In SuperShuttle, the Politics of Employment Status Tests Laid Bare

Earlier this year, the NLRB decided SuperShuttle DFW, Inc. v. Amalgamated Transit Union Local 1338.  In that case, the Board determined that a shuttle company’s drivers were correctly classified independent contractors.  The Board took that opportunity to revise its test of employment status, placing the vaguely defined idea of “entrepreneurial activity” at the center of its analysis.  As explained below, the new test makes it difficult for gig-workers to be classified employees under the NLRA.

At the time, commentators proclaimed SuperShuttle a victory for Uber and Lyft; SuperShuttle does indeed look like a “shabby, low-tech version of Uber.”  So, like the Department of Labor’s recent guidance eviscerating gig-workers’ claims to employee status under the FLSA, it seems clear that SuperShuttle was handed down primarily to reassure investors anticipating Uber and Lyft’s IPOs that they need not fear reclassification.  On the longer view, however, investors and tech companies should be a little more circumspect.  The real lesson of SuperShuttle is that the NLRB’s test of employment status is pretty much meaningless.  As Ben explained in the context of the FLSA, these kinds of tests function as little more than empty vessels through which decisionmakers channel their policy preferences.  If that is true, then SuperShuttle drivers and other gig-workers may be independent contractors only so long as the NLRB continues to be composed of a Republican majority.

The NLRB’s Test and Entrepreneurial Opportunity

To determine employment status, the Board has historically applied a confusing, multi-factor test based on common-law agency principles. Decision-makers assess each factor individually, with no one factor being dispositive, before determining whether they tend to show that the individual is an employee or independent contractor.  The upshot is that board members have a lot of discretion in deciding whether someone is an employee.

That test has been cause for dispute between the Board and the D.C. Circuit for ten years now.  In 2009, the Circuit called the Board’s test into question in a case involving the employment status of FedEx drivers.  After overturning a regional director’s determination that the drivers were employees, a divided panel announced a new test which it claimed reflected an evolution in the Board’s jurisprudence toward focusing on “whether the ‘putative independent contractors have significant entrepreneurial opportunity for gain or loss.’”  The Circuit’s proposed test placed “entrepreneurial opportunity” at the center of the inquiry as an “animating principle” by which to evaluate the common law factors.  The Circuit also suggested that entrepreneurial opportunity may be found where a worker has retained the contractual right to engage in certain activities, including working for competitors, hiring employees, owning capital, and selling assets for profit.  Per the Circuit’s understanding, workers need not regularly engage in any of these activities to be deemed independent contractors; even “one instance” can suffice.  As Judge Garland pointed out in dissent, under the Circuit’s test “an insubstantial exercise [of entrepreneurial activity] may, in effect, tilt the entire outcome” of the inquiry.

Five years later, the Board shot back in FedEx Home Delivery, declining to adopt the Circuit’s test and rejecting the notion that it had elevated “entrepreneurial opportunity” above any other consideration.  Instead, it held that entrepreneurial opportunity should be treated as “one aspect of a relevant factor that asks whether the evidence tends to show that the putative contractor is, in fact, rendering services as part of an independent business.”  Relevant evidence speaking to the “rendering services” factor would include the worker’s ability to engage in the kinds of activities described above.  Crucially, the Board emphasized that putative contractors must be able to realistically and regularly engage in those activities, taking into consideration employer-imposed constraints, in order for that factor to bear any weight.  It thus explicitly repudiated the Circuit’s understanding of entrepreneurial opportunity, emphasizing that “the fact that only a small percentage of workers in a proposed bargaining unit have pursued an opportunity demonstrates that it is not, in fact, a significant aspect of their working relationship with the putative employer.”

SuperShuttle and Implications

In SuperShuttle, the Board has at last adopted a version of the Circuit’s test.  Per that decision, entrepreneurial opportunity now serves as a “prism” through which all of the traditional common law factors are analyzed: those factors that cut in favor of entrepreneurial opportunity indicate contractor status; those that don’t point to employee status.  Moreover, like the Circuit before it, the Board seemed to care little about the workers’ actual ability to leverage entrepreneurial opportunity for economic gain or to place any particular weight on evidence that workers regularly engaged in activities that could be considered “entrepreneurial” in nature.

The facts of SuperShuttle are instructive. Drivers enter into non-negotiable “uniform franchise agreements” (UFAs) that establish conditions with which they must comply lest they face termination.  Drivers must then purchase or lease their own vehicles, but choice is constrained by stringent specifications laid out in the UFA. SuperShuttle also leases compliant vehicles to its drivers in order to help out “these guys who have poor credit.”  Like Uber and Lyft, SuperShuttle does not set schedules or routes; drivers are—as the majority puts it—allowed to work “as much as they choose, whenever they choose.”  When drivers wish to begin a “shift” they need only turn on their “trip generating system,” a company-owned device that transmits gigs.   In return for the right to use that job distribution system and the company’s intellectual property, drivers pay SuperShuttle an initial fee totaling $300–500 and a flat weekly fee of $375–575.  After fees, drivers get to keep all of the fares they earn.

Those facts sufficed to convince the Board majority that drivers possessed significant opportunity for profit and loss consistent with entrepreneurial activity and were thus independent contractors.  But as Board Member McFerran pointed out in dissent, the majority glossed over several countervailing factors.  Two are worth emphasizing.  First, drivers have no control over how much they charge; SuperShuttle sets all fares.  Second, drivers are barred from using their vehicles to work for competitors or any other transportation business.  Thus, the only way for drivers to earn more money—and to see more return on the investment in their vehicles—is by working longer hours for SuperShuttle at rates dictated by SuperShuttle under conditions imposed by SuperShuttle.

It’s hard to imagine how that means of making a living qualifies as “entrepreneurial” in any sense of the word.  It certainly does not comport with the D.C. Circuit’s original understanding of what an “entrepreneur” is: one who “takes economic risk and has the corresponding opportunity to profit from working smarter, not just harder.”  The majority’s holding can be supported only by the highly formal definition of entrepreneurial opportunity that it seems to adopt——one that looks at what workers are contractually allowed to do instead of practically able to do.

All of which is to say that entrepreneurial opportunity means only what the Board or a court says it means.  And if that is the case—if adjudicators really are free to add, subtract, redefine, and weigh the factors of their test as they please—then we should be cautious about declaring SuperShuttle a wholesale victory for Uber and Lyft.

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