This Employment Law This Week® Monthly Rundown discusses the most important developments for employers in July 2019. Both the video and the extended audio podcast are now available.

This episode includes:

  • State Legislation Heats Up
  • NLRB Overturns Another Long-Standing Precedent
  • SCOTUS October Term 2018 Wraps Up
  • Tip of the Week: How inclusion and trust can increase innovation in the workplace

See below to watch the full episode – click here for story details, the video, and the extended audio podcast.

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Last Friday, the National Labor Relations Board (“NLRB”) in UPMC overturned 38-year old precedent and held that employers may lawfully prohibit non-employee union solicitation in public spaces on their property absent evidence of discriminatory enforcement. This ruling may seem like common sense to many as employers have long been permitted to control what types of activities occur on their private property in other contexts.  However, for the past four decades, the NLRB has compelled employers to allow non-employee union organizers to engage in non-disruptive solicitation in areas, such as cafeterias and restaurants, where the Employer had opened its private property to the public.  The NLRB’s ruling in UPMC ends this compelled acquiesce and affirms employers’ property rights.

Although labor organizations will undoubtedly decry this decision as an unjustified departure from precedent, the holding in UPMC merely conforms Board law to Supreme Court precedent and eliminates an intrusion to employer property rights that has long been widely criticized and soundly rejected by federal courts.

The Facts in UPMC.  

In UPMC, security officers removed two nonemployee union representatives from the cafeteria at the University of Pittsburg Medical Center Presbyterian Shadyside.  At the time they were removed, the nonemployee union representatives were sitting at tables on which union pins and flyers were displayed and were discussing union organizational matters with employees.    Security informed the union representatives that the cafeteria was only for the use of patients, their families and visitors, and employees.  In response, the union representatives pointed out that there was at least one other nonemployee in the cafeteria waiting to eat lunch with a friend who worked at the Medical Center.  However, security did not remove that patron.

The NLRB Realigns the Standard with Supreme Court Precedent.

In NLRB v. Babcock & Wilcox Co., 351 U.S. 105 (1956), the United States Supreme Court held that an employer may deny access to its property by nonemployee union organizers, absent two limited exceptions: (1) inaccessibility (i.e., company towns and other situations where employees are largely otherwise secluded) and (2) activity-based discrimination (i.e., treating unions differently from other third parties engaged in similar activities).  The Board noted that the Supreme Court viewed both exceptions narrowly and imposed a heavy burden on the party attempting to establish either one.

However, in deciding cases in which union organizers sought access to a portion of private property open to the public, the Board created an additional exception that effectively disregarded Babcock’s limited exceptions to the general rule restricting nonemployee access.  Specifically, in Ameron Automotive Centers, 265 NLRB 511, 512 (1982), the Board stated that where an employer has opened up its property the “Babcock & Wilcox criteria need not be met, since nonemployees cannot in any event lawfully be barred from patronizing the restaurant as a general member of the public.”

This third Board-created exception, referred to as the “public space” exception, found discrimination based solely on the fact that nonemployee union organizers were denied access to areas of an employer’s private property where the employer has arguably permitted the public general access.  Under this exception, the Board did not consider “whether the employer permitted any other nonemployees to engage in the same solicitation or promotional activities engaged in by the union.”

As noted, federal courts, including the 4th, 6th, and 8th Circuits, soundly rejected this additional exception created in Ameron Automotive Centers. 

Accordingly, relying on Babcock and its progeny, the current Board has now overruled Ameron Automotive Centers and any decision which permitted nonemployee union solicitation based on the “public space” exception, explaining that to allow such an exception, absent inaccessibility or activity-based discrimination, was “irreconcilable with well-established Supreme Court precedent” as set forth in Babcock.  Importantly, the Board specifically noted:

[A]n employer does not have a duty to allow the use of its facility by nonemployees for promotional or organizational activity. The fact that a cafeteria located on the employer’s private property is open to the public does not mean that an employer must allow any nonemployee access for any purpose.

The Board further ruled that this new standard will be applied retroactively.

The Medical Center Was Within Its Rights to Eject the Nonemployee Union Organizers.

In applying this standard to the facts of the case, the Board held that there was no violation “because there is no evidence that the Respondent permitted any solicitation or promotional activity in its cafeteria.”  In fact, the employer had a practice of removing all nonemployees engaged in promotional or solicitation activities in or near the cafeteria.

Moreover, the Board rejected the argument that discrimination occurred because there was another nonemployee present in the cafeteria that day who was not ejected.  The Board reasoned that this individual was using the cafeteria consistent with the purposes authorized by the Medical Center, i.e., to eat lunch.  By contrast, the nonemployee union organizers sought to use the cafeteria in a manner that went well beyond eating lunch with friends.  Thus, they were rightfully ejected while the friend of the employee was permitted to remain.

Applying this Standard Moving Forward.

The core holding in UPMC recognizes employers’ property rights and employers’ rights to determine the use of their property.  Specifically, UPMC recognizes that an employer can invite members of the public to patronize its facilities or even rest or congregate in open spaces on the private property, such as tables and benches, without forfeiting its right to prohibit solicitation and other antagonistic activities.

Under UPMC, employers are no longer required to allow nonemployee union solicitation in areas of their property just because these areas are open to the public.  Rather, an employer can now prohibit such activities on its property without fear of violating the Act “so long as it applies the practice in a nondiscriminatory manner by prohibiting other nonemployees from engaging in similar activity.”  In other words, employers are again in control of what activities may take place in their own facilities.

In light of UPMC, employers should review their policies on access, solicitation, and distribution with labor counsel to ensure they are providing the desired protections.

In its new podcast series, Employment Law This Week has released an extended Monthly Rundown, discussing some of the most important developments for employers in June 2019.

This episode includes:

  • Worker Classification in the Gig Economy
  • NLRB Announces Rulemaking Agenda
  • National Backlash Builds Against Non-Compete Agreements
  • Tip of the Week: Compliance with New Jersey’s Equal Pay Act

Stay tuned: Listen to the latest episode on our website or on your preferred platform – iTunes, Google Play, Soundcloud, or Spotify – be sure to subscribe!

The rulemaking priorities of the National Labor Relations Board (“NLRB” or “Board”) have been released, signaling what Board Chairman John F. Ring described as “the Board majority’s strong interest in continued rulemaking.” The announcement was contained in the Unified Agenda of Federal Regulatory and Deregulatory Actions, published by the Office of Management and Budget’s Office of Information and Regulatory Affairs.

Issues Identified by the Board for Further Rulemaking

The Board majority has identified the following as areas in which it intends to engage in additional rulemaking:

  • The Board’s current representation-case procedures.
  • The Board’s current standards for blocking charges, voluntary recognition, and the formation of Section 9(a) bargaining relationships in the construction industry.
  • The standard for determining whether students who perform services at private colleges or universities in connection with their studies [including student athletes on a scholarship] are “employees” within the meaning of Section 2(3) of the National Labor Relations Act (29 U.S.C. Sec. 153(3)).
  • Standards for access to an employer’s private property.

The Board noted that, in addition to these areas, it is “proceeding with its rulemaking regarding the joint-employer standard.”

Notably, each of the identified issues is one that the current Board majority has identified as an area in which it questions Obama-era Board rulemaking (in the case of representation case and election procedures) or Board decisions that have been seen as advancing the agenda of organized labor and its supporters.

The Board’s Representation Election Rules

One of the Obama Board’s most controversial actions was its own exercise in rulemaking, which resulted in the 2015 implementation of expedited election rules that not only reduced the average time between the filing of a representation petition and the holding of a vote from approximately 45 days to something in the 25-day range, but also limited employer rights to resolve legal issues at a pre-election hearing and increased union rights to information about employees at an earlier stage.

In December 2107, the then-new Republican majority announced that it was seeking comment from interested parties concerning the impact of the changes in the representation case rules that took effect two years earlier. Specifically, the Board posed three question in its Request for Comments:

  • Should the 2014 Election Rule be retained without change?
  • Should the 2014 Election Rule be retained with modifications? (If so, what should be modified?)
  • Should the 2014 Election Rule be rescinded? (If so, should the Board revert to the Election Regulations that were in effect prior to the 2014 Election Rule’s adoption, or should the Board make changes to the prior Election Regulations? If the Board should make changes to the prior Election Regulations, what should be changed?)

In explaining its decision to issue the Request for Comments, the Board majority made clear that it is seeking the views of all interested parties, including labor and management, those in government and the Board’s General Counsel. The Board has also made clear that while it is possible that it may engage in rulemaking to further amend the election rules and procedures, it may maintain the 2014 Election Rules without change, noting that “the Board merely poses three questions, two of which contemplate the possible retention of the 2014 Election Rule.”

While the Board has not yet released the results of its Request for Comments, it is likely that they will be reflected in any new proposed rulemaking in connection with the processing of representation petitions and the holding of elections.

The “Blocking Charge Rule”

The Blocking Charge Rule, which holds that in many circumstances the Board will not conduct a representation election while there are pending unfair labor practice (“ULP”) charges, is another area in which members of the current Board majority indicated an interest in changing and is also identified in the Rulemaking Agenda.

Under the Board’s 2014 Amended Election Rules, the NLRB holds that, when a ULP charge is filed during the pendency of a representation petition, the Board will not conduct the election if the party that has filed the charge—typically the petitioning union or, in the case of a decertification petition, the incumbent union facing a vote to decertify it as the representative—asks that the election be deferred until after the charges are resolved, provided that the charges allege actions by the employer that the union claims prevent or interfere with a fair election. Many observers believe that such blocking charges are used tactically by unions that are concerned that they will face defeat at the polls.

Section 103.20 of the final rule requires that a party wishing to block processing of the petition must file a request to block and simultaneously file a written offer of proof in support of its unfair labor practice charge. If the Region believes the charge precludes a question concerning representation and no request is filed, the Region may ask the Charging Party if they wish to request to block. If so, the Charging Party should be informed that they must file a request to block and an offer of proof, including the names of witnesses who will testify in support of the charge and a summary of each witness’s anticipated testimony. In addition, the Charging Party must promptly make the witnesses available to the Region.

In December 2017, in two decisions, one unpublished, Board Members Kaplan and Emanuel, who both participated in the Rulemaking Agenda, indicated that they believed that the Board should reexamine the Blocking Charge Rule.

The Board Intends to Engage in Rulemaking on the Issue of Whether Graduate Teaching Assistants Are Employees for Purposes of the Act

Another legacy of the Obama Board that the Rulemaking Agenda indicates is likely to be reversed is the Board’s holding in Columbia University that graduate teaching assistants and research assistants are employees under the National Labor Relations Act (“Act”), with the rights to organize and engage in collective bargaining.

In deciding Columbia University, the Board jettisoned its 2004 decision in Brown University in which graduate teaching assistants were held not to be employees for purposes of the Act. The Columbia University majority concluded that the Brown University majority “failed to acknowledge that the Act does not speak directly to the issue posed here, which calls on the Board to interpret the language of the statute in light of its policies.” The Columbia University majority noted that “the Brown University decision, in turn, deprived an entire category of workers of the protection of the Act, without a convincing justification in either the statutory language of the Act or the policies of the Act.”

The Agenda Suggests the Board Will Likely Increase Its Use of Its Rulemaking Authority

Commenting on the Rulemaking Agenda, Chairman Ring noted, “Addressing these important topics through rulemaking allows the Board to consider and issue guidance in a clear and more comprehensive manner.”

The Division of Advice of the National Labor Relations Board (“NLRB” or “Board”), in an Advice Memorandum, dated April 16, 2019 (“Advice Memo”),[1] has concluded that “drivers providing personal transportation services” using Uber Technologies Inc.’s “app-based ride-share platforms” were independent contractors and not employees, as the drivers had alleged in a series of unfair labor practice charges filed in 2014, 2015, and 2016. Based on the Division of Advice’s analysis of the relationship between Uber and the drivers, the General Counsel’s office directed that the Regional Directors in San Francisco, Chicago, and Brooklyn dismiss the charges.

Other Recent Developments 

Given recent pronouncements from the NLRB in decisions such as SuperShuttle DFW, Inc. (367 NLRB N0. 75, January 25, 2019), and the recently released U.S. Department of Labor (“DOL”) Opinion Letter, in which the Board and the DOL have found similar types of gig-economy workers to be independent contractors and not employees, the Advice Memo should not come as a surprise to those who follow developments in this area. In fact, the Advice Memo expressly states that the Division of Advice’s conclusion that drivers using the app are not employees and thus not entitled to the right to unionize or the other protections of the National Labor Relations Act (“Act”) is based on “the common-law agency test as explicated in SuperShuttle DFW, Inc.” As noted in the Advice Memo, the Act’s definition of the term “Employees” explicitly excludes independent contractors. See 29 U.S.C. Section 152(3).

The Board Will Continue to Rely Upon the Restatement (Second) of Agency

 While noting that the Board and the General Counsel will continue to apply these tests for distinguishing between employees and independent contractors, the Advice Memo includes a summary of the “ten nonexhaustive factors enumerated in the Restatement (Second) of Agency” that the Board relies upon:

  • 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 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 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 business.

The Advice Memo notes that the analysis of these factors is qualitative and not “strictly quantitative” and that there is “no shorthand formula.” It also notes that the Board considers the questions of whether the worker is assuming “the opportunities and risks inherent in entrepreneurialism” with such factors likely to lead to a finding of independent contractor status.

What This Means for Businesses

The NLRB, like the DOL, will continue to place great emphasis on whether an individual is taking risk in return for potential gain, finding that this is more consistent with an independent contractor relationship than an employer-employee relationship. However, the Advice Memo indicates that the NLRB will continue to assess each situation based on its own unique facts.

________________

[1] The Advice Memo notes that the Division of Advice’s analysis and conclusions are based on Uber’s “operations and policies” as in effect during the period February 27, 2015, and August 11, 2016, which includes the dates the unfair labor practice charges were filed and the six-month statute of limitations period preceding the filing of the first charge. The Advice Memo also notes that “some current terms” for drivers may now differ from those in effect during that period.

On April 29, 2019, the U.S. Department of Labor (“DOL”) issued an opinion letter concluding that workers providing services to customers referred to them through an unidentified virtual marketplace are properly classified as independent contractors under the Fair Labor Standards Act (“FLSA”).

Although the opinion letter is not “binding” authority, the DOL’s guidance should provide support to gig economy businesses defending against claims of independent contractor misclassification under the FLSA. The opinion letter may also be of value to businesses facing other kinds of claims from gig economy workers that are predicated on employee status, such as organizing for collective bargaining purposes.

Overview

An unidentified “virtual marketplace company” – defined by the DOL to include an “online and/or smartphone-based referral service that connects service providers to end-market consumers to provide a wide variety of services, such as transportation, delivery, shopping, moving, cleaning, plumbing, painting, and household services” – requested an opinion on whether service providers who utilize the company’s platform to connect with customers are employees or independent contractors under the FLSA.

To answer this question, the DOL analyzed whether, and to what extent, the service providers are “economically dependent” upon the company. Applying what is commonly referred to as the “economic realities test,” the DOL considered the following six factors:

  1. the nature and degree of the putative employer’s control;
  2. the permanency of the relationship;
  3. the level of the worker’s investment in facilities, equipment, or helpers;
  4. the amount of skill, initiative, judgment, or foresight needed;
  5. the worker’s opportunity for profit and loss; and
  6. the extent to which the worker’s services are integrated into the putative employer’s business.

The DOL noted that because status determinations depend upon the “circumstances of the whole activity,” it could not “simply count[] factors” when evaluating the service providers’ independent contractor status. Instead, it needed to weigh the relevant factors to determine whether the service providers are in business for themselves, or economically dependent on the company.

The DOL’s Analysis

The DOL began its analysis by explaining that because the service providers work for customers – and not the virtual marketplace, or the company that maintains it – it was “inherently difficult to conceptualize the service providers’ ‘working relationship’” with the company. The DOL then applied the factors listed above, finding that each weighed in favor of independent contractor status.

  • Control. The DOL determined that the “control” factor weighed heavily in favor of independent contractor status. In reaching this conclusion, the DOL noted that the service providers – who have the right to accept, reject, or ignore any opportunity offered to them through the platform – control “if, when, where, how, and for whom they will work,” and are not required to complete a minimum number of jobs in order to maintain access to the platform. The DOL also pointed to the service providers’ freedom to work for competitors, and to simultaneously use competing platforms when looking for work. Finally, the DOL found that the service providers are subject to minimal, if any, supervision. Although customers have the ability to rate the service providers’ performance, the company does not inspect the service providers’ work or rate their performance, or otherwise monitor, supervise, or control the details of their work.
  • Permanence. The DOL found that the lack of permanence in the parties’ relationship weighed strongly in favor of independent contractor status because: (i) the service providers have a “high degree of freedom to exit” the relationship; (ii) the service providers are not restricted from “interacting with competitors” during the course of the parties’ relationship (or after the relationship ends); and (iii) even if the service providers maintain a “lengthy working relationship” with the company, they do so only on a “project-by-project” basis.
  • Investment. The DOL next concluded that the level of investment favored independent contractor status, reasoning that although the company invests in its platform, it does not invest in facilities, equipment, or helpers on behalf of the service providers, who are responsible for all costs associated with the “necessary resources for their work.”
  • Skill and Initiative. Although the company did not disclose the specific types of services available to customers through the platform, the DOL concluded that the level of skill and initiative needed to perform the work supported independent contractor status. Regardless of the specific types of work they perform, the service providers “choose between different service opportunities and competing virtual platforms,” “exercise managerial discretion in order to maximize their profits,” and do not receive training from the company.
  • Opportunity for Profit and Loss. The DOL found that although the company sets default prices, the service providers control the major determinants of profit and loss because they are able to select among different jobs with different prices, accept as many jobs as they see fit, and negotiate with customers over pricing. The DOL also found that the service providers can “further control their profit or loss” by “toggling back and forth between” competing platforms, and determining whether to cancel an accepted job (and incur a cancellation fee) if they find a more lucrative opportunity.
  • Integration. The DOL concluded that the service providers are not integrated into the company’s business operations because: (i) the service providers do not develop, maintain, or operate the company’s platform; (ii) the company’s business operations effectively terminate at the point of connecting service providers to consumers; and (iii) the company’s “primary purpose” is to provide a referral system to connect service providers with consumers in need of services – not to provide any of those services itself.

The DOL found that these facts “demonstrate economic independence, rather than economic dependence,” and concluded that the service providers are independent contractors under the FLSA.

Takeaways

As noted by the DOL, determining “[w]hether a worker is economically dependent on a potential employer is a fact-specific inquiry that is individualized to each worker.” In addition, the tests for determining independent contractor status vary by statute, and by jurisdiction. Accordingly, agencies in some jurisdictions, including in states that apply the “ABC test” to determine independent contractor status in certain contexts, such as California and New Jersey, may disregard the opinion letter. Indeed, the New Jersey Labor Commissioner recently issued a statement indicating that the opinion letter “has zero effect on how the New Jersey Department of Labor enforces state laws … [because] the statutory three-part test for independent contractor status [in New Jersey] … is distinct from and much more rigorous than the standard referenced in the opinion letter.” Nevertheless, the opinion letter should provide support to gig economy businesses defending against claims of independent contractor misclassification under the FLSA, and in jurisdictions that apply tests that overlap with the FLSA’s economic realities test.

The opinion letter may also be of value to businesses facing other kinds of claims from gig economy workers that are predicated on employee status, such as organizing for collective bargaining purposes. Earlier this year, the National Labor Relations Board (“NLRB” or “Board”) adopted a new test to be used in distinguishing between “employees,” who have rights under the National Labor Relations Act (“NLRA” or “Act”) and independent contractors who do not. In its January 25, 2019 decision in SuperShuttle DFW, Inc., 367 NLRB No.75 (2019) the Board rejected the test adopted in 2014 in FedEx Home Delivery, 361 NLRB 610 (2014) and returned to the common-law test, finding that the test adopted in FedEx minimized the significance of a worker’s entrepreneurial opportunity.

SuperShuttle involved a union petition for an election among a group of franchisees operating SuperShuttle airport vans at Dallas-Fort Worth Airport. In response to the petition, SuperShuttle, the franchisor, argued that the franchisees who were seeking representation were not employees but rather independent contractors and as such were not entitled to vote in an NLRB election or to exercise the rights granted to employees, but not independent contractors, under the Act. The Board found that the franchisees’ leasing or ownership of their work vans, their method of compensation, and their nearly unfettered control over their daily work schedules and working conditions provided the franchisees with significant entrepreneurial opportunity for economic gain. These factors, along with the absence of supervision and the parties’ understanding that the franchisees are independent contractors, resulted in the Board’s finding that the franchisees are not employees under the Act. While the tests for determining independent contractor status under the NLRA and FLSA differ, both the Board’s decision in SuperShuttle and the DOL’s opinion letter emphasize similar themes, including the significance of a worker’s economic opportunity and discretion.

Our colleague Steven Swirsky is featured on Employment Law This Week – DOL Proposes New Joint-Employer Rule speaking on the recent Department of Labor (DOL) ruling regarding joint-employers status under the Fair Labor Standards Act while the The National Labor Relations Board’s (NLRB) joint-employment rule proposed in September 2018 is still pending.

Watch the interview below.

My colleagues and I have posted on Epstein Becker & Green, P.C.’s  Hospitality Labor and Employment Law blog concerning the U.S. Department of Labor’s Proposed New Rule to Determine Joint Employer Status under the Fair Labor Standards Act.  In its proposed new rule, the DOL notes that the National Labor Relations Board is also engaged in rulemaking to set new standards for determining joint employer status under the National Labor Relations Act.  Our blog post discusses the similarities and differences between the two proposed rules.

Following is an excerpt:

In the first meaningful revision of its joint employer regulations in over 60 years, on Monday, April 1, 2019 the Department of Labor (“DOL”) proposed a new rule establishing a four-part test to determine whether a person or company will be deemed to be the joint employer of persons employed by another employer. Joint employer status confers joint and several liability with the primary employer and any other joint employers for all wages due to the employee under the Fair Labor Standards Act (“FLSA”), and it’s often a point of dispute when an employee lodges claims for unpaid wages or overtime.

Under current DOL regulations, two or more employers acting entirely independently of each other may be deemed joint employers if they are “not completely disassociated” with respect to the employment of an employee who performs work for more than one employer in a workweek. In its proposal – a sharp departure from earlier Obama-era proposals to broaden the test for determining joint employer status to one based on economic realities – the DOL seeks to abandon the “not completely disassociated” test and has proposed to replace it with a four-part balancing test derived from Bonnette v. California Health & Welfare Agency, a 1983 decision by the Ninth Circuit Court of Appeals. …

Read the full post here.

Since 2015, employers have faced continued uncertainty regarding which standard the National Labor Relations Board (“NLRB” or the “Board”) will apply when determining joint-employer status under the National Labor Relations Act (“NLRA”). Businesses utilizing contractors and staffing firms or operating in partnering arrangements, as well as those engaged in providing temporaries and other contingent workers, have faced a moving target before the Board when it comes to potential responsibility in union recognition, bargaining obligations, and unfair labor practice cases.

We’ve previously reported on the somewhat tortured history of the evolving joint-employer standard, which the Board first significantly revised in 2015 in Browning-Ferris Industries, 362 NLRB No. 186. In that decision, the Board held that an employer which merely possesses the authority to control the terms and conditions of employment, either directly or indirectly, and even when that authority is not exercised, may nonetheless be a joint-employer under the NLRA.

In 2017, following a shift in the composition of the Board to a majority of Republican appointees, the Board discarded the Browning-Ferris standard in its decision in Hy-Brand Industrial Contractors Ltd. and Brandt Construction Co., and returned to its prior test for determining joint-employer status. Under Hy-Brand, the Board reverted to a test based on the common law, which required a putative joint-employer to possess “direct and immediate” control over the essential terms and conditions of employment of employees of another business, and actually exercise joint control, rather than simply reserve the right to exercise such control.

The return to the traditional joint-employer test, however, was short-lived. In 2018, the Board vacated its decision in Hy-Brand due to a finding by the Board’s Designated Agency Ethics Official that Member William Emanuel should have been disqualified from participating in the Hy-Brand decision because of potential conflict-of-interest concerns. As a result of the decision to vacate Hy-Brand, the Board once again returned to the Browning-Ferris standard for determining joint-employer status, which remains the applicable legal standard at this time.

However, the joint-employer roller coaster continued to roll when the Board published a notice of proposed rulemaking regarding the standard for determining joint-employer status on September 14, 2018. The proposed rule would again reverse the Browning-Ferris decision and provide that employers will only be considered joint-employers where the putative employer possesses and exercises “substantial direct and immediate control over the essential terms and conditions of employment of another employer’s employees in a manner that is not limited and routine.” The Board received a large number of submissions in the public comment period, resulting in three extensions of the time for the submission of comments regarding the proposed rule to accommodate the overwhelming response.

After the conclusion of the public comment period, Representatives Bobby Scott and Frederica Wilson issued a letter to Board Chairman John Ring regarding what the Representatives perceived was an inappropriate method for internally reviewing the nearly 29,000 public comments the Board received in response to the proposed rule. In particular, Representatives Scott and Wilson raised concerns that the Board was freezing out agency professional staff in the review process by outsourcing the substantive review of public comments to private contractors, and that such outsourcing raised potential conflict-of-interest concerns.

On March 22, 2019, Chairman Ring submitted a response back to Representatives Scott and Wilson regarding the Board’s process for reviewing the public comments received in response to the proposed joint-employer rule. In the response, Chairman Ring agreed that outsourcing substantive review of public comments could create the appearance of conflicts of interest, but stated that the Representatives were “misinformed” about the Board’s review process.

Ring clarified that the Board was utilizing a temporary employment agency contracted through the General Service Administration’s bid process, and that the temporary employees’ work would be limited to sorting and coding the public comments for later substantive review by the Board’s staff. Countering the lawmakers’ suggestion of Board impropriety, Chairman Ring stated that the Board took due consideration of all conflict-of-interest issues in the bid process for contracting out the work. The response further emphasized the routine nature of federal agencies contracting out such coding and sorting work, and the inefficient use of resources that utilizing the Board’s attorneys to perform ministerial document-processing work would entail. Lastly, Ring noted that the Board previously shared the decision to contract out the initial sorting work to its staff and received no negative reaction to the announcement.

As has been the case each step of the way, the joint-employer saga has evoked impassioned responses from both management and labor alike. There is little doubt the Board’s final joint-employer rule will elicit anything less. Stay tuned for the next chapter when the Board publishes its final rule in the coming weeks.

In a three to one decision issued on January 25, 2019, the National Labor Relations Board (“NLRB” or the “Board”) in SuperShuttle DFW, Inc., 367 NLRB No.75 (2019), the Board announced it was rejecting the test adopted in 2014 in FedEx Home Delivery, 361 NLRB 610 (2014) for determining whether a worker was an employee or an independent contractor and returning to the test it used prior to the FedEx Home decision.

As the decision in SuperShuttle makes clear, the determination of whether a worker is an employee entitled to the protections of the National Labor Relations Act (the “Act”), or an independent contractor will continue to be based on a case by case examination of the specific facts. Under Section 2(3) of Act, only employees and not independent contractors are entitled to the Act’s protections.

SuperShuttle involved a union petition for an election among a group of franchisees operating SuperShuttle airport vans at Dallas-Fort Worth Airport. In response to the petition, SuperShuttle, the franchisor, argued that the franchisees who were seeking representation were not employees but rather independent contractors and as such were not entitled to vote in an NLRB election or to exercise the rights granted to employees, but not independent contractors, under the Act.

The Board’s Acting Regional Director (“ARD”) based on the facts of the case, found that the franchisees were independent contractors and not employees, and dismissed the petition. The petitioner, Amalgamated Transit Union Local 338, appealed the ARD’s decision, arguing that based on the degree of control exercised by the franchisor’s operations and terms and conditions, they were employees and not independent contractors.

As the Board explained in its Press Release, the decision to affirm the ARD’s conclusion that the drivers in the case were not employees turned on the facts of their franchise agreements with SuperShuttle:

The Board found that the franchisees’ leasing or ownership of their work vans, their method of compensation, and their nearly unfettered control over their daily work schedules and working conditions provided the franchisees with significant entrepreneurial opportunity for economic gain. These factors, along with the absence of supervision and the parties’ understanding that the franchisees are independent contractors, resulted in the Board’s finding that the franchisees are not employees under the Act. The decision affirms the Acting Regional Director’s finding that the franchisees are independent contractors.

The Board Returns to its pre-2014 Standards for Distinguishing between Employees and Independent Contractors

 As the majority in SuperShuttle DFW explained, under the standard adopted in 2014 in FedEx Home Delivery, the Board had essentially created a new requirement for finding workers to be independent contractors and not employees.

The Board majority’s decision in FedEx did far more than merely “refine” the common-law independent contractor test – it “fundamentally shifted the independent contractor analysis, for implicit policy-based reasons to one of economic realities, i.e., a test that greatly diminishes the significance of entrepreneurial opportunity and selectively overemphasizes the significance of “right to control” factors relevant to perceived economic dependency. (citations omitted). Today, we overrule this purported “refinement.”
(emphasis added)

The majority opinion in SuperShuttle DFW, joined by Chairman Ring, Member Kaplan and Member Emanuel returned to the Board’s longstanding prior practice of considering “all of the common-law factors as described in the Restatement (Second) of Agency:”

a) The extent of control which, by the agreement, the master may exercise over the details of the work.
b) Whether or not the one employed is engaged in a distinct occupation or business.
c) 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.
d) The skills required in the particular occupation.
e) Whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work.
f) The length of time for which the person is employed.
g) The method of payment, whether by the time or by the job.
h) Whether or not the work is part of the regular business of the employer.
i) Whether or not the parties believe they are creating the relation of master and servant.
j) Whether the principal is or is not in business.

As the majority in SuperShuttle explained, citing to the US Supreme Court’s 1968 decision in NLRB v. United Insurance Co. of America, 390 U.S. 254 “there is no shorthand formula” and “all the incidents of the relationship must be assessed and weighed with no one factor being decisive,” and that what is important is that the total factual context is assessed in light of the pertinent common law principles.” Id. at 258.

In FedEx Home Delivery the Board had adopted a test that made it more difficult to prove an independent contractor relationship

In FedEx Home Delivery, a Board majority composed of appointees of President Obama had adopted a test that moved beyond the traditional common law standards for determining whether a worker was an employee or an independent contractor “by creating a new factor (‘rendering services as part of an independent business’) and then making entrepreneurial opportunity merely ‘one aspect’ of that factor.” 367 NLRB No. 75 at page 1.

As the majority in SuperShuttle explained, the Board majority in FedEx was no “mere refinement,” but rather a shift of the independent-contractor test to “one of ‘economic dependency,’ a test that was specifically rejected by Congress.” 367 NLRB N0. 75, at p. 8-9.

What Happens Now?

It is notable that although the Board announced its return to the former test for determining whether workers are independent contractors or employees, the ARD had reached the conclusion that the SuperShuttle drivers were independent contractors under the test adopted in FedEx Home.

The modification of the test for making this determination by discarding “the undue significance of a worker’s entrepreneurial opportunity for economic gain” is likely to mean that workers who traditionally would have been found to be independent contractors and outside the Act’s protections, will be found independent contractors in the future once again.

It is clear that detailed factual analysis will be required in all cases. It would be appropriate, given the reliance on the terms of the franchise agreements in SuperShuttle and the fact that those agreements did demonstrate that the drivers retained significant discretion to run their businesses and knew they would be independent contractors and not employees when they entered into those agreements, for businesses that rely on independent contractor and other such arrangements to review and where appropriate update their agreements and other operating documents.