Question: NLRB v. Friendly Cab Co. 512 F.3d 1090 (9th Cir. 2008)
Friendly is a taxi company in Oakland, California, run by Surinder Singh, the chief administrator, and her husband, Baljit Singh, the president of the company. After tension arose between Friendly and its drivers, the drivers' union filed a petition with the National Labor Relations Board seeking a declaration that Friendly's taxicab drivers were indeed employees rather than independent contractors, and therefore entitled to representation for collective bargaining purposes. The court explores the myriad facts that might support either conclusion to determine the drivers' classification.
I. Background: Friendly, along with six other taxicab entities, operates out of a facility in Oakland, California, and is under the control of Surinder Singh, the chief administrator, and her husband, Baljit Singh, the president of the company. Friendly owns approximately eighty taxicabs (fifty of which are designated as airport cabs) and leases these cabs to its drivers. . .These leases typically state that the taxicabs are rented for seven days, renew automatically, and provide the drivers with six days of service and one day of mandatory maintenance per week. Each of Friendly's drivers is required to pay a fee or "gate," which ranges from $450 to $600 per week based on Friendly's discretion. In determining this fee, Friendly takes into account the cab model, as well as the driver's driving record, driving ability, and prior accidents.
Friendly has a limited number of permits to operate at the Oakland Airport, which are in high demand and are typically held by drivers with more experience. Although drivers designate which entity they want to work for, Friendly retains the discretion to assign drivers to different taxicab entities, taxicab models, and the type of cab (airport or street cabs). These leases also specify that there is no employer-employee relationship between Friendly and its taxicab drivers, and that Friendly is not responsible for withholding any federal or state taxes or providing workers' compensation insurance. As part of the lease, Friendly's drivers agree to comply with Friendly's Taxicab Company Policy Manual ("Manual") and its Standard Operating Procedures ("SOP"). Although Friendly's Manual and SOP cover a broad range of topics that are common to the operation of a taxi service (e.g., safety concerns, non-discrimination policy, etc.), there are a number of regulations that concern Friendly's control over its drivers.
For example, the Manual instructs drivers that: "[a]cceleration should be smooth," they should "[a]void abrupt stops," they should "not stop next to puddles or in front of obstacles such as signs, trees or hydrants," and that "[w]hen stopping at curbs, stop either right next to curb or out away from the curb." Friendly's Manual also imposes a dress code, which requires that all taxicab drivers "maintain good personal hygiene and dress appropriately and professionally: collared shirts with sleeves, slacks or knee-high skirts, closed shoes with socks or hose." Friendly's SOP contains a number of relevant regulations as well. Of particular significance to this case, the; SOP restricts outside business opportunities for Friendly's drivers by stating that: "[a]ll calls for service must be conducted over company provided communications system and telephone number.
No private or individual business cards or phone numbers are allowed for distribution to customers as these constitute an interference in company business and a form of competition not permitted while working under the lease." The SOP also provides that "[d]rivers must service all reasonable customer calls from dispatchers." Several drivers testified that the dispatcher will ignore or bypass them if they refuse or are late to a dispatch. One driver testified that if drivers do not respond in a certain amount of time, the dispatcher reminds drivers over the radio that "we run the show, you guys are just the driver. Just drive. That's it." *** In addition to the requirements contained in the Manual and the SOP, Friendly imposes a number of additional restrictions on its drivers. For example, Friendly's general manager testified that taxicab drivers are not able to sublease their vehicles to other drivers. Friendly also requires that its taxicabs carry advertisements for outside vendors on the roofs of the taxicabs. Drivers must return to the station to replace these advertisements at Friendly's discretion. Furthermore, Friendly requires that its drivers attend, at their expense, annual classes on company policies and laws dealing with discrimination.
Finally, if the drivers do not comply with Friendly's policies, Friendly can terminate their leases. Friendly employs a "road manager" who monitors the drivers' appearance and compliance with Friendly's policies. As a result of tension between Friendly and its drivers, the Union was appointed as the representative of a number of Friendly's drivers. The Union filed a petition under Section 9(c) of the Act with the NLRB for a declaration that Friendly's taxicab drivers were employees and thus entitled to representation for collective bargaining purposes. [After a number of administrative actions, the court in the current case evaluates whether the drivers are employees or independent contractors for purposes of representation under the NLRA.]
III. Analysis: In order to distinguish an "employee" from an "independent contractor," we must undertake a fact-based inquiry applying common law principles of agency. Although courts must look to the totality of the circumstances, "[t]he essential ingredient of the agency test is the extent of control exercised by the ‘employer.' It rests primarily upon the amount of supervision that the putative employer has a right to exercise over the individual, particularly regarding the details of the work." Additional factors that are relevant to this determination include "entrepreneurial aspects of the individual's business; risk of loss and opportunity for profit; and the individual's proprietary interest in his business." We must assess and weigh all of the incidents of the relationship with the understanding that no one factor is decisive, and that "[i]t is the rare case where the various factors will point with unanimity in one direction or the other." We cannot displace the NLRB's conclusion that Friendly's drivers are "employees" within the meaning of the Act because there is substantial evidence in the record that Friendly exercises significant control over the means and manner of its drivers' performance. In finding that the incidents of the relationship between Friendly and its drivers militate in favor of "employee" status, we place particular significance on Friendly's requirement that its drivers may not engage in any entrepreneurial opportunities.
A. Evidence of Independent Contractor Status
The payment by taxicab drivers of a fixed rental rate to an employer where drivers retain all fares collected without accounting to that employer typically creates a "strong inference" that the employer does not exert control over the means and manner of the drivers' performance. The rationale behind this "strong inference" is that the employer does not have an incentive to control the means and manner of the drivers' performance when the employer makes the same amount of money irrespective of the fares received by the drivers. Here, the NLRB accepted that this "strong inference" exists because Friendly's drivers pay a flat fee and are not required to account for the amount of fares or tips they collect. Although Friendly received the benefit of this inference, the NLRB was generous to give it. There is nothing flat about this fee since it varies among the drivers between $450 and $600, depending on their cab model, driving record, driving ability and prior accidents.
Those drivers that do not incur additional expenses for Friendly-for example, in the form of higher automobile insurance rates for poor driving records or increased costs for repairs of taxicabs damaged in accidents-are presumably rewarded with lower rental rates. Friendly's rental fees thus do in fact reflect some control over the drivers' performance. In addition to Friendly's rental fees, the NLRB found additional indicia of independent contractor status. These include the facts that Friendly's drivers do not work set hours or a minimum number of hours, the taxicab lease agreements provide that the drivers are independent contractors, Friendly does not provide any benefits to drivers, and Friendly does not withhold social security or other taxes on behalf of the drivers. However, the NLRB properly concluded that such factors are substantially outweighed by the evidence in the record of significant control by Friendly over the means and manner of its drivers' performance.
B. Evidence of Employee Status
The ability to operate an independent business and develop entrepreneurial opportunities is significant in any analysis of whether an individual is an "employee" or an "independent contractor" under the common law agency test. Friendly's restrictions against its drivers' operating independent businesses or developing entrepreneurial opportunities strongly support the NLRB's determination that Friendly's drivers are employees. . . In the Underlying Representation Proceeding, the NLRB stated that "[t]he most significant evidence of Employer control in this case is that the drivers are not permitted to operate independent businesses." A review of the record supports this conclusion. Friendly's own general manager testified that drivers can use the taxicabs only to respond to dispatches from Friendly and not for outside business.
The SOP prohibits drivers from soliciting customers, stating that "all calls for service must be conducted over company provided communications system and telephone number." It also requires that drivers maintain company business cards at all times in the taxicab and prohibits drivers from distributing any private business cards or telephone numbers to customers because this would "constitute an interference in company business and a form of competition not permitted while working under the lease." Drivers cannot accept calls for service on personal cellular telephones and, in fact, cannot even use cellular telephones while driving. These limitations do not allow Friendly's drivers the entrepreneurial freedom to develop their own business interests like true independent contractors. . .Here, it is telling that Friendly's SOP mandates that its 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.
Friendly's taxicab drivers do not own the taxicabs, but must lease them from Friendly. Friendly also prohibits its drivers from employing others by preventing the subleasing of its taxicabs. One former driver testified that while he was hospitalized, he was instructed by Mrs. Singh that drivers were prohibited from subleasing the vehicles, even to other Friendly drivers. Friendly maintains direct control over the performance of its drivers' duties by exercising "discretion to determine which entity a driver is assigned to, the model of the vehicle assigned to a driver, . . . and whether a driver may drive an airport cab." Friendly's Manual further instructs drivers in the manner they should accelerate and stop their vehicles, as well as factors they should consider in choosing where to stop their taxicabs. Thus, Friendly's interest in controlling the means and manner of its drivers' performance extends to the actual details of the operation of the taxicabs.
The type of control Friendly exercises over its drivers exceeds that found in the typical case in which a company requires its workers [to] place advertisements on work vehicles. . .
In this case, Friendly's requirement constitutes significantly greater control. Friendly's advertising requirement represents a form of control that inures to the benefit of Friendly at the financial expense of the drivers. *** In City Cab of Orlando II, the court cited the extensive dress code the taxicab company required of its drivers as one of the factors that led the court to conclude the taxicab drivers were employees. There, the drivers were required to wear a shirt with a collar, not to wear jeans or short pants, to be clean-shaven, not to wear tennis shoes, and, if the driver chose to wear a hat, it had to be a designated "cab drivers hat." Friendly's dress code is very similar to the one in City Cab of Orlando II. Although this court and others have not given a dress code requirement much weight, Friendly's extensive dress code is an additional factor supporting the NLRB's determination.
Friendly's training policy outlined in its Manual, which incorporates both local government regulations and company specific regulations, also constitutes another minimal indicium of control over the drivers. While the incorporation of government regulations into a company's manual is not evidence of an employer- employee relationship, the NLRB reasonably found that Friendly's training requirements exceed those required by the City of Oakland's ordinance and constitute some degree of control over the drivers. Friendly describes its mandatory two-day training class as being "in addition to the class conducted by the City of Oakland Police Taxi Detail." It covers sensitivity training, operating procedures, hands-on practical training, record keeping, and local geography training. Like the dress code requirement, we find the training requirement supports the NLRB's determination that Friendly's drivers are employees.
V. Conclusion
In sum, we conclude there is substantial evidence in the record to support the NLRB's determination that Friendly's taxicab drivers are "employees" within the meaning of the Act. The NLRB relied on a number of factors that in their totality compel a finding of employee status, the most significant of these being Friendly's prohibition on its drivers' operating an independent business and developing entrepreneurial opportunities with customers. Additional salient indicia of control by Friendly over the means and manner of its drivers' performance include:
(1) regulating the details of how drivers must operate their taxicabs,
(2) imposing discipline for refusing or delays in responding to dispatches,
(3) requiring drivers to carry advertisements without receiving revenue,
(4) requiring drivers to accept vouchers subject to graduated "processing fees,"
(5) prohibiting subleases,
(6) imposing a strict dress code, and
(7) requiring training in excess of government regulations. Although some of these factors individually may not constitute substantial control, the NLRB reasonably concluded that these factors taken together overcame any evidence of independent contractor status. We therefore affirm the NLRB's decision.
AFFIRMED
1. Though the court was quite clear that simply identifying workers as employees is insufficient to qualify them as employees, does the name by which an employer calls its workers matter at all? In other words, does it matter at all whether the employer calls its workers independent contractors or employees, or is it completely irrelevant?
2. Of the factors considered critical by the court in reaching its conclusion, which seem more critical to a determination of employment status? If you were advising Friendly Cab Co. to modify its employment relationship in order to ensure a determination of independent contractor status rather than employee status, which elements would you advise changing?
3. What are the public policy reasons why Friendly should be required to consider these workers as employees rather than as independent contractors?