On March 3, 2017, the U.S. Court of Appeals for the D.C. Circuit (“D.C. Circuit”) issued a forceful decision strongly in favor of FedEx and its claims of independent contractor status for some of its drivers. The D.C. Circuit squarely disagreed with the National Labor Relations Board (NLRB), which had held that single-route Ground Division drivers for FedEx were employees (and not independent contractors) under the NLRB independent contractor test. FedEx Home Delivery, an Operating Division of FedEx Ground Package System, Inc. v. NLRB, Nos. 14-1196, 15-1066, 15-1116 (D.C. Cir. Mar. 3, 2017).

This March 3, 2017 decision was the second time that the D.C. Circuit denied enforcement of an NLRB decision which would have required FedEx to bargain with a local Teamsters union (as the representative of a bargaining unit of Ground Division drivers).

FIRST DECISION: In the earlier (virtually identical) decision in 2009 by the D.C. Circuit, the D.C. Circuit concluded that, as a matter of law, the drivers were independent contractors under the common-law agency test used to determine independent contractor status under the National Labor Relations Act (NLRA). FedEx Home Delivery v. NLRB, 563 F.3d 492 (D.C. Cir. 2009).

The D.C. Circuit noted in this first 2009 FedEx case that decisions by the NLRB had shifted over time. In earlier decisions, the NLRB had focused on an “’employer’s right to exercise control’ over the workers’ performance of their jobs,” but in later decisions the NLRB placed emphasis on whether the workers in question “have significant entrepreneurial opportunity for gain or loss.”

The D.C. Circuit concluded that the “indicia of independent contractor status ‘clearly outweighed’ the factors that would support employee status.” The NLRB had not sought Supreme Court review of the first 2009 FedEx decision by the D.C. Circuit. So, independent contractor status for the drivers won out.

SECOND DECISION: In the second FedEx independent contractor case in March 2017 before the NLRB, FedEx argued that the prior 2009 D.C. Circuit decision (where FedEx won against the NLRB) compelled a ruling of independent contractor status by the D.C. Circuit. The NLRB, however, strangely had chosen to disregard the 2009 decision by the D.C. Circuit. In its ruling, the NLRB said it “disagreed with [the D.C. Circuit’s] interpretation of the Act.” That NLRB decision was promptly appealed by FedEx.

The D.C. Circuit again reversed the NLRB. The D.C. Circuit stated in March 2017: “It is as clear as clear can be that ‘the same issue presented in a later case in the same court should lead to the same result.” The D.C. Circuit then stated forcefully: “Doubly so when the parties are the same.” Same facts; same parties.

The March 2017 D.C. Circuit decision applies only to single-route FedEx Ground drivers, who were FedEx’s most questionable group of drivers in terms of independent contractor misclassification.

Happily for FedEx, FedEx has now totally succeeded for a second time before the U.S. Court of Appeals for the D.C. Circuit in its legal challenge to a ruling by the NLRB that FedEx Ground Division drivers are not independent contractors but rather employees who can be unionized.

So in this 2017 D.C. Circuit Decision, the D.C. Circuit vacated the NLRB’s order that certified the Teamsters as the FedEx drivers’ representative. FedEx again soundly won against the NLRB. The D.C. Circuit announced in its 2017 Decision, “The Hartford single-route FedEx drivers are independent contractors to whom the National Labor Relations Act’s protections for collective action do not apply.”

INDEPENDENT CONTRACTORS ARE EXCLUDED FROM THE NLRA’S DEFINITION OF EMPLOYEE: This March 2017 decision is important because the NLRB guarantees private-sector employees (not independent contractors!) the right to organize, form unions, and bargain collectively with their employers. In 1947, Congress amended the NLRA to expressly exclude independent contractors from the Act’s definition of employee.

CONFUSION OF MANY DIFFERENT INDEPENDENT CONTRACTOR TESTS: The takeaway for employers from the March 2017 FedEx decision is that in determining whether workers are employees or independent contractors, employers must remember that there are very different tests as related to the NLRA, federal taxes, the Fair Labor Standards Act, state wage and hour law, ERISA, the Affordable Care Act, and various other circumstances. For example, the Illinois Department of Employment Security (IDES) test (Section 212.1) is so unique as an independent contractor trucking test that it is the only one of its kind in the entire United States.

While the D.C. Circuit has for the moment clarified (or rather reinforced) its view as to the proper test for independent contractor status under the NLRA, employers should always focus on where their greatest risk is and work at lowering this risk.

For assistance with independent contractor hearings or issues or restructuring independent contractor relationships or agreements to reduce risk, contact Attorney Nancy E. Joerg who can be reached at Wessels Sherman’s St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com.