Court Holds Taxicab Drivers Improperly Classified as Independent Contractors
In a somewhat disappointing ruling for employers, the Ninth Circuit recently held in NLRB v. Friendly Cab Company that taxicab drivers were improperly classified as independent contractors rather than employees. In reaching its decision, the court focused on the control the employer exercised over the drivers and its restriction on the drivers' entrepreneurial activities.
As background, the National Labor Relations Act ("NLRA") provides employees the right to engage in collective bargaining, but does not extend this right to independent contractors. Friendly Cab Company ("Friendly") contended that its taxicab drivers were independent contractors and therefore not entitled to collective bargaining rights under the NLRA. The National Labor Relations Board ("NLRB") concluded that the drivers were indeed employees, rather than independent contractors. Friendly appealed the decision to the Ninth Circuit, and the Ninth Circuit affirmed.
In its review, the Ninth Circuit focused on Friendly's control over the drivers' job performance. Through its policy manual and its standard operating procedures, Friendly regulated how the drivers operated their cabs, imposed a strict dress code, and required drivers to attend training in excess of government requirements. Drivers were required to accept Friendly vouchers from customers, even when these vouchers paid the drivers less than their normal metered fares; Friendly also required the drivers to accept all reasonable customer calls from dispatchers and subjected them to discipline if they refused or were late. The evidence also showed that Friendly monetarily penalized drivers who expressed any disagreement with management. In extreme cases, drivers who did not comply with Friendly's requirements could have their leases suspended or terminated.
The court also focused on the restrictions Friendly placed on the drivers' ability to pursue entrepreneurial opportunities, noting that drivers were expected to conduct all service calls on company-provided equipment and were forbidden from giving their own business cards or phone numbers to customers. In addition, drivers could not sublease their vehicles and had to carry ads for outside vendors that Friendly provided.
The court found that these factors outweighed those indicating the drivers were independent contractors: The drivers leased their cabs under seven-day rental agreements specifying that they were independent contractors; they kept all fares and tips they earned; they did not work set hours or minimum hours; they did not receive benefits from Friendly; and Friendly did not withhold social security or other taxes on their behalf. Weighing these facts against those described above, the found that these taxicab drivers had been misclassified and were actually employees.
Although some of the elements the court focused on are specific to the taxicab industry, a number of them apply to employers more generally. Restrictions on the drivers' entrepreneurial freedom played a large part in the court's analysis, as did Friendly's control over how the drivers performed their jobs and the system of discipline in place for violating these rules. Friendly's training and dress code requirements provided further support for the court's conclusion that the drivers were employees.
Employers who classify any of their workers as independent contractors should review the Friendly Cab decision – with careful attention to the factors of control and restrictions on entrepreneurial activity – to ensure their employment practices comply with the evolving standards governing this issue. If you have any questions about the implications of this decision for your business, please contact us directly.