JeremyRosenJohnQuieroGuest Commentary

By Jeremy B. Rosen, John F. Querio, and Lacey L. Estudillo, Horvitz & Levy LLP*

The National Labor Relations Act guarantees private-sector employees the right to organize, form unions, and bargain collectively with their employers.  In 1947, Congress amended the NLRA to expressly exclude independent contractors from the Act’s definition of employee.

In NLRB v. United Insurance Company of America, the US Supreme Court stressed that “there is no shorthand formula or magic phrase that can be applied to find the answer” to whether someone is an employee or independent contractor.  Rather, “all of the incidents of the relationship must be assessed and weighed with no one factor being decisive.”  Following United Insurance, the United States Court of Appeals for the District of Columbia Circuit and the National Labor Relations Board—the agency charged with enforcing the NLRA—have applied a non-exhaustive, ten-factor test utilizing common-law agency principles to determine whether a worker is properly classified as an employee or independent contractor: (1) the extent of control the employer has over the work; (2) whether the worker is engaged in a distinct occupation or business; (3) whether the kind of occupation is usually done under the direction of the employer or by a specialist without supervision; (4) what level of skill is required in the particular occupation; (5) whether the employer or worker supplies the instrumentalities, tools, and the place of work; (6) length of employment; (7) whether the employer pays by the time or by the job; (8) whether the work is part of the employer’s regular business; (9) whether the employer and worker believe they are creating an employer-employee relationship; and (10) whether the hiring party is in business.

On April 21, 2009, the DC Circuit issued its opinion in FedEx Home Delivery v. NLRB (FedEx I), reversing a Board decision that single-route contractors providing delivery service for FedEx out of its Wilmington, Massachusetts facilities were employees, not independent contractors.  The court explained how the Board’s application of the common-law agency test had changed over time—initially, the Board had focused on “‘an employer’s right to exercise control’ over the workers’ performance of their jobs” but in recent years placed emphasis on what the court described “as a more accurate proxy: whether the ‘putative independent contractors have significant entrepreneurial opportunity for gain or loss.’”

The court turned then to the facts of the case, asking “whether the [drivers’] position presents the opportunities and risks inherent in entrepreneurialism.”  In particular, the court noted that the drivers appeared to be independent contractors because (1) drivers owned their own vehicles, which could be used for non-FedEx purposes so long as they removed or masked all FedEx Home logos and markings on the truck; (2) FedEx allowed drivers to incorporate independently, serve single or multiple routes, and hire their own employees; and, most importantly, (3) drivers had “entrepreneurial opportunity” in that they could sell or otherwise assign their routes without FedEx’s permission.  The court also found that the constraints that FedEx imposed on drivers—such as FedEx’s uniform, personal grooming, availability, and insurance requirements—were driven by “customer demands and government regulations,” and thus were insufficient to demonstrate an employment relationship.  Because the indicia of independent contractor status “clearly outweighed” the factors that would support employee status, the court held that all the Wilmington FedEx drivers were independent contractors beyond the statutory jurisdiction of the Board.

Three years later, the Board issued a revised decision refusing to adopt FedEx I’s interpretation of the NLRA.  The Board disagreed with FedEx I’s treatment of “entrepreneurial opportunity” as an “animating principle” for determining whether a worker is an employee or independent contractor under the Act.  The Board held that entrepreneurial opportunity should merely be one “part of a broader factor that asks whether [a] putative independent contractor is, in fact, rendering services as part of an independent business.”  The Board reasoned that the “independent-business factor” should not receive special weight in the overall common-law agency analysis.  Applying its revised independent-contractor test, the Board concluded that single-route drivers based at FedEx’s Hartford facilities were employees under the Act.  FedEx filed a petition for review challenging the Board’s decision.

On March 3, 2017, the DC Circuit reversed the NLRB, again holding  that single-route FedEx drivers, this time based at the company’s Hartford, Connecticut terminal, are independent contractors under the NLRA.  FedEx Home Delivery v. NLRB (FedEx II).  Judge Millett, joined by Judges Kavanaugh and Henderson, emphasized that the matter was “asked and answered in FedEx I” because the case involved the same parties, virtually identical facts, and presented the same legal question.  The court explained that under its law-of-the-circuit doctrine, “the same issue presented in a later case in the same court should lead to the same result.”  The court noted that the Board—having chosen not to seek Supreme Court review in FedEx I—could not “effectively nullify th[e] court’s decision in FedEx I by asking a second panel of th[e] court to apply the same law to the same material facts but give a different answer.”

The court concluded that because the question of whether a worker is an employee or independent contractor under the NLRA is “a question of ‘pure’ common law agency principles ‘involv[ing] no special expertise that a court does not possess,’” Chevron deference to the Board’s views was neither appropriate nor required. The court likewise held the Board was not entitled to the deference that would be due “between two fairly conflicting views,” because the court had previously considered and decided the issue in FedEx I.  Accordingly, the court granted FedEx’s petition for review, vacated the Board’s order, and denied the Board’s cross-application for enforcement.

Because the DC Circuit plays a significant role in the development of labor law and has concurrent jurisdiction to review every Board order, this decision will likely influence other federal and state courts facing the same employee vs. independent contractor question under the NLRA.

*Jeremy B. Rosen and John F. Querio are Partners at Horvitz & Levy LLP in Burbank, CA, where Lacey L. Estudillo is an Appellate Fellow.