Federal Express (“FedEx”) “single-route” drivers are independent contractors, not employees, the D.C. Circuit Court of Appeals held this month, reversing a 2014 National Labor Relations Board (“NLRB”) decision. The Court of Appeals decision, FedEx Home Delivery v. NLRB, Nos. 14 1196, et al. (D.C. Cir. Mar. 3, 2017) (“FedEx II”), blocked several Teamster locals’ attempts to organize the FedEx drivers and reaffirmed a 2009 D.C. Circuit decision (“FedEx I”) that also held that FedEx drivers were independent contractors, not employees. The Labor-Management Relations Act (the “LMRA”) specifically exempts independent contractors from the definition of “employees” who may vote to recognize a union and force an employer to negotiate a collective bargaining agreement.
FedEx argued that the D.C. Circuit’s FedEx I decision in 2009 required reversal of the NLRB’s 2014 ruling that FedEx drivers were employees, not independent contractors, because independent contractors have no right to organize and no right to union representation under the LMRA. The D.C. Circuit emphatically agreed:
It is as clear as clear can be that “the same issue presented in a later case in the same court should lead to the same result.” Doubly so when the parties are the same.
FedEx II, slip op. at 8 (emphasis and citations omitted). The D.C. Circuit said that the NLRB was simply seeking to “nullify this court’s decision in FedEx I.” Id.
Single-route FedEx drivers are assigned to and drive a single route for FedEx. In recent years, FedEx has moved away from the single-route model and encouraged its contractors to hire multiple drivers, so that the contractors, not FedEx, would be the employers of the drivers. Most analysts consider the single-route driver to be the more difficult business model, established as an independent contractor relationship rather than as an employer-employee relationship, when litigating with the NLRB.
The D.C. Circuit Court applied the same common-law test of independent contractors that it did in 2009, emphasizing the entrepreneurial aspects of the relationship between the independent contractor drivers and FedEx. Under this test, the NLRB emphasizes the independent contractor’s opportunity to either make or lose money based on its contractual relationship with FedEx.
Although the D.C. Circuit decisions are clearly favorable to those businesses attempting to use independent contractors instead of employees, it is questionable whether FedEx II will have any application outside the NLRB and its enforcement of the LMRA. For example, the U.S. Department of Labor (the “DOL”) and Washington and Oregon state courts use the economic-reality test to determine whether someone is an employee or an independent contractor for purposes of overtime, meal and rest breaks, and other wage-and-hour regulations. The economic-reality test is more favorable to those drivers and other workers seeking to convert an independent contractor relationship into an employer-employee relationship. The DOL readily acknowledges on its website the confusing regulatory environment for businesses seeking to establish and maintain independent contractor relationships. “Even if you are a legitimate independent contractor under one law, you may still be an employee under other laws,” the DOL cautions.
Although the Trump Administration is in the process of rewriting federal regulatory agencies’ websites and revoking DOL and other agency regulations, employers in Washington and Oregon still need to worry about lawsuits challenging whether their independent contractors are actually employees under state law and should be paid minimum wage and overtime under state law for all hours worked in excess of 40 in any given week. There is no indication that the Bureau of Labor & Industries in Oregon, the Department of Labor and Industries in Washington, or state courts in Oregon and Washington are going to drop the economic-reality test for the entrepreneurial, common-law test that FedEx has used to reverse the NLRB twice in eight years to resist union-organizing campaigns.
The five-seat NLRB currently has a 2-1 majority of Democratic board members with two vacant seats. The Trump Administration is widely reported to have a short list of three potential NLRB candidates from which two Republican nominees could be submitted to the Senate for approval. As of the date of this e flash, however, President Donald Trump has yet to nominate anyone to fill the two vacancies that would give Republicans a majority on the NLRB.