. 456). As long as it âcan be said for the Boardâs decision ... that it made a choice between two fairly conflicting views, ... the Court of Appeals should ... enforce[ ] the Boardâs order. It [is] error to refuse to do so.â Id.
In the succeeding decades, the NLRB has consistently â[a]ppl[ied] the common-law agency test as interpreted by the Supreme Court in NLRB v. United Insurance Co.â to determine whether a worker is an employee or an independent contractor. Roadway Package Sys., Inc. (Roadway II), 326 N.L.R.B. 842, 843 (1998); id. at 849 (declaring that the Supreme Courtâs âcases teach us not only that the common law of agency is the standard to measure employee status but also that we have no authority to change itâ).
This Circuit has likewise recognized that âCongress intended that traditional agency
B
My colleagues contend that â[gradually,â both this Court and the Board shifted away from âthe unwieldy control inquiry in favor of a more accurate proxy: whether the âputative independent contractors have significant entrepreneurial opportunity for gain or loss.â â Op. at 496-97 (quoting Corporate Express Delivery Sys. v. NLRB, 292 F.3d 777, 780 (D.C.Cir.2002)). â[W]hile all the considerations at common law remain in play,â my colleagues maintain that now the âemphasisâ is on âwhether the position presents the opportunities and risks inherent in entrepreneurialism.â Id. at 497.
The cases, however, do not evidence this gradual evolution to a test that emphasizes entrepreneurial opportunity. According to my colleagues, the evolutionary process began âimplicitly]â in our decisions in NAVL and C.C. Eastern. Op. at 497. It is true that those decisions listed entrepreneurial opportunity as a relevant factor, notwithstanding that it is not expressly mentioned in either United Insurance or the Restatement (or in any comment to the Restatement
My colleagues cite only one case from this (or- any) Circuit, our 2002 opinion in Corporate Express, for the proposition that entrepreneurial opportunity has âexplicitly]â become the emphasis of the independent contractor test. Op. at 497. I do not dispute that theirs is one fair reading of that opinion, which contains considerable language regarding entrepreneurial opportunity and the benefits of using such a test. But Corporate Express did not purport to overrule Supreme Court, Circuit, and Board precedent. Indeed, in affirming as reasonable the Boardâs determination that the owner-operator drivers in that case were not independent contractors, the court not only agreed that they lacked entrepreneurial opportunity, but also acknowledged that the Board may have correctly determined that the employer controlled the way in which they performed their jobs. Corporate Express, 292 F.3d at 779-80. Hence, Corporate Express can also be read as merely holding that the Board was reasonable in determining that entrepreneurial opportunity tipped the balance in that case â a logical result given that the court thought the vector of the other common-law factors somewhat unclear, see id. at 780 & n. *, while finding that the âowner-operators lacked all entrepreneurial opportunity,â id. at 780-81 (emphasis added). And when there are two possible readings of an opinion, only one of which is consistent with earlier precedent, the appropriate course is to adopt the consistent reading â on the presumption that the court followed the command of stare decisis. Cf. Indep. Cmty. Bankers of Am. v. Bd. of Governors of the Fed. Reserve Sys., 195 F.3d 28, 34 (D.C.Cir.1999) (âIn the event of conflicting panel opinions ... the earlier one controls, as one panel of this court may not overrule another.â (internal quotation marks and citation omitted)).
My colleagues maintain that the evolution toward an emphasis on entrepreneurial opportunity âseems to play a part in the Boardâs own cases,â although they âreadily concede the Boardâs language has not been ... unambiguous.â Op. at 498. The principal NLRB decision upon which they rely is Arizona Republic, a decision issued after the Regional Directorâs decision in this case. Ariz. Republic, 349 N.L.R.B. 1040 (May 8, 2007). But Arizona Republic does not support my colleaguesâ proposition either. Once again, it is true that one of the factors weighing in favor of the independent contractor determination in that case was âentrepreneurial potential.â Id. at 1042. There simply is no indication, however, that this factor was the âemphasisâ of the test Arizona Republic applied. To the contrary, the Board announced that, â[i]n determining the status of the [newspaper] carriers in this case, we rely on ... the common-law factors.â Id. at 1043. It then proceeded to examine the Restatement factors individually, id. at 1043-46, repeating its oft-stated mantra that âthis list of factors is not exclusive or exhaustive, and that, in applying the common-law agency test, [we] will consider âall the incidents of the individualâs relationship to the employing entity,â â id. at 1042 (quoting Roadway III, 326 N.L.R.B. at 850). The Board ultimately concluded that the majority of the factors âweigh[ed] in favorâ of finding that the carriers were independent contractors. Id. at 1043-46. One of those factors was entrepreneurial opportunity; another was the employerâs lack of control over the carriers. Id. But the Board gave pride of place to neither one, declaring only that the common-law factors, âon balance,â yielded the conclusion that the carriers were independent contractors. Id. at 1043. The same traditional common-law analysis was employed in both of the other NLRB decisions that my colleagues cite. Op. at 498.
Finally, I do not dispute my colleaguesâ contention that the multi-factor analysis of the common law is ânot especially amenable to any sort of bright-line rule.â Op. at 495-96. Although they acknowledge that an emphasis on entrepreneurial opportunity âdoes not make applying the test purely mechanical,â they maintain that âthe line drawing is easierâ under that test. Id. at 498. There is no question that the common-law agency test makes for difficult line drawing. Indeed, the Supreme Court expressly acknowledged as much when it announced the test. See United Ins., 390 U.S. at 258, 88 S.Ct. 988 (âThere are innumerable situations which arise in the common law where it is difficult to say whether a particular individual is an employee or
But the comparative practical advantage of one or the other of these two tests has no bearing on which one we must apply. Although the NLRB may have authority to alter the test, or at least to alter its focus, see Chevron, 467 U.S. at 842-43, 863-64, 104 S.Ct. 2778, this court does not. Until the Supreme Court or the Board tells us differently, we must continue to apply the multi-factor common-law test as set forth by the Supreme Court and applied by the Board.
II
In this case, the NLRBâs Regional Director applied the traditional âcommon law agency test.â FedEx Home Delivery and Local 25, N.L.R.B. Case Nos. 1-RC-22034, 22035, slip op. at 33 (First Region, Sept. 20, 2006) [hereinafter Regional Directorâs Decision], In so doing, she âconsidered] all the incidents of the individualâs relationship with the employing entity,â id., including both the extent of FedExâs control over the drivers and the extent of the driversâ entrepreneurial opportunities, id. at 35-36. Although the Regional Director acknowledged many of the facts cited by my colleagues in support of FedExâs contention that the contractors are independent contractors, facts that I do not rehearse here, she concluded that they were outweighed by other factors supporting employee status. Id. at 39. Part II.A reviews the bulk of the factors that the Director found to support employee status. Part II.B discusses her analysis of the issue of entrepreneurial opportunity.
A
In a lengthy and considered opinion, the Regional Director found the following facts to favor a determination that FedEx Home Deliveryâs drivers, whom the company calls âcontractors,â were employees:
[A]ll the FedEx Home contractors perform a function that is a regular and essential part of FedEx Homeâs normal operations, the delivery of packages.... [A]ll contractors must do business in the name of FedEx Home[,] ... wear[ ] FedEx Home-approved uniforms and badges, ... [and] operate vehicles that must meet FedEx Home specifications and uniformly display the FedEx Home name, logo, and colors.... No prior delivery training or experience is required, and FedEx Home will train those with no experience....
... [Contractors are not permitted to use their vehicles for other purposes while providing service for FedEx Home. The contractors have a contractual right to use their FedEx Home trucks in business activity outside their relationship with FedEx Home during off-hours, provided they remove all FedEx Home markings, but only one former multiple route contractor ... and no current contractors at either Wilmington terminal have ever done so....
... FedEx Home exercises substantial control over all the contractorsâ performance of their functions. FedEx Home offers what is essentially a take-it-or-leave-it agreement.... [It] retains the right to reconfigure the service area unilaterally. All contractors must furnish a FedEx Home-approved vehicle and FedEx Home-approved driver daily from Tuesday through Saturday; they do not have discretion not to provide delivery service on a given day. While all contractors control their starting times and take breaks when they wish, their control over their work schedule is*511 circumscribed by the requirement that all packages be delivered on the day of assignment____
... FedEx Home provides support to all its contractors in various ways that are inconsistent with independent contractor status.... FedEx Home provides extensive support to contractors by offering the Business Support Package and arranging for the required insurance, thus providing an array of required goods and services that would be far more difficult for contractors to arrange on their own.... FedEx Home also offers to arrange for approved substitute drivers for its contractors by virtue of the Time Off Program. FedEx Home provides contractors who maintain sufficient vehicle maintenance accounts with $100 per accounting period to help defray repair costs[, and] requires contractors to permit FedEx Home to pay certain vehicle-related taxes and fees on their behalf and to have the payments deducted from their settlement.
Regional Directorâs Decision at 34-37 (internal citations omitted). Many of these are the kind of facts that United Insurance, the Restatement, and numerous Circuit and Board decisions confirm are indicative of employee status.
My colleagues nonetheless reject the import of many of these facts, arguing that they merely âreflect differences in the type of service the contractors are providing rather than differences in the employment relationship.â Op. at 501. In particular, the court rejects the import of the following requirements imposed by FedEx: that drivers wear a recognizable uniform; that vehicles be of a particular color and size range; that trucks display the FedEx logo in a size larger than Department of Transportation regulations require; that drivers complete a driving course if they do not have prior training; that drivers submit to two customer service rides per year to audit their performance; and that a truck and driver be available for deliveries every Tuesday through Saturday. Id. The courts and the Board,
B
In accord with court and agency precedent, the Regional Director also considered whether FedEx Home Deliveryâs drivers have significant entrepreneurial opportunity for gain or loss. For the following reasons, she concluded that the evidence of entrepreneurial opportunity was weak:
The contractorsâ compensation package also supports employee status. With [one] exception ..., FedEx Home unilaterally establishes the rates of compensation for all contractors.... [T]here is little room for the contractors to influence their income through their own efforts or ingenuity, as their terminal manager determines, for the most part, how many deliveries they will make each day.... A contractorâs territory may be unilaterally reconfigured by FedEx Home. FedEx Home tries to insulate its contractors from loss to some degree by means of the vehicle availability payment, which they receive just for showing up, and the temporary core zone density payment, both of which payments guarantee contractors an income level predetermined by FedEx Home, irrespective of the contractorsâ personal initiative. FedEx Home also shields drivers from loss due to substantial increases in fuel prices by means of the fuel/mileage settlement.
Regional Directorâs Decision at 37.
Notwithstanding these findings, my colleagues perceive many âcharacteristics of entrepreneurial potentialâ in the driversâ relationship to FedEx. Op. at 498. Some of the characteristics they cite, however, appear to have little to do with entrepreneurial opportunity. For example, the courtâs opinion notes that FedExâs Standard Contractor Operating Agreement âspecifies the contractor is not an employee of FedEx for any purpose.â Id. at 498-99. But the label FedEx puts on its rela
My colleagues also observe that FedEx âmay not prescribe hours of work [or] whether or when the contractors take breaks,â and that the drivers âare not subject to reprimands or other discipline,â Op. at 498 â all of which go not to the workersâ entrepreneurial opportunity but to the extent of the employerâs control, a factor discussed in Part II.A above. In any event, although FedEx does not fix specific hours or break times, it does require its contractors to provide delivery services every day, Tuesday through Saturday, and to finish each dayâs deliveries by the end of the day. Regional Directorâs Decision at 17, 36.
In addition, my colleagues state that â[a]t least one contractor has negotiated with FedEx for higher fees.â Op. at 499. Without agreeing that a workerâs ability to negotiate his salary takes him out of the category of âemployee,â the Regional Director rightly regarded the only evidence on this point as quite weak: One former manager testified that one former driver âonce requested some customer service rides to gauge if his core zone payment was set properly, and the payment was raised as a result, although [the manager] was not sure by how much. There is no evidence that any other contractors at the Wilmington facilities have negotiated a change in their core zone payment.â Regional Directorâs Decision at 20.
Closer to the mark on the issue of entrepreneurial opportunity is the courtâs observation that drivers âare responsible for all the costs associated with operating and
My colleagues further note that, under the Operator Agreement, drivers âmay use the vehicles for other commercial or personal purposesâ when they are not in the service of FedEx, âso long as they remove or mask all FedEx Home logos and markings.â Op. at 498. But do the drivers actually use their trucks for other purposes? Not so much. Indeed, the most that can be said is that âsome do use them for personal uses like moving family members,â id., hardly an indicator of a â âsignificant entrepreneurial opportunity for gain or loss,â â id. at 497 (quoting Corporate Express, 292 F.3d at 780). Although the driversâ use of their trucks to conduct business independent of FedEx could well be an indicator of entrepreneurialism, the Regional Director found that âno current contractors at either Wilmington terminal have ever done so.â Regional Directorâs Decision at 35.
Based on these facts, the Regional Director found that the
âlack of pursuit of outside business activity appears to be less a reflection of entrepreneurial choice by the ... drivers and more a matter of the obstacles created by their relationship with [the Company.]â Thus, the contractorsâ contractual right to engage in outside business falls within the category of âentrepreneurial opportunities that they cannot realistically take,â because the contractorsâ work schedules prevent them from taking on additional business during their off-hours during the workweek.
Regional Directorâs Decision at 35 (quoting Roadway III, 326 N.L.R.B. at 851 & n. 36). That is at least a fair conclusion, and consequently one that we may not displace. See United Ins., 390 U.S. at 260, 88 S.Ct. 988.