In a case handled by Sherman & Howard’s Labor and Employment Department, the National Labor Relations Board (“NLRB”) returned to its traditional independent contractor test, reversing the Obama Board’s 2014 decision in FedEx Home Delivery, 361 NLRB 610, and finding the Dallas/Ft. Worth SuperShuttle franchisees to be independent contractors. The Board explained that the FedEx decision improperly minimized the consideration of whether alleged independent contractors had significant “entrepreneurial opportunity” for gain and loss. In addition, the Board clarified that regulatory requirements imposed on the SuperShuttle franchisees could not be considered “control” asserted by the alleged employer. The Board concluded that in light of the franchisees’ ownership and control over their vans, their near complete freedom to independently control their schedules and accept or reject work, the absence of supervision, and the franchisees’ significant entrepreneurial opportunity, they could not be considered employees covered by the National Labor Relations Act. In a strongly-worded dissent, Member McFerran quipped “calling the SuperShuttle drivers ‘entrepreneurs’ or ‘small business owners’ doesn’t make them any less employees.” We respectfully disagree with the dissent.
A federal District Court in Michigan recently found that a plaintiff had presented enough direct evidence of age discrimination to merit a trial. The plaintiff worked as a member of defendants’ kitchen staff for about two months. The day after his termination, plaintiff met with the company’s owner to discuss the situation further. Unbeknownst to the owner, the plaintiff recorded the conversation.
On the recording, the owner said the plaintiff had not been “fitting in” with the rest of the staff. At one point, plaintiff stated, “So you think it’s probably the age difference.” The owner responded, “I think that’s probably a big part of it, from day one.” The conversation continued in a similar fashion.
The plaintiff filed a Charge with the EEOC alleging age discrimination and eventually filed suit against his former employer and its owners. When confronted with the recorded conversation, the owner explained that he “was trying to soften the blow,” “thought it was the kind thing to do,” and “was just trying to make [the plaintiff] feel a little bit better” about the termination.
Lesson learned? While compassion may play an important role in the employee-separation process, employers have to pay attention to how that compassion is displayed. It isn’t “kind” to blame an employment decision on the employee’s age, race, sex, disability or any other protected characteristic; if anything, it is likely to seem unfair – both to the employee and to the court and jury.
Yesterday the U.S. Supreme Court ruled against a large national trucking company in its attempt to enforce an arbitration agreement against one of its independent contractor truck-drivers. New Prime Inc. v. Oliveira, No. 17-340 (U.S. January 15, 2019). The lawsuit alleged that New Prime contractors were actually employees, but were not paid minimum wage. New Prime defended by seeking to enforce Mr. Oliveira’s arbitration agreement, which required all disputes, including disputes over the scope of the agreement, to be submitted to an arbitrator. Oliveira successfully argued at the trial court and in the Court of Appeals that the Federal Arbitration Act exempts from its coverage “contracts of employment” of certain transportation workers.
Before the Supreme Court, New Prime argued that the phrase “contracts of employment” in the FAA could not possibly apply to its independent contractor truck drivers because they are not employees in the first place. The Supreme Court disagreed in a unanimous decision (Justice Kavanaugh did not participate). First, the Court held that despite the agreement’s broad grant of authority to the arbitrator, the trial court (and not the arbitrator) should first determine whether an FAA exception applies to the agreement. Second, the Court held that the term “contracts of employment” must be defined based on its meaning back when the FAA was passed in 1925. Third, the Court concluded that, as of 1925, the phrase “contracts of employment” had a very broad meaning that included independent contractor relationships. So, despite the broad scope of the FAA and the strong federal public policy encouraging private arbitration, New Prime cannot enforce Oliveira’s arbitration agreement under the FAA.
The case is a game-changer for the trucking industry, as many interstate trucking companies rely on an independent contractor model coupled with mandatory arbitration. The case is also noteworthy as a rare example of the Supreme Court finding against an arbitration covenant, although the ruling is limited to contracts involving interstate transportation.
On December 28, 2018, the U.S. Court of Appeals for the District of Columbia Circuit issued a decision partially granting enforcement to the National Labor Relations Board’s controversial decision in Browning-Ferris Industries (316 NLRB No. 186 (2015), “BFI”) which radically altered the test for when separate companies can be declared “joint employers” under the National Labor Relations Act. In a 2-1 decision, the court affirmed the NLRB’s use of elements of “indirect control” over a contractor to find joint employment, but remanded the case to have the NLRB distinguish those elements from aspects of the business relationship intrinsic to company-to-company contracting. In other words, the court failed to resolve the main problem with the BFI decision—that such routine contracting provisions put all contractors at risk of being declared a joint employer with their business partners. In a searing dissent, Senior Judge Randolph pointed out that the court should not even render a decision while the NLRB is in the process of issuing a formal rule on the definition of “joint employer”. Judge Randolph argued that the majority’s opinion effectively short-circuits the NLRB’s rulemaking process, as the majority held the Agency is entitled to no particular deference on the issue of which companies may be declared joint employers. Judge Randolph pointed out that by failing to distinguish between normal business contract provisions and evidence of so-called “indirect control”, the court was creating more confusion and assuring that any eventual NLRB decision would return to the court on appeal. The more immediate question for employers, however, is whether the NLRB will now be able to return to a more rational definition of joint employment that requires evidence that two employers directly codetermine employees’ essential terms and conditions of employment. Perhaps we will have that answer by 2020.