Fedex Home Delivery v. National Labor Relations Board
563 F.3d 492, 385 U.S. App. D.C. 283, 186 L.R.R.M. (BNA) 2292 (2009)
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Rule of Law:
When determining whether a worker is an employee or an independent contractor under the National Labor Relations Act, the analysis should focus on whether the position presents significant entrepreneurial opportunity for gain or loss, rather than focusing primarily on the employer's right to control the means and manner of the work.
Facts:
- FedEx Home Delivery contracts with drivers to provide small package delivery to residential customers.
- Drivers sign a Standard Contractor Operating Agreement which explicitly states they are independent contractors, not employees.
- Contractors must provide their own vehicles, which must comply with FedEx specifications regarding color, size, and logos, and are responsible for all operating and maintenance costs.
- FedEx requires contractors to wear a specific uniform and adhere to certain grooming standards.
- Contractors may contract to serve multiple routes and have the right to hire their own employees, substitutes, and helpers without FedEx's approval, as long as the hired driver is qualified.
- Contractors have a proprietary interest in their routes and can sell or assign their contractual rights to another party, negotiating the price directly with the buyer.
- Contractors can use their vehicles for other commercial purposes during non-business hours, provided they mask all FedEx logos.
- At least one contractor successfully negotiated for higher fees, and others have incorporated their businesses.
Procedural Posture:
- The International Brotherhood of Teamsters, Local Union 25, filed petitions with the National Labor Relations Board (NLRB) seeking to represent drivers at two FedEx Home Delivery terminals.
- The NLRB's Regional Director found the drivers were 'employees' under the NLRA and directed that representation elections be held.
- The drivers voted in favor of union representation, and the NLRB certified the Union as their collective bargaining representative.
- FedEx refused to bargain with the Union, challenging the NLRB's underlying determination that the drivers were employees.
- The NLRB ruled that FedEx's refusal to bargain constituted an unfair labor practice and issued an order compelling the company to bargain.
- FedEx filed a petition for review of the NLRB's order in the U.S. Court of Appeals for the D.C. Circuit. The NLRB filed a cross-application for enforcement of its order.
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Issue:
Are single-route drivers for FedEx Home Delivery 'employees' under the National Labor Relations Act, or are they independent contractors excluded from the Act's coverage?
Opinions:
Majority - Brown, J.
No, the drivers are independent contractors. The court holds that when applying the common-law agency test, the primary animating principle is whether the position presents significant entrepreneurial opportunity for gain or loss. Here, the drivers possess such opportunities because they own their vehicles, can hire their own employees and substitutes, can operate multiple routes, and, most significantly, can sell their routes for a profit. The controls that FedEx imposes, such as uniform and vehicle appearance requirements, are driven by customer service demands and safety regulations, not a desire to control the means and manner of the work, and are therefore not indicative of an employment relationship. The court found that the drivers' retention of the right to engage in these entrepreneurial activities is more relevant than whether they regularly exercise those rights.
Dissenting - Garland, J.
The National Labor Relations Board's determination that the drivers are employees represented a choice between two fairly conflicting views and should have been upheld. The majority improperly elevates the 'entrepreneurial opportunity' factor above the traditional multi-factor common-law agency test established by the Supreme Court, which focuses on the employer's right to control the 'means and manner' of the work. Numerous facts support the Board's conclusion of an employment relationship: the drivers perform work essential to FedEx's core business, must wear FedEx uniforms, use FedEx-branded vehicles, and are subject to FedEx's unilateral control over their service areas. The dissent argues that the supposed entrepreneurial opportunities are largely theoretical and not realistically available to most drivers, making the Board's conclusion reasonable and worthy of deference.
Analysis:
This decision represents a significant doctrinal shift in the D.C. Circuit for classifying workers under the NLRA. By elevating 'entrepreneurial opportunity' to be the primary lens for analyzing the common-law factors, the court moves away from the traditional 'right to control' test. This precedent makes it substantially more difficult for the NLRB to classify workers as employees if their contracts grant them rights like selling their routes or hiring others, even if those rights are rarely exercised. The ruling has broad implications for the gig economy and other business models that rely on workers classified as independent contractors.
