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The National Labor Relations Board recently addressed whether the independent-contractor status of newspaper carriers would continue to be analyzed under the common law agency test. Based on its application of this test, the board held in St. Joseph News-Press, 345 NLRB 31 (Aug. 27, 2005), that the News-Press’ newspaper carriers and haulers were not employees, but were instead independent contractors excluded from the protection of the National Labor Relations Act (NLRA). This decision reaffirmed the board’s long line of cases consistently finding newspaper carriers independent contractors, and rejected any focus on the carriers’ asserted lack of bargaining power. Section 2(3) of the NLRA provides that the term “employee” shall not include “any individual having the status of independent contractor.” 29 U.S.C. 2(3). In NLRB v. United Insurance Co. of America, 340 U.S. 254 (1968), the Supreme Court declared that: “[t]he obvious purpose of [the exclusion of independent contractors] was to have the Board and the courts apply general agency principles in distinguishing between employees and independent contractors under the [NLRA] … Thus there is no doubt that we should apply the common-law agency test here in distinguishing an employee from an independent contractor.” Id. at 256. The court noted there was no “shorthand formula” to applying the common law test, and held that under the common law agency test, “all the incidents of the relationship must be assessed and weighed with no one factor being decisive. What is important is that the total factual context is assessed in light of the pertinent common-law principles.” Id. at 258. BOARD RECONSIDERS ITS STANDARDS FOR CONTRACTORS In 1998, in light of United Insurance and other Supreme Court precedents, the board reconsidered its standards for determining independent-contractor status under the NLRA in two companion cases, Roadway Packaging System, 326 NLRB 842 (1998), and Dial-A-Mattress Operating Corp., 326 NLRB 884 (1998). The board in Roadway balanced the “right of control” factor and other factors that did not involve the right of control in applying the common law agency test. It found the company’s delivery drivers to be employees based on the degree of financial support they received from the company, the requirements that the drivers display the corporate logo on their vehicles and be present for work every weekday, and especially the company’s control over the drivers’ manner of performing their work, particularly by setting the drivers’ schedules and by prohibiting refusals of delivery. In Roadway‘s companion case, Dial-A-Mattress, by contrast, the board found that the company’s delivery drivers were independent contractors, based on the company’s lack of control over the drivers’ performance of work, the drivers’ ownership of and control over their vehicles, the drivers’ control over employees that delivered some or all of the company’s goods, and the scope of the contractual arrangement between the company and the drivers. The board in St. Joseph News-Press confirmed that “Prior to Roadway and Dial-A-Mattress, the board consistently found newspaper carriers to be independent contractors … [W]e do not find that our reasoning in Roadway and Dial-A-Mattress diminishes the weight of those earlier cases which addressed both the right of control along with the other common law factors.” Id. at 6. The board also cited with approval six newspaper cases decided prior to Roadway holding that the carriers at issue were independent contractors. In determining the status of the carriers in St. Joseph News-Press, the board applied the Roadway and Dial-A-Mattress standards and found, on balance, that the carriers were independent contractors because they “provide their own ‘tools’ of work, their vehicles and supplies; they receive little training from the Newspaper, they are not supervised by the Newspaper while performing the work, they may hire their own employees, they may work for more than one party, they can solicit new business, and they can subcontract their routes to others.” Id. at 10. The board found that the degree of control exercised by the company was demonstrably less than in Roadway and akin to that of the company in Dial-A-Mattress because the carriers were free to change the order of deliveries, could disregard customers’ delivery requests without fear of discipline and could refuse to deliver to customers they deemed unlikely to pay or to whom it would not be economically feasible to deliver. The board found that the “provision of tools” factor also weighed in favor of finding independent-contractor status because the company was not involved in the drivers/carriers’ ownership of their vehicles, and the drivers/carriers owned their own vehicles, were responsible for maintaining their vehicles and could use their vehicles for other purposes. The board further found that the carriers had the ability to affect their own compensation because they could hire full-time substitutes and hold contracts on multiple routes; had complete control over their substitutes’ terms and conditions of employment; were permitted to deliver other products, including competing newspapers, while delivering the company’s newspaper; and they, with help from the company in the form of free promotional newspapers, solicited new customers to increase the profitability of their routes. Another common law factor the board found weighed in favor of independent-contractor status was the carriers’ performance of their duties without the company’s supervision-they were not subject to discipline, the employee handbook or the company’s work rules. Finally, the board found that the parties’ intent regarding the nature of their relationship “weighed strongly” in favor of finding independent-contractor status as the parties believed they were creating an independent-contractor relationship and the carriers’ contracts specified that they created an “independent contractor” relationship. Although reversing the administrative law judge’s conclusion that the carriers were employees, the board did not disagree with the ALJ’s finding that several factors in the parties’ relationship weighed in favor of employee status: namely that the carriers’ work was an integral part of the company’s business; that the work performed by the carriers was “not particularly skilled”; that the carrier was hired for an indefinite period, rather than for merely a specific project; and that the company employed several undisputed employees who made deliveries. BOARD REJECTED ECONOMIC-DEPENDENCE FACTORS The board, however, rejected the dissent’s contention that the carriers should be deemed employees if their economic circumstances are markedly inferior in terms of low incomes, few if any fringe benefits and little or no bargaining power, reasoning that it is constrained by the language of the statute explicitly excluding independent contractors. Similarly, the board rejected the dissent’s argument that the common law test itself requires an analysis of the parties’ relative bargaining strength, finding that such an approach is “contrary to the statute, precedent, and common law.” Id. at 8. Moreover, the board found “nothing in Supreme Court precedent that supports importing an economic dependence factor into the common law test.” Id. at 9. Member Liebman’s dissent, by contrast, contended that the judge correctly concluded that the carriers were employees, and that under Roadway such a finding was required because the carriers’ work was integral to the company’s business, the carriers were relatively unskilled, they were hired for an indefinite period of time, had no true entrepreneurial opportunities and the company largely controlled the economic relations of the parties (through a “contract of adhesion”). Her dissent also posited that “economic dependence” (the disparity between the parties) is a relevant additional factor under the common law of agency. According to Liebman’s dissent, the terms of the contract between the carriers and the company were not determinative of the carriers’ status. St. Joseph News-Press is significant because it reaffirmed the application of the board’s common law agency test in determining the independent-contractor status of newspaper carriers. While rejecting any consideration of “economic dependence” as a relevant factor in this analysis, the case reaffirmed the viability of the pre- Roadway cases involving newspaper carriers, as well as the Roadway and Dial-A-Mattress standards. Similar contractorlike relationships have become more prevalent in other industries as companies seek flexibility in a more competitive economic climate. Accordingly, while the board in St. Joseph News-Press found the carriers at issue to be independent contractors, it reaffirmed the common law agency test that considered multiple factors. Companies, especially those in the newspaper industry, should therefore consider these factors in auditing their independent-contractor relationships to determine if they will withstand scrutiny. In this regard, the audit should focus on how much control the company exercises over the work; the skill required; the degree of financial support provided by the company; the degree of company supervision; the source of the vehicles, supplies and tools; the training provided by the company; the method of payment and provision of employee benefits; the tax treatment of the hired party; the duration of the relationship; the location of the work; the company’s role in hiring and paying assistants; whether the hired party can work for others; whether they can solicit new business; whether they can subcontract their routes to others; whether the work is part of the regular business of the company; and the parties’ intent with respect to the nature of the relationship involved. Kenneth R. Dolin is a partner in the labor and employment practice group of Chicago’s Seyfarth Shaw. He can be reached at [email protected]

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