Ahead of the Curve: New Labor Decision Makes it Easier to Classify Workers as Contractors

By Will Sehestedt, Vice President of Government Affairs

Independent contractor relationships are critically important to 3PLs of all sizes and specializations, so TIA closely monitors all regulatory developments related to this issue. TIA works to maintain up-to-date frameworks and guidance on labor issues on the Members Only side of the TIA website. TIA will also report on any efforts by Congress or the Department of Labor to make changes to the independent contractor tests laid out by the National Labor Relations Act (which governs activities related to union organization) and the Fair Labor Standards Act (which regulates employment relationships for contractors and employees, as well as minimum wage and overtime requirements).

On January 25, the National Labor Relations Board (NLRB) issued a decision in the case of SuperShuttle DFW, Inc.This decision (viewable here) revised a test for determining whether workers are independent contractors or employees, which will provide clarity for companies that seek to classify those workers as contractors.  The court decision reversed a 2014 NLRB decision and emphasized the importance of “entrepreneurial opportunity” as part of the independent contractor test.

The case under consideration is related to an effort to unionize drivers for SuperShuttle, a shared-ride service, in Dallas. Prior to 2005, SuperShuttle classified workers as employees, including regular hourly wages and other benefits. In 2005, the company changed its business model and required all drivers to sign 1-year Unit Franchise Agreements (UFAs) that expressly characterize the drivers as non-employee franchisees operating independent businesses. These franchisees are required to supply their own vans and to pay SuperShuttle DFW a franchise fee and a flat fee for the right to utilize the brand and dispatch/payment processing software. Franchisees work no set schedule or number of hours per week. These franchisees then operate under the terms of a shared-ride contract signed between the Dallas-Fort Worth International Airport Board and SuperShuttle DFW.

In its ruling the NLRB determined that the workers were independent contractors, and thus could not join in union organization efforts, because:

1. The drivers were free from control by SuperShuttle for most aspects of their work (such as scheduling or setting up dedicated routes with hotels and customers);
2. The drivers retained all fares and tips earned from customers, and only compensate SuperShuttle DFW for their work by paying the flat fees specified in the UFA;
3. The drivers made significant investments in their respective businesses by providing the shuttle vans;
4. SuperShuttle did not perform meaningful general oversight as to how the drivers conducted their daily work; and
5. The UFA agreement was clear and explicit about the expectation that the drivers and SuperShuttle DFW were entering into an independent contractor relationship.

For more information on this decision or issues related to labor law compliance, please contact TIA’s government affairs staff at advocacy@tianet.org or 703-299-5700.