A recent NLRB decision, SuperShuttle DFW, Inc. marks a renewed focus on entrepreneurship, giving businesses and workers greater flexibility in their relationships. The decision is also a resounding victory for the franchise industry who, in recent years, have faced repeated threats to its core business model. With a heightened focus on the entrepreneurial opportunity, franchisors are less likely to be determined joint employers with their franchisees based upon the degree of control they exercise to protect the franchise system and brand reputation.
The NLRB returned to its long-established common law test for independent-contractor status in a decision released last week, clarifying the role of entrepreneurial opportunity as an important part of the test. The decision overturned a 2014 decision in FedEx Home Delivery which “fundamentally shifted the independent contractor analysis, for implicit policy-based reasons, to one of economic realities, i.e, a test that greatly diminishes the significance of entrepreneurial opportunity.” Last week’s decision is a big win for the franchise community to businesses who engage workers to provide temporary or short-term services and to rideshare companies such as Lyft and Uber (who is currently engaged in litigation with the Board over this issue).
SuperShuttle DFW, Inc., involved shuttle-van-driver franchisees of SuperShuttle at DFW airport. In determining that the franchisees are not employees, the NLRB determined that the franchisees’ leasing or ownership of their work vans, their method of compensation, and their almost-unilateral control over their daily work schedules and working conditions provided the franchisees with significant entrepreneurial opportunity for economic gain. These factors, along with the absence of supervision and the parties’ understanding of an independent contractor relationship, led the NLRB to hold that the franchisees are not employees.
In reaching its decision, the NLRB expressly overruled an Obama-era decision in FedEx Home Delivery, which ignored the realities of entrepreneurial opportunities in determining independent contractor status.