FIRACT – Chapter 1 (p.37)
Susan Ho
NLRB v. Friendly Cab Co. 512 F.3d 1090 (9th Cir. 2008) Facts Friendly is a taxi company in Oakland, CA, run by Singh’s family. After tension arouse between Friendly and its drivers, the Union was appointed as the rep to file a petition with the NLRB seeking a declaration that these drivers were employees and entitled to representation for collective bargaining purposes. Evidence of IC Status • • • • The agreement specifically stated that no employee-‐employer relationship existed Drivers do not work set hours or a minimum number of hours Friendly does not provide any benefits to drivers Friendly does not provide standard employer responsibilities such as withholding SS taxes, payroll taxes, and other taxes on behalf of the drivers • • Friendly does not provide workers’ compensation insurance Drivers paid fixed rental rate and kept all collected fares and are not required to account for them Evidence of Employee Status • There is nothing flat about the rental fee since it varies among the drivers, depending on their cab model and driving record, which reflect some control over the drivers’ performance. • The manual instructs drivers to accelerate smoothly, avoid abrupt stops, not stop next to or in front of puddles or other obstacles, stop either right next to or out away from the curb when stopping at curbs. • Dress code
FIRACT – Chapter 1 (p.37) •
Susan Ho
All calls for service must be conducted over company provided communications system and phone number
•
Cannot distribute private or individual business cards or phone numbers as these constitute interference in company business and a form of competition
•
Drivers must service all reasonable customer calls from dispatchers. If drivers do not or is slow to respond, the dispatcher reminds drivers over the radio that “we run the show, you guys are just the driver. Just drive. That’s it.”
• •
Friendly’s taxicabs are to carry ads for outside vendors on the cabs’ roofs Drivers are required to attend at their expense annual classes on companies policies and laws or the teases can be terminated.
•
Friendly hires a “road manager” to monitor the drivers’ appearance and compliance with Friendly’s policies.
Issue The taxi company identified its drivers as IC in its leases. However, given the significant control by Friendly over the means and manner of its drivers’ performance, the workers have the right reasons to believe that they are in fact employees. We need to weight the evidence of IC status against the evidence of employee status and determine if these employees were really ICs or employees. Rule of Law The courts use several tests to distinguish “employees” from “independent contractors”: (1) common-‐law test of agency; (2) IRS 20-‐factor analysis; and (3) economic realities
FIRACT – Chapter 1 (p.37)
Susan Ho
analysis. The most critical factor of the agency test is the extent of control exercised by the employers. The 20-‐factor test is an analytical tool only; the legal test remains whether there is a right to direct and control the means and details of the work. Under the economic realities test, we look at whether the worker is economically dependent on the business or is in business for himself or herself, the worker’s opportunity for profit/loss, the worker’s investment in the business, the permanence of the working relationship, the degree of skill required by the worker, and the extent the work is an integral part of the employer’s business. Generally, all these factors are considered as a whole with no one single factor being determinative.
Analysis • In spite of the insistence of Friendly that the drivers were ICs, the agency test and economic realities of the relationship actually determine its ultimate legal definition. • Friendly’s restrictions against its drivers’ operating independent businesses or developing entrepreneurial opportunities strongly support the NLRB’s determination that the drivers are employees. • These limitations do not allow the drivers the entrepreneurial freedom to develop their own business interests like true ICs. • Friendly’s SOP mandates that the drivers must operate the taxis “in such a manner as to protect the goodwill that exists between the company and its customers.” • Additional entrepreneurial characteristics – such as substantial investment in property and the ability to employ others – are also absent.
FIRACT – Chapter 1 (p.37) •
Susan Ho
Friendly maintains direct control over the performance of its drivers’ duties and its interest in controlling the means and manner of the drivers’ performance extends to the actual details of the operation of the taxicabs.
Conclusion There is substantial evidence to support that Friendly’s taxicab drivers are “employee”. First and foremost, Friendly prohibited its drivers’ operating an independent business and developing entrepreneurial opportunities with customers. Additional evidence include: regulating the details of how drivers must operate their cabs; imposing discipline for refusing or delays in responding to dispatchers; demanding drivers to carry ads without receiving revenue; mandating drivers to accept vouchers subject to graduated processing fees; not allowing subleases; enforcing a strict dress code; and requiring training on top of government regulations.
Take-‐home message The effectiveness of the IC does not depend on the purposes for which a company adopts it but on the extent to which it conforms in fact with the label. The textbook couldn’t have said it better, “An apple must grow on an apple tree; just because you call something apple does not make it an apple!” The best defense against costly litigation & liability is to do the right thing w/ solid, consistently applied workplace policies. Never misclassify employees. 