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October 8, 2014

NLRB Finds FedEx Home Delivery Drivers Are Employees, Not Independent Contractors

On September 30, 2014, the National Labor Relations Board (“NLRB”) ruled that drivers who operate out of FedEx Home Delivery’s Connecticut terminal are employees covered under Section 2(3) of the National Labor Relations Act (the “Act”), and not independent contractors who are excluded from coverage. FedEx Home Delivery, 361 NLRB No. 55 (Sept. 30, 2014). In so holding, the NLRB reaffirmed its use of the multi-factor, common-law agency test. The NLRB explained that no factor in its test is dispositive, and rejected a recent decision of the U.S. Court of Appeals for the District of Columbia Circuit (the “D.C. Circuit”), that placed greater weight on the “significant entrepreneurial opportunity for gain or loss” than other factors in the common-law agency test.

The NLRB decided to hear the case after the D.C. Circuit vacated a prior NLRB Order in which the NLRB had found the FedEx drivers at another terminal to be employees. The D.C. Circuit held that those drivers, who performed the same jobs as the drivers at the Connecticut terminal, were independent contractors exempt from the Act. In reaching this determination, the Court observed that the standard for determining independent contractor status had changed its focus from the employer’s right to exercise control over the means and manner of the worker’s performance to the significant entrepreneurial opportunity for gain or loss. Although the D.C. Circuit applied the common-law agency test, it essentially treated the existence of significant entrepreneurial opportunity as dispositive.

The NLRB clarified its position that no one factor is determinative and that all of the incidents of the relationship must be assessed. The NLRB rejected the D.C. Circuit’s decision and explained that it has “never held that entrepreneurial opportunity, in and of itself, is sufficient to establish independent contractor status.”  The NLRB also explained that with respect to analysis of the entrepreneurial factor, the board should give weight “to actual, but not merely theoretical entrepreneurial opportunity” and it should evaluate the constraints imposed by a company on the individual’s ability to pursue this opportunity.

In determining whether an individual is an employee or independent contractor, the following non-exhaustive list of factors should be considered: 

  • The extent of control which, by the agreement, the master may exercise over the details of the work;
  • Whether or not the one employed is engaged in a distinct occupation or business;
  • The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision;
  • The skill required in the particular occupation;
  • Whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work;
  • The length of time for which the person is employed;
  • The method of payment, whether by the time or by the job;
  • Whether or not the work is part of the regular business of the employer;
  • Whether or not the parties believe they are creating the relation of master and servant;
  • Whether the principal is or is not in the business;
  • Whether the evidence tends to show that the individual is, in fact, rendering services as an independent business.

Take Away for Employers

The NLRB’s decision in FedEx Home Delivery indicates that it favors a broad definition of “employee.” This approach is consistent with the increasingly narrow interpretation of “independent contractor” used by various federal, state and local agencies, including the United States Department of Labor. FedEx is expected to appeal the NLRB’s decision to the D.C. Circuit and it remains to be seen whether the D.C. Circuit will vacate the NLRB’s Order in this case. However, as agencies and courts continue to closely scrutinize employee vs. independent contractor classifications, employers must carefully evaluate all of the relevant factors in determining whether to classify an individual as an employee or an independent contractor.

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Please do not hesitate to contact us should you have any questions concerning classifying individuals as employees vs. independent contractors.