NLRB v. Friendly Cab Co.NLRB v. Friendly Cab Co.
On Petition for Review of an Order of the National Labor Relations Board
Before: Jane R. Roth,* Sidney R. Thomas, and Consuelo M. Callahan, Circuit Judges.
Opinion by Judge Callahan
Arthur F. Rosenfeld, Acting General Counsel, John E. Higgins, Jr., Deputy General Counsel, John H. Ferguson, Associate General Counsel, Aileen A. Armstrong, Deputy Associate General Counsel, David Habenstreit, Supervising Attorney, Kathleen E. Lyon, Attorney, Meredith L. Jason, Attorney (Argued), for petitioner-respondent National Labor Relations Board.
Alexander J. Berline, Esq. (Argued), Shai Zemach, Esq., Hanson Bridgett Marcus Vlahos & Rudy, LLP, for respondents-petitioners Friendly Cab Company, Inc., et al.
David A. Rosenfeld, Esq., Caren P. Sencer, Esq. (Argued), Weinberg, Roger & Rosenfeld, A Professional Corporation,
OPINION
CALLAHAN, Circuit Judge:
Congress enacted the
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,
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
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.”
Although there was conflicting testimony regarding whether Friendly’s drivers had to accept credit cards, the SOP requires that drivers accept scrip and vouchers from customers.3
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
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. Following a hearing conducted before a hearing officer, a NLRB regional director issued a Decision and Direction of Election concluding that Friendly’s drivers were employees within the meaning of Section 2(3) of the Act and directing that a formal vote take place among all of the taxicab drivers to determine whether they wanted the Union as their official representative. Friendly petitioned for review, and a three-member panel of the NLRB affirmed the regional director’s decision in a Decision on Review. See Friendly Cab Co., Inc., 341 N.L.R.B. 722 (2004) (generally referred to as the “Underlying Representation Proceeding”).
Following its certification as the exclusive collective-bargaining representative of Friendly’s taxicab drivers, the Union wrote Friendly on several occasions to meet and negotiate over the terms of employment of Friendly’s taxicab drivers. Friendly refused on the basis that it would seek judicial review of the Underlying Representation Proceeding. The Union subsequently filed a charge with the NLRB alleging that Friendly violated Sections 8(a)(1) and (a)(5) of the Act by refusing to participate in collective bargaining. Following a trial, an administrative law judge (“ALJ”) concluded that Friendly violated the Act and recommended Friendly be “ordered to cease-and-desist, to meet and bargain on request with the Union, and, if an understanding is reached, to embody the understanding in a signed agreement.” The NLRB affirmed the ALJ’s decision that Friendly violated the Act and adopted the ALJ’s recommended order. See Friendly Cab Co., Inc., 344 N.L.R.B. No. 64, 177 L.R.R.M. (BNA) 1135 (Apr. 20, 2005) (generally referred to as the “Unfair Labor Practice Proceeding”). Friendly now seeks review of that order. Because the NLRB’s decision in the Unfair Labor Practice Proceeding is based on findings made in the Underlying Representation Proceeding, the record in the Underlying Representation Proceeding is also before this court. See
II. Standard of Review
In reviewing the NLRB’s application of agency principles to the facts of this case, “the court should not set aside the Board’s determination of the issue merely because the court, as an original matter, would have decided the case the other way. If the Board’s conclusion represents a choice between two fairly conflicting views, it may not be displaced.” Merchants Home Delivery Serv., Inc. v. NLRB, 580 F.2d 966, 973 (9th Cir. 1978) (internal quotation marks and citations omitted); see also NLRB v. Town & Country Elec., Inc., 516 U.S. 85, 94 (1995) (stating “[s]ince the task of defining the term ‘employee’ is one that has been assigned primarily to the agency created by Congress to administer the Act, . . . the Board’s construction of that term is entitled to considerable deference”) (internal quotation marks and citations omitted). However, the NLRB’s decision cannot be upheld if its “ ‘application of the law to the facts overlooked accepted principles of the law of agency . . . .’ ” SIDA of Hawaii, Inc. v. NLRB, 512 F.2d 354, 357 (9th Cir. 1975) (citation omitted). This is because “a determination of pure agency law involve[s] no special administrative expertise that a court does not possess.” NLRB v. United Ins. Co. of Am., 390 U.S. 254, 260 (1968). Accordingly, we will uphold the NLRB’s decision if it “correctly applied the law and if there is substantial evidence on the record as a whole to support its findings of fact.” Chipman Freight Servs., Inc. v. NLRB, 843 F.2d 1224, 1225 (9th Cir. 1988) (citing NLRB v. Int’l Longshoremen’s Ass’n, 473 U.S. 61, 78-79 (1985)).
[1] The entire dispute between Friendly, its taxicab drivers, the Union, and the NLRB can be distilled into one question: Are Friendly’s taxicab drivers “employees” or “independent contractors” under the Act?5 If they are “employees,” Friendly’s drivers are protected by the Act and are entitled to collective bargaining representation. See
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.
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. See NLRB v. Associated Diamond Cabs, Inc., 702 F.2d 912, 924 (11th Cir. 1983); Local 777, Democratic Union Org. Comm., Seafarers Int’l Union of N. Am., AFL-CIO v. NLRB, 603 F.2d 862, 879 (D.C. Cir. 1978); City Cab Co. of Orlando, Inc., 285 N.L.R.B. 1191, 1194 (1987) (“City Cab of Orlando I”). 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. See Associated Diamond Cabs, 702 F.2d at 924; Local 777, Seafarers, 603 F.2d at 879; City Cab of Orlando I, 285 N.L.R.B. at 1194.
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. Friendly Cab, 341 N.L.R.B. at 724. 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. Id. at 722. 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
B. Evidence of Employee Status
[3] 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. See Merchants, 580 F.2d at 973; see also Corporate Express, 292 F.3d at 780. Friendly’s restrictions against its drivers’ operating independent businesses or developing entrepreneurial opportunities strongly supports the NLRB’s determination that Friendly’s drivers are employees.
In SIDA, this court found that the taxicab drivers were independent contractors, stating: “[t]he drivers are substantially independent in their operations. They are generally free to work or not work for SIDA when they choose; they may ‘moonlight’ by working for other cab companies; they are free to make their own arrangements with clients and to develop their own goodwill . . . .” 512 F.2d at 357-58. Similarly, in Merchants, this court found that the “entrepreneurial characteristics of the owner-operators tip decidedly in favor of independent contractor status,” noting that the delivery truck drivers “sometimes engage in non-Merchants business.”
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.” Friendly Cab, 341 N.L.R.B. at 724. 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.8
[4] These limitations do not allow Friendly’s drivers the entrepreneurial freedom to develop their own business interests like true independent contractors. In SIDA, our conclusion that the taxicab drivers were independent contractors was premised largely on the fact that SIDA drivers were able “to make their own arrangements with clients and to develop their own goodwill.” 512 F.2d at 357-58. Here, it is telling that Friendly’s SOP mandates that its drivers must operate the
[5] Additional entrepreneurial characteristics — such as substantial investment in property and the ability to employ others — are also absent. See Merchants, 580 F.2d at 975 (finding ownership and ability to employ others as important factors indicating independent contractor status); SIDA, 512 F.2d at 357 (finding ownership as an important factor indicating independent contractor status); see also Corporate Express, 292 F.3d at 780 (stating “[t]ypically an entrepreneur not only supplies his own equipment or tools; he may also hire subordinates and work for more than one party”). 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.
[6] Another factor supporting the NLRB’s determination that Friendly’s drivers are employees is the evidence that Friendly sought to control the means and manner of its drivers’ performance by regulating the manner in which they drive, imposing a strict disciplinary regime, requiring drivers to carry advertisements without receiving revenue, requiring drivers to accept vouchers subject to Friendly’s “processing fees,” imposing a strict dress code, and requiring training in excess of government regulations. All of these factors support the NLRB’s determination that Friendly’s drivers are employees.
[7] 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 Cab, 341 N.L.R.B. at 724. Friendly’s Manual further instructs drivers in the manner they should
In assessing control, courts have also focused on the presence, or lack thereof, of discipline imposed by a taxicab company on its drivers. In City Cab Co. of Orlando, Inc. v. NLRB, 628 F.2d 261 (D.C. Cir. 1980) (“City Cab of Orlando II”), the court found it significant that drivers were reluctant to refuse either a dispatcher’s call for fear of not receiving future dispatches or an airport assignment because they would have to return to the end of the airport taxicab line. Id. at 265 (concluding that taxicab drivers were employees); see NLRB v. O’Hare-Midway Limousine Serv., 924 F.2d 692, 695 (7th Cir. 1991) (finding company’s “right to fine or reprimand the drivers for failure to comply with company procedures” as support for concluding limousine drivers were employees); Stamford Taxi, Inc., 332 N.L.R.B. 1372, 1384 (2000) (finding taxicab drivers that refused dispatch calls were “subject to discipline, denial of further dispatched calls, or lease termination” as support for concluding taxicab drivers were employees). Conversely, in Yellow Taxi Co. of Minneapolis v. NLRB, 721 F.2d 366 (D.C. Cir. 1983), the court held the lack of a disciplinary regime was an important factor leading to the determination that the taxicab drivers were independent contractors. Id. at 376-77; see also C.C. Eastern, 60 F.3d at 858 (finding company’s lack of a conventional disciplinary system was an indicator of independent contractor status). Distinguishing the disciplinary system in City Cab of Orlando II, the court in Yellow Taxi of Minneapolis found that the drivers were free to refuse any radio call from the dispatcher. 721 F.2d at 377. In fact, the chief dispatcher testified that the drivers were “free to refuse orders for runs, without penalty, and dispatchers are so instructed.” Id. Such is not the case here.
Friendly exercised substantial control over its drivers through a strict disciplinary regime. Significantly, Friendly
Friendly’s requirement that its taxicabs carry advertisements is additional evidence of control because drivers are subject to Friendly’s discretionary requests to change advertisements. Friendly Cab, 341 N.L.R.B. at 724. These requests require that the driver sit idle while advertisements are changed and result in the driver losing potential fares. Also, drivers testified that they complained to Friendly that they did not want advertising signs for various companies on top of their taxicabs, but were told they did not have a choice in the matter. One driver testified that Friendly required him to change the advertising up to once every twenty days, requiring him to wait each time at the company’s premises between fifteen minutes and one hour.
The type of control Friendly exercises over its drivers exceeds that found in the typical case in which a company requires its workers place advertisements on work vehicles. In Carnation Company v. NLRB, 429 F.2d 1130 (9th Cir. 1970),
Friendly’s requirement that its drivers accept vouchers is yet further evidence of control. Some courts have found that requiring taxicab drivers to accept flat voucher fees is not evidence of sufficient control by itself to indicate “employee” status. See, e.g., Yellow Taxi of Minneapolis, 721 F.2d at 371; Air Transit, Inc. v. NLRB, 679 F.2d 1095, 1100 (4th Cir. 1982). However, Friendly exercises greater control through the graduated processing fees it charges drivers when they redeem vouchers. While it is unclear how often it occurs, Friendly’s drivers are required at Friendly’s discretion to transport passengers and packages pursuant to contracts between Friendly Transportation and various companies. Friendly Cab, 341 N.L.R.B. at 723. These mandated voucher trips can pay lower amounts than the meter rates, and the voucher reimbursement system charges Friendly’s drivers graduated processing fees ranging from ten to thirty percent of the total amount of the voucher. Id. Similar to the advertising requirement, Friendly’s voucher requirement exceeds the type of control typically exercised over independent contractors.
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. See Friendly Cab, 341 N.L.R.B. at 722-24. While the incorporation of government regulations into a company’s manual is not evidence of an employer-employee relationship, see SIDA, 512 F.2d at 359, 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. Cf. Carnation, 429 F.2d at 1132 (noting that the fact distributors were not required to undergo training at company’s request was indicative of independent contractor status); Air Transit, 679 F.2d at 1098 (finding in independent contractor analysis that “drivers receive no type of training and are not
IV. Regional Director’s Decision as Evidence of Arbitrariness
[8] Finally, we reject Friendly’s contention that the NLRB’s decision in Friendly Cab was arbitrary. Friendly’s argument is based on the fact that the same regional director that concluded Friendly’s taxicab drivers are employees in the Underlying Representation Proceeding also concluded in a separate representation proceeding that drivers for a rival taxicab company, Veteran’s Cab Corporation, are independent contractors. We find Friendly’s argument unpersuasive because it is the three-member panel’s Decision on Review — not the regional director’s Decision and Direction of Election — that is being reviewed pursuant to Section 9(d) of the Act, and, in any event, Veteran’s Cab is distinguishable.
Under Section 3(b) of the Act, Congress provided the NLRB with the authority to delegate “any or all” of its powers to a three-member panel and to delegate “to its Regional Directors the [authority under Section 9] to determine the appropriate bargaining units, to direct elections, and to certify the results of such elections, subject to review by the Board.” Ritz-Carlton Hotel Co. v. NLRB, 123 F.3d 760, 762 (3d Cir. 1997) (citing Pub. L. 86-257, 73 Stat. 542 (1959) (codified as amended at
Friendly ignores the fact that the Board — acting through a panel — granted Friendly’s request to review the regional director’s decision and concluded that Friendly’s drivers are “employees” within the meaning of the Act.9 See Friendly Cab, 341 N.L.R.B. 722. The panel’s decision then became the final administrative decision that we review. See
Moreover, Friendly’s reliance on Veteran’s Cab is flawed because Friendly exercises substantially more control over its taxicab drivers than Veteran’s does over its drivers. The weekly gate charged by Veteran’s to its drivers depends solely on the type of cab they drive (city cab, airport, or clean natural gas) and does not vary from driver-to-driver based on discretionary factors such as driving record or driving ability. See Veteran’s Cab Corp. & East Bay Taxi Drivers Ass’n, 99
Thus, we do not find any support for Friendly’s position that the NLRB’s decision is arbitrary based on the actions of the regional director in adjudicating the representation proceedings in this case and in Veteran’s Cab. Even if we could examine the regional director’s decisions for evidence of arbitrariness, we would find that they are sound because Veteran’s Cab exercises substantially less control over its drivers.
V. Conclusion
[9] 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.10
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.
Notes
Id. (quoting H.R. Rep. No. 245, 80th Cong., 1st Sess. 18 (1947), reprinted in 1 NLRB, Legislative History of the Labor Management Relations Act, 1947, 309 (1948)).‘Employees’ work for wages or salaries under direct supervision. ‘Independent contractors’ undertake to do a job for a price, decide how the work will be done, usually hire others to do the work, and depend for their income not upon wages, but upon the difference between what they pay for goods, materials, and labor and what they receive for the end result, that is, upon profits.