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Divided Labor Board Adopts Business-Friendly Independent Contractor Test

John Ring testifies during his confirmation hearing to be a member of the NLRB. (Photo: Diego M. Radzinschi / ALM)

The Republican majority on the National Labor Relations Board on Friday adopted a new standard for determining whether a worker is an independent contractor or an employee, embracing a business-friendly approach that could make it easier for companies to avoid some union disputes.

The ruling in the case SuperShuttle DFW Inc. could present broader implications for the gig economy and other industries that rely on contractors and delivery drivers. Much of the gig economy is built on the backs of contractors, who can enjoy greater flexibility than traditional employees. But independent contractors, unlike employees, cannot join a union, and they don't share many of the workplace benefits that employees do.

Trump-appointed NLRB Chairman John Ring, voting with fellow Republican members William Emanuel and Marvin Kaplan, overturned an Obama-era decision from 2014 involving FedEx delivery drivers who wanted to form a union. Democratic member Lauren McFerran dissented in Friday’s decision.

The board's ruling involved shuttle van drivers at Dallas Fort Worth airport who wanted to be considered employees. SuperShuttle DFW before 2005 had considered its drivers to be employees. But the company subsequently switched to a franchise model that still exists today. The franchises operated as independent businesses.

The divided board rejected a push by the drivers arguing they were employees and not contractors. The board said leasing or ownership of work vans, method of compensation and control over their daily work schedules and working conditions provided the franchisees with “significant entrepreneurial opportunity for economic gain.” The new standard clarified the role "entrepreneurial opportunity" plays in determining worker status.

Writing in her dissent, McFerran said: "SuperShuttle’s drivers are not independent in any meaningful way, and they have little meaningful 'entrepreneurial opportunity.' Under well-established Board law—reflected in decisions leading up to and including FedEx—this should be a straightforward case."

In an amicus brief in an earlier federal appeals court, the U.S. Chamber along with other business groups urged the court to overturn the Obama board’s decision on the independent contractor standard.

"Independent contractor relationships are voluntary arrangements mutually beneficial to individuals and companies in the trucking industry and other sectors of the economy," lawyers from Jones Day wrote in the chamber's brief. “Where, as here, an independent contractor has substantial entrepreneurial opportunities, not to mention substantial control over whether and with whom to work, both the board and the courts should be exceedingly cautious before disregarding the parties’ decision to structure the relationship as an independent contractor arrangement.”

Disputes over whether a worker is an independent contractor or employee have posed central questions in cases involving companies such as Uber and Lyft. A California Supreme Court ruling last year made it harder for companies to justify classifying their workers as contractors. That ruling has created added uncertainty for companies, and courts are confronting whether the decision should be applied retroactively.