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Shift Toward Importance of "Entrepreneurial Opportunity" in Test for Classifying Independent Contractors Under Labor Law

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May 21, 2009

The United States Court of Appeals for the District of Columbia Circuit recently held in FedEx Home Delivery v. NLRB that FedEx drivers were independent contractors, not FedEx employees that can organize under the National Labor Relations Act.

FedEx had opposed efforts to organize its drivers by asserting that they were independent contractors and were unprotected by the Act. The Act only applies employees. The National Labor Relations Board rejected FedEx's argument and concluded that the drivers were FedEx employees for purposes of the Act. FedEx appealed and the D.C. Circuit vacated the Board's order.

The D.C. Circuit's decision in FedEx is significant because in overruling the Board, the court relied heavily on whether the driver's "position presents the opportunities and risks inherent in entrepreneurialism," rather than focusing on FedEx's right to control the driver's work, which has historically been the most significant factor in determining whether a worker is an employee or an independent contractor. Though the court took pains to state that it had examined the case under the factors of the traditional right-of-control test, it explained that an "entrepreneurial opportunity" is the most important consideration of all. The court concluded that FedEx drivers have such entrepreneurial opportunity because the drivers set their own hours of work and routes, and FedEx allows them to use their trucks for personal errands or other business ventures (provided that the drivers cover up the FedEx logo). FedEx drivers can also hire and pay their own staffs, and can even assign their contractual rights to their routes without FedEx's permission.

Although it may be too early to proclaim that the D.C. Circuit's decision in FedEx has created a new test for independent contractor status, this case will likely have a significant impact given that the D.C. Circuit has concurrent jurisdiction to review every order issued by the Board, and its decisions on labor issues are generally held in high esteem by other courts.

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