A crucial issue in labor and employment law is often whether a person is an "employee" or "independent contractor," because this will determine whether or not the worker is entitled to various protections. In the Fall 2010 issue of the ABA Journal of Labor and Employment Law, Jeffrey E. Dilger analyzes the .D.C. Circuit's 2009 decision, FedEx Home Delivery v. NLRB, 563 F.3d 492 ("FedEx III"), concluding that it will dramatically reshape independent contractor jurisprudence.
Historically, pre-industrial employment relations were regulated under Anglo "master-servant law," which assigned tort liability to an employer or "principle" for the actions of an employee or "servant" based on the amount of authority and control the employer exercised over the employee. This "right-to-control" or "agency" test was codified in the First Restatement of Agency, § 220, in 1933.
During the early twentieth century capitalist expansion, however, numerous laws were promulgated affording a variety of rights and protections to employees. These new employment laws were necessary, but they severely strained the application of the comparatively simple master-service principles.
Accordingly, during the 1940s, the courts began to focus on a five-factor test rather than merely employer control: (1) degree of control; (2) opportunities for profit or loss; (3) investment in facilities; (4) permanency of relation; and (5) skill required in the claimed independent operation. No one factor of this "economic reality test" was controlling, and the factors were not exhaustive. They were eventually codified in the Second Restatement of Agency, § 220, in 1958.
However, it should be noted that the Second's factors were largely the same as under the First Restatement--indeed, only "opportunity for profit and loss" was new. What was new, however, Dilger argues, is the "focus of the factored inquiry," which "was to 'identify who as a matter of economic reality are dependent upon the business to which they render service.'" Citing Bartels v. Birmingham, 332 US 126 (1947). Both Restatements also add, to the five-part economic reality test, such factors as who provides the tools and materials; the location of work; subjective belief of worker; whether the worker has a distinct business; and whether it is a kind of occupation that
Throughout the second half of the 20th Century, and still ongoing today, new employment laws have continued to be created at a steady pace, with a particular emphasis on anti-discrimination laws. Such legislation generally continued, however, to define employees vaguely as "persons employed," or some such, although FLSA and FMLA also define the verb "employ" to mean "to suffer or permit work." Under this variegated yet similar landscape, some courts used the original agency tests and some have used the more nuanced economic reality test. The only definite was that NLRA decisions were decided under the § 220 agency test.
Eventually, however, a whole new test was articulated, as Dilger argues. In FedEx III, he says, the Supreme Court mandated a new focus: "not upon the employer's control of the means and manner of work, but instead upon whether the putative independent contractors have a 'significant entrepreneurial opportunity for gain or loss.'" Dilger also argues persuasively and at considerable length that, in reality, FedEx home delivery drivers had only the hypothetical, not actual, entrepreneurial opportunities. For example, the Court noted the drivers "only" used their vehicles "40 to 50" hours per week for FedEx, so still had adequate opportunities to use the trucks for their personal entrepreneurial activities after hours...
Dilger concludes, therefore, that the case establishes a very low bar for "significant" entrepreneurial opportunities. It appears to be primarily for this reason that he argues this case will reshape independent contractor jurisprudence as we know it. He does not, however, point to any subsequent cases in which his prognosis is borne out.
Dilger concludes, therefore, that the case establishes a very low bar for "significant" entrepreneurial opportunities. It appears to be primarily for this reason that he argues this case will reshape independent contractor jurisprudence as we know it. He does not, however, point to any subsequent cases in which his prognosis is borne out.
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