Pay No Attention to the Man Behind the Curtain: Control as a Nonfactor in Employee Status
Determinations Under FedEx Home Delivery v. NLRB
Author(s): Jeffrey E. Dilger
Source: ABA Journal of Labor & Employment Law, Vol. 26, No. 1 (Fall 2010), pp. 123-149
Published by: American Bar Association
Stable URL: http://www.jstor.org/stable/41320566
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123
No

Pay

Attention
the

Behind
a

Nonfactor

Curtain:
in

Determinations
Home

to

Delivery

the

Man

Control

Employee
Under

as
Status

FedEx

v . NLRB

Jeffrey E. Dilger*

Introduction
In July2006, deliverydrivers at two terminals located in Wilmington, Massachusetts, forthe Home Delivery Division of FedEx Ground
Package Systems, Inc. (FedEx Home Delivery) separately elected the
International BrotherhoodofTeamsters,Local Union 25, as theircollective bargaining representative.1In the wake of those elections, FedEx
Home Delivery refused to bargain with the union, contendingthat the
drivers were independent contractors and thereforenot "employees"
under § 2(3) of the National Labor Relations Act (NLRA).2 A Regional
Director of the National Labor Relations Board (NLRB) rejected FedEx's argument but found that certain drivers were statutorysupervi; sors and ordered a new election.3The NLRB affirmedthe findingsof
the Regional Director.4In the pursuant enforcementaction in FedEx
Home Delivery v. NLRB (.FedEx III), the court of appeals forthe D.C.
Circuit refused to enforcethe decision ofthe NLRB, reasoning that the
deliverydriverswere independent contractors.5
Courts and the NLRB have long construed "employee" in the
NLRA solely under the common law test of agency.6However, after
FedEx III , the crux ofthat test has changed in the D.C. Circuit Court of
of
LawSchool;
B.A.2005,University
ofMinnesota
*J.D.candidate
2011,University
and
fortheirsteadfast
Minnesota.
Theauthor
dedicates
thispiecetohisfamily
support
Theauthor
forall theyhavedoneovertheyearstoensurehisacademic
development.
andProfessor
LauraJ.Cooper
F.Befort
wishestothankProfessor
Stephen
additionally
Theauthorfinally
in developing
a publishable
fortheirinsightful
assistance
product.
hisgreatfriend,
effort.
thanks
editing
TylerWiese,forhistireless
563F.3d492,495(D.C.Cir.2009).
1. FedExHomeDelivery
v.NLRB{FedEx///),
2. NationalLaborRelations
Act§ 2(3),29 U.S.C.§ 152(3)(2006);FedExIII , 563
F.3dat 495.
3. FedExHomeDelivery
{FedEx7),NLRBCaseNos.l-RC-22034,
l-RC-22035,
slip
op.at 64 (Sept.20,2006).
4. FedExHomeDelivery
{FedEx77),351N.L.R.B.No.16(Sept.28,2007).
5. FedExIII , 563F.3dat 504.
6. NLRBv.UnitedIns.Co.ofAm.,390U.S.254,256(1968).

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124

26 ABA Journal of Labor & EmploymentLaw 123 (2011)

Appeals: controlhas been replaced with entrepreneurial opportunity.7
This alteration of the test has significantimplications for both current determinationsofemployee status and futureemployerpractices.
Under the NLRA, the decision is especially significantbecause the D.C.
Circuit Court of Appeals, which issued the decision, may be asked to
review any NLRB decision.8 More broadly,the D.C. Circuit's decision
may affectthe application of a host of other employmentstatutes that
also use the commonlaw test to determineemployee status. Because of
FedEx Ill's importance to labor law, the NLRB sought en banc review
of the D.C. Circuit panel's decision, which was denied.9 However, the
NLRB appears determinedto forcethe issue. On October 29, 2010, the
NLRB affirmeda 2007 decision findingthat, under the rightto control
test,FedEx Home Delivery driversbased out of Hartford,Connecticut,
were employees and not independent contractors.10
The goal of this Comment is to explore the implications ofFedEx
ZZ/'smandated focus on entrepreneurial opportunityunder the common law test of agency.11Since the New Deal, courts have struggled
to make decisions regarding employee status. With many statutes,
the issue has been settled, and courts apply the common law test of
agency.12But the FedEx III decision represents a radical departure
fromthe traditional commonlaw test of agency by allowing employers
to exercise greater control over workers without risking the attachment of various statutoryrights under the NLRA. Hence, application
of the FedEx III test will increase the number of workers classified as
independent contractors.
I.
A.

Background
The Origins of theIndependent Contractor!
Employee Distinction
Dichotomizingworkers into independent contractorsand employees finds its origins, like many legal principles, in the English com-

7. FedExIII , 563F.3dat 497.
8. NationalLaborRelations
Act§ 10(f),29 U.S.C.§ 160(f)(2006).Thusfar,the
FedExIII decision
hasbeencitedfavorably
district
court.
See Ruizv.Afbyonefederal
697F.Supp.2d 1199,1214-15(S.D.Cal.2010).
finity
Logistics
Corp.,
9. FedExIII, 563F.3d492,reh'g.
denied(Sept.4,2009).
10. FedExHomeDelivery,
NLRBCase No.34-RC-2205
(Apr.11,2007),affd, 356
N.L.R.B.No.10(2010).
11.Thelegalreasoning
oftheD.C.Circuit
willnotbequestioned.
Thedissent
does
a sufficient
thepotential
inthemajority's
errors
FedExIII ,
job ofanalyzing
reasoning.
563F.3dat 504(Garland,
J.,dissenting).
12. See ClackamasGastroenterology
Assocs.,P.C.v.Wells,538 U.S.440,448-51
theAmericans
withDisabilities
Mut.Ins. Co. v.
(2003)(regarding
Act);Nationwide
503U.S.318(1992)(regarding
theEmployee
Retirement
Income
Darden,
Act);
Security
theAge
Speenv.Crown
Clothing
Corp.,102F.3d625,630-32(1stCir.1996)(regarding
in Employment
Discrimination
ofKandiyohi,
15 F.3d103,105-06
Act);Wildev.Cnty.
TitleVII oftheCivilRights
Actof1964).
(8thCir.1994)(regarding

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Pay No Attentionto the Man Behind the Curtain

125

mon law. In England, the concept necessitating the dichotomy was
the master-servant relationship, the pre-industrial analogue to the
employer-employeerelationship.13The master-servant relationship
accorded certain rights and responsibilities to the parties in the
relationship,14as well as rights to third parties under the theory of
respondeat superior.15These rights and responsibilities were drawn
fromthe personal, paternalistic nature of the relationship.16In this
relationship, it was not uncommon for servants to work forone master their entire lives.17Paternalism, combined with longevity,led William Blackstone to describe the master-servantrelationship as one of
"[t]he three great relations in private life,"alongside husband and wife
and parent and child.18However, not all workers shared such a distinct,paternalistic relationship with their employer.As a result, these
workers were not accorded the benefitsand obligations of the masterservant relationship,19and their masters were not liable forthe torts
of these individuals.20This division in obligation and liability as a re- as it still does today.
sult of employmentstatus created controversy
In resolving the dispute, English courts focused their examination on
"a master's lordly authority and control and the worker's primary or
exclusive dependence on the master forhis livelihood."21
The master-servant relationship survived the transatlantic voyage and played a significantrole in the early American agrarian economy.22However, the arrival of the Industrial Revolution in the late
nineteenth century obliterated the policies underlying the masterservant relationship.The relationship was no longer simple.23New occupations came into existence, as well as new corporate structures.24
13. Richard
R.Carlson,
theLawStillCan'tTellanEmployee
When
ItSeesOne
Why
andHowIt OughttoStopTrying
J.Emp.& Lab.L. 295,302(2001).
, 22 Berkeley
14.Id. (elaborating
thattherights
included
rateandmethod
ofpay,termsofemfortermination
oftherelationship,
andthemaster's
domination
and
ployment,
grounds
control
overtheservant).
15. Benjamin
S. Asia,Employment
Relation:
Common-Law
and LegislaConcept
tiveDefinition
thatinitially,
ofin, 55Yale L.J.76,76-77(1945)(explaining
regardless
contractor
was liableforall tortscommitted
in the
status,an entrepreneur
dependent
courseofservices
forhim).
performed
16. Carlson,
supranote13,at 302.
17. MarkA. Rothstein,
theOtherHalfofthe
Wrongful
RefusaltoHire:Attacking
Rule, 24 Conn.L. Rev.97,99 n.4(1991).
Employment-at-Will
18. 1William
Commentaries
ontheLawsofEngland*410.
Blackstone,
19. Carlson,
supranote13,at 303.
20. Asia,supranote15,at 77(explaining
thatin1826anexception
forindependent
contractors
wascarvedoutofthedoctrine
ofrespondeat
superior).
21. Carlson,
supranote13,at 303.
22. Deborah
A.Ballam,TheTraditional
ViewontheOrigins
oftheEmployment-atWillDoctrine:
orReality
theeffect
ofthe
?,33Am.Bus.L.J.1,6-7 (1995)(describing
Myth
master-servant
servitude
andslavery).
relationship
uponindentured
23. Carlson,
supranote13,at 303.
24. Id.

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126

26 ABA Journal of Labor & EmploymentLaw 123 (2011)

The resultant relationship was impersonal and without the reciprocal
rights and responsibilities of the master-servant relationship.26This
new employer-employeerelationship was largely unregulated, thereby
making definitionof the relationship less important.Tort law, and not
employment or labor laws, provided the early impetus for defining
the employer-employeerelationship in order to determine employer
liability to iiyured third parties.26While courts initially struggled, a
test emerged as the predominate method to determine
right-to-control
test was never
Yet, the right-to-control
respondeat superior liability.27
the exclusive test, nor was it simple or predictable.28This test focused
on the amount of control exercised by the employer over the worker,
reasoning that such controlwas vital in determiningemployerfault.29
It was embodied in the Restatement (First) ofAgency § 220 in 1933.30
B.

Employee Status and theRise ofStatutoryRegulation
During the early twentiethcentury,laissez-faire capitalism ruled
the economyand the law.31The results ofthis period were not favorable
for the worker: poor working conditions,low wages, long hours, and
littlejob security.32
In response, Congress enacted numerous labor and
employmentstatutes, including the Railway Labor Act,33the NLRA,34
and the Fair Labor Standards Act (FLSA).35 From that moment,definingthe employer-employeerelationship took on new importance.
Instead ofsolely definingtortliability,the employer-employeerelationship now accorded various rightsand responsibilities.

Cen25. Note,Tortious
withContractual
Relations
in theNineteenth
Interference
TheTransformation
andTort
Contract,
,93 Harv.L. Rev.1510,1520-21
tury:
ofProperty,
(1980).
26. Carlson,
supranote13,at 304.
A RoseIs Not
27. JohnBruntz,
TheEmployee
/Independent
Contractor
Dichotomy:
supranote13,at 305
Alwaysa Rose, 8 HofstraLab.L.J.337,338-39(1991);Carlson,
theearlyapplication
oftheright-to-control
testfortortliability).
(explaining
28. GeraldM.Stevens,
Relation
TheTestoftheEmployment
, 38 Mich.L. Rev.188,
in 1917showed
no
ofrespondeat
189-90(1939)(noting
thata survey
liability
superior
fewer
thanninedifferent
tests);Carlson,
supranote13,at 310-11.
29. Carlson,
supranote13,at 305;seealsoBoswellv.Laird,8 Cal.469,489(1857)
thesupeis placedwherethepowerexists.
("Theresponsibility
Havingpowertocontrol,
tothirdparties,
orhe
ittotheprevention
ofinjuries
riorormaster
is boundtoexercise
willbeheldliable.").
30. Stevens,
supranote28,at 189.
31. BretBoyce,
as a NaturalRightandas a Conventional
RightinConProperty
Law, 29 Loy.L.A.Int'l& Comp.
L. Rev.201,276(2007)("[T]heCourtstruck
stitutional
and
aimedat ensuring
downa hostofProgressive
enactments
publichealthandsafety
minimum
conditions
wages,maximum
bymeasuresestablishing
improving
working
oflaissez-faire
theprinciple
restrictions
onchildlabor.. . . [and]elevated
hours,
capitalism... tothestatusof[an]immutable
lawDofnature.").
32. SeeToddE. Pettys,
OurAnticompetitive
Patriotism
, 39U.C.DavisL. Rev.1353,
1394(2006).
33. 45U.S.C.§§ 151-188(2006).
34. 29U.S.C.§§ 151-169(2006).
35. 29U.S.C.§§ 201-219(2006).

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Pay No Attentionto the Man Behind the Curtain

127

Though Congress had the power to define clearly the relationit largely deferredthis
ship by being explicit in statutory drafting,36
decision to the courts by vaguely defining"employee" and "employer."
For example, the FLSA defined"[e]mployer"as "any person acting directlyor indirectlyin the interestofan employerto an employee"37and
The NLRA
"employee"as "any individual employed by an employer."38
defined"employer"as "any person acting as an agent of an employer,
and "employee"as "any employee,and shall not
directlyor indirectly"39
be limited to the employees of a particular employer."40
The courts struggled,as they did with respondeat superior liabilto
ity, define the bounds of the relationship. Control was important,
but courts considered the common law right-to-control
test too narrow
to effectuatethe policies and purposes ofNew Deal social legislation.41
The additional policy considerations underlying these employment
statutes merited consideration of factors beyond the traditional common law controltest.42The result of the additional considerations was
the creation of a competingtest- the economic reality test.43
Initially recognized in NLRB v. Hearst Publishing, Inc .,44the economic reality test was furtherdefined in the 1947 trilogyof United
States v. Silk,45RutherfordFood Corp. v. McComb ,46and Bartels v. Birmingham.47These cases applied the economic realitytest to the NLRA,
Social Security Act, and FLSA. In Silk, the Court considered five factors: degrees of control,opportunities forprofitor loss, investment in
facilities,permanency of relation, and skill required in the claimed independent operation.48In determiningemployee status, "[n]o one [factor] is controllingnor is the list complete."49While the Court strove
to distinguish economic reality from common law agency, only one
factor- opportunitiesforprofitor loss- was unique to the economic reality test.50The remainder were also factorsin the Restatement (First)
36. Vincent
P.Tassinari,
PatentCompensation
Under35 U.S.C.§ 284, 5 J.Intell.
Prop.L. 59,79-80(1997).
37. 29U.S.C.§ 203(d)(2006).
38. Id. § 203(e)(1).
39. Id. § 152(2).
40. Id. § 152(3).
41. See, e.g.,UnitedStatesv.Silk,331 U.S. 704,711-12(1947);NLRBv.Hearst
PubFns,
Inc.,322U.S.Ill, 128-29(1944).
42. Carlson,
supranote13,at 311.
43. HearstPubl'ns
, 322U.S.at 127-29.
44. Id.
45. 331U.S.704(1947).
46. 331US. 722(1947).
47. 332U.S.126(1947).
48. Silk,331U.S.at 716.
49. Id.
50. CompareSilk, 331 U.S. at 716,withRestatement
(First)of Agency§ 220
(1933).

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128

26 ABA Journal of Labor & EmploymentLaw 123 (2011)

of Agency.51The true differencein the tests was in the focus of the
factoredinquiry.In Bartels , the Court explained that the purpose of
the economic reality test was to identify"those who as a matter of economic reality are dependent upon the business to which they render
service."52
The application ofthe economicrealitytest to the NLRA was short
lived. At the end of World War II, amid a wave of labor disputes and
congressional discontentover the Hearst decision, Congress passed the
Taft-HartleyAct53and implicitlyoverturnedHearst by excluding indeThis forcedthe NLRB and
pendent contractorsfromNLRA protection.54
courtsto use the commonlaw right-to-control
test.This test was embodied in the American Law Institute's Restatement (Second) ofAgency:
§ 220. Definitionof Servant
servicesin the af(1) A servantis a personemployedto perform
fairsofanotherand whowithrespecttothephysicalconductin
theperformance
oftheservicesis subjectto theother'scontrol
orrightto control.
whetherone actingforanotheris a servantor
(2) In determining
an independent
thefollowing
mattersoffact,among
contractor,
others,are considered:
the master
(a) the extentofcontrolwhich,by the agreement,
mayexerciseoverthedetailsofthework;
(b) whetheror not the one employedis engagedin a distinct
occupationorbusiness;
(c) the kind of occupation,withreferenceto whether,in the
theworkis usuallydoneunderthedirectionofthe
locality,
employerorbya specialistwithoutsupervision;
(d) theskillrequiredin theparticularoccupation;
(e) whetherthe employeror the workmansupplies the instrumentalities,
tools,and theplace ofworkfortheperson
doingthework;
(f) thelengthoftimeforwhichthepersonis employed;
whetherbythetimeorbythejob;
(g) themethodofpayment,
(h) whetherornottheworkis a partoftheregularbusinessof
theemployer;
(i) whetherornotthepartiesbelievetheyare creatingtherelationofmasterand servant;and
(j) whethertheprincipalis oris notin business.55
As § 220(1) indicates, the focus of the Restatement test is the control
that an employerexercises over the employee.56While § 220(2) provides
guidance on the factors to be considered, the phrase "among others"
51. Compare
Silk, 331 U.S. at 716,withRestatement
(First)of Agency
§ 220
(1933).
52. Bartels
, 332U.S.at 130.
53. Labor-Management
Relations
61 Stat.
Act,Pub.L. No.80-101,
(Taft-Hartley)
137(1947)(codified
as amended
inscattered
sections
of29 U.S.C.).
54. Id. § 101,29U.S.C.§ 152(3)(2006).
55. Restatement
(Second)ofAgency
§ 220(1958).
56. Seeid.§ 220(1).

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Pay No Attentionto the Man Behind the Curtain

129

indicates that the list is not exclusive.57Ultimately,this test was not
significantlydifferentfromthat in the Restatement (First) of Agency
offeredin 1933.58But like many multifactortests, the calculus proved
to be neither simple nor predictable.59
In 1968, the Supreme Court revisited the definitionof"employee"
under the amended NLRA in NLRB v. United Insurance Co. ofAmerica60 and decided what had already been widely accepted- the TaftHartley Act's purpose "was to have the Board and the courts apply
general agency principles in distinguishingbetween employees and independent contractorsunder the Act."61This effectivelymade Restatement § 220 the officialmethod ofdeterminingthe meaning ofemployee
in § 2(3) of the NLRA.62The Court added that regardless of which factors a court considered,the longstanding hallmark of the common law
test is that "there is no shorthand formulaor magic phrase that can be
applied to findthe answer, but all of the incidents of the relationship
must be assessed and weighed with no one factorbeing decisive."63
Toward a Broader Reliance on Restatement§ 220
Congress continued to legislate in the field of employment law,
passing Title VII of the Civil Rights Act of 1964 (Title VII),64Title I of
the Americans with Disabilities Act (ADA),65the Age Discrimination
in Employment Act (ADEA),66 the Employee Retirement Income SecurityAct (ERISA),67 and the Family Medical Leave Act (FMLA).68 In
doing so, Congress continued to opt forvague definitionsof"employee"
and "employer."In these statutes, Congress defined"employee" as "an
individual employed by an employer"69and "employer" as "a person
engaged in an industryaffectingcommerce."70It was the Hearst! TaftHartley debate all over again. Some courts applied the common law
agency test, and others applied economic reality.
C.

57. Seeid.§ 220(2).
58. Compare
id.§ 220withRestatement
(First)ofAgency
§ 220(1933).
Additional
59. RuthBurdick,
Permit
theNLRBtoConsider
ofAgency
Principles
and theRelativeDependence
FactorsofEntrepreneurial
ofEmployees
Independence
Lab.&
Contractor
StatusUnder
Section
whenDetermining
2(3),15Hofstra
Independent
Emp.
L.J.75,113-14(1997).
60. 390U.S.254(1968).
61. Id. at 256.
62. See id.
63. Id. at 258.
17 (2006).
64. 42U.S.C.§§ 2000e-2000e65. Id. §§ 12111-17.
66. 29U.S.C.§§ 621-34(2006).
67. Id. §§ 1001-461.
68. Id. §§ 2601-54.
69. ADEA§ 11(f),29 U.S.C.§ 630(f)(2006);TitleVII,42 U.S.C.§ 2000e(f)(2006);
ADA§ 101(4),42 U.S.C.§ 12111(4)(2006).
70.ADEA§ 11(b),29U.S.C.§ 630(b);TitleVII,42U.S.C.§ 2000e(b);
ADA§ 101(5)(A),
42 U.S.C.§ 12111(5)(A);
seealso ERISA§ 3, 29 U.S.C.§ 1002(5)("[A]ny
personacting
intheinterest
as an employer,
orindirectly
ofan employer.
. . .").
directly

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130

26 ABA Journal of Labor & EmploymentLaw 123 (2011)

The case law remained split until the Supreme Court decision in
Nationwide Mutual Insurance Co. v. Darden ,71which added some clarity to the scope of the term "employee/'In Darden , the Court interpreted the definitionof "employee" in ERISA to be the common law
master-servantdefinition,reasoning that
whereCongressuses termsthathave accumulatedsettledmeaning
under. . . thecommonlaw,a courtmustinfer,
unlessthestatuteotherwisedictates,thatCongressmeans to incorporate
the established
meaningoftheseterms In thepast,whenCongresshas used the
term"employee"withoutdefiningit, we have concludedthat Conmaster-servant
relationgressintendedto describetheconventional
shipas understood
bycommon-law
agencydoctrine.72
ERISA uses the same definitionof "employee"as Title VII, the FLSA,
the ADA, the ADEA, and the FMLA.73 Though it would be a natural
conclusion that Darden would be controllingfor all of these statutes,
this is not the case. Darden has governedTitle VII,74the ADA,75and the
ADEA.76 However,the Court has used the economic reality test forthe
FLSA and FMLA.77The Court distinguished the FLSA and the FMLA
because both Acts also define the verb "employ"to mean "to sufferor
permitwork."78
D.

The Rise ofEntrepreneurialOpportunity
The pronouncementsofthe Supreme Court in Darden and United
Insurance made clear that, absent congressional action, common law
agency doctrinewas the sole test fordefiningemployees formost employmentstatutes79and the NLRA.80Therefore,attorneyswere leftto
arguments within the Restatement test. Of course, the Restatement
test does not mandate uniformity.
It allows consideration of additional
factors as indicated by the phrase "among others."81One such addi71. 503U.S.318(1992).
72. Id. at 322-23(quoting
forCreative
NonViolence
v.Reid,490U.S.730,
Cmty.
739-40(1989)).
73. ADEA§ 11(f),29 U.S.C.§ 630(f);TitleVII,42 U.S.C.§ 2000e(f);
ADA§ 101(4),
42 U.S.C.§ 12111(4);seealso FLSA,29 U.S.C.§ 203(e)(1)(2006);ERISA§ 3,29 U.S.C.
§ 1002(6);FMLA,29U.S.C.§ 2611(3)(2006)(substituting
"any"for"an"inthedefinition
ofemployee:
"anyindividual
employed
byan employer").
74. Wildev.Cnty.
ofKandiyohi,
15F.3d103,105-06(8thCir.1994).
75. ClackamasGastroenterology
Assocs.,P.C. v. Wells,538 U.S. 440, 448-51
(2003).
76. Speenv.Crown
Clothing
Corp.,102F.3d625,630-32(1stCir.1996).
77. SeeWalling
v.Portland
Terminal
Co.,330U.S.148,150-51(1947)("[I]ndeterwhoare'employees'
undertheAct,common
lawemployee
oremployermining
categories
classifications
underotherstatutes
arenotofcontrolling
employee
significance").
78. Id. at 151-53;seeFLSA,29U.S.C.§ 203(g);FMLA,29U.S.C.§ 2611(3).
79. bee Nationwide
Mut.Ins.Co.v.Darden,503 U.S.318,322-23(1992)(citing
forCreative
NonViolence
v.Reid,490U.S.730,739-40(1989)).
Cmty.
80. Roadway
326N.L.R.B.842,849(1998).
///),
PackageSys.,Inc.(Roadway
81. See Restatement
(Second)ofAgency
§ 220(2)(1958).

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Pay No Attentionto the Man Behind the Curtain

131

tional factor borrows from the economic reality test- opportunities
This innovation has
forprofitor loss or entrepreneurial opportunity.82
been sporadically considered by the NLRB since at least 1977.83
However, consideration of entrepreneurial opportunity eventually gave rise to a more significant argument that entrepreneurial
opportunitywas the proper focus of the Restatement test, in place
of control.84This argument had unusual origins. It started when an
administrative law judge (ALJ) issued a routine decision findingthat
Corporate Express Delivery Systems (Corporate Express) had committedunfairlabor practices.85In doing so, the ALJ rejected Corporate
Express's defense that the workers were independent contractors.86
The ALJ used the traditional formulation of the Restatement test
and considered entrepreneurial opportunity among other factors.87
The NLRB affirmedthe findings of the ALJ, again citing entrepreneurial opportunity as one factor among many that supported the
findingof employee status.88The majority of these findings demonstrated the significantamount of control Corporate Express had over
its workers.89
There was no discussion in Corporate Express of changing the Restatement test's focus or formulationeither by the ALJ or the NLRB.90
The appellate briefto the D.C. Circuit filed by Corporate Express did
The firsttime the issue
not even mentionentrepreneurialopportunity.91
of supplanting controlwith entrepreneurial opportunityarose was in
the appellate briefofthe General Counsel ofthe NLRB beforethe D.C.
Circuit.92There, the General Counsel argued that entrepreneurialism could sometimes be so strongthat "significantmanner-and-means
controls cannot convert a bargain that was struck by an independent
businessmen [sic] into a basis forfindingthat an employer-employee
toconform
82. UnitedStatesv.Silk,331U.S.704,716(1947)(defining
"employee"
testrules).
lawrules,as opposed
toeconomic
withcommon
reality
a commission
83. See StandardOil Co.,230 N.L.R.B.967,971 (1977)(rejecting
statusbecauseit"provide
contractor
as indiciaofindependent
[s]nosignificant
system
orlosses").
drivers
forinfluencing
theirprofits
tocommission
opportunity
as thediswas a movement
control
84. Thepretext
forthisargument
awayfrom
490 U.S.
test.See Cmty.
issuein theRestatement
Non-Violence,
forCreative
positive
overthedetailsoftheproduct
ofcontrol
thehiring
at 752("[T]heextent
partyexercises
is notdispositive").
85. Corporate
Sys.,332N.L.R.B.1522,1532(2000).
ExpressDelivery
86. Id. at 1527.
87. Id. at 1526-27.
ofindea multitude
offactors
88. Id. at 1522(listing
militating
againsta finding
contractor
status).
pendent
89. Id.
90. Id. at 1522-33.
91. Petitioner's
Brief,
Sys.v.NLRB,292F.3d777(D.C.
Corporate
ExpressDelivery
Cir.2002)(No.01-1058).
Boardat 20-24,Corporate
92. BrieffortheNationalLaborRelations
ExpressDeSys.v.NLRB,292F.3d777(D.C.Cir.2002)(No.01-1058).
livery

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26 ABA Journal of Labor & EmploymentLaw 123 (2011)

relationship had been created."93Conversely, the General Counsel
noted that "where there is no ownership or proprietaryinterest in a
business and minimal entrepreneurial prerogatives,it is more likely
"94
that an employer-employeerelationship will be foundto exist
Althoughthe D.C. Circuit Court did not depart fromthe traditional
confinesofthe Restatement test, the court adopted the General Counsel's argumentthat the NLRB had, in this particular case, changed the
focus of the Restatement test fromcontrol to entrepreneurial opportunity.Ultimately,the D.C. Circuit decided that the NLRB was within
its jurisdiction "to focus not upon the employer'scontrolof the means
and manner of the work but instead upon whether the putative independent contractorshave a 'significantentrepreneurialopportunityfor
gain or loss.'"95This marked a fundamental alteration of the common
law test ofagency,but this view was not mandated.96It was simplyapproved as permissible,leaving the Board discretionto adopt it.97
The Board never took its opportunityto change the focus of the
commonlaw controltest. Instead, the Board continuedto apply the traditional Restatement test, with occasional consideration of the workers' entrepreneurialopportunity.98
As the Restatement test and Darden
require,it was considered as one factor,among many,and was not considered controlling.99
II. FedEx III Mandates a New Focus
A. The Long HistoryofManagement VersusDeliveryDrivers
Fighting between FedEx and some of its deliverydrivers is nothnew.
It is a natural byproductof FedEx classifyingits 14,000-plus
ing
in FedEx Ground Package Systems, Inc., as independrivers
delivery
dent contractors.100
Under this framework,FedEx maintains that it
is not subject to basic workplace legislation such as the FLSA or the
NLRA.101

93. Id. at 22.
94. Id. at 23.
95. Corporate
ExpressDelivery
Sys.v.NLRB,292F.3d777,780(D.C.Cir.2002)
(quoting
Corporate
ExpressDelivery
Sys.,332N.L.R.B.1522,1527(2000)).
96. Id.
97. Id.
98. See Ariz.Republic,
349N.L.R.B.1040,1042(2007)(applying
thetraditional
formulation
oftheRestatement
§ 220test).
99. Id. at 1044-45.
100.DeanFoust,TheGround
WaratFedEx,Bus.Wk.,Nov.28,2005,at 42,42-43.
101.SeealsoIn reFedExGround
Practices
PackageSys.,Inc.,Employment
Litig.
infifteen
(No.II),381F.Supp.2d1380(J.P.M.L.
2005)(consolidating
pretrial
proceedings
andtransferring
theseconcases,alongwithtenpotential
ongoing
actions,
"tag-along"
solidated
actions
totheFederalCourtfortheNorthern
District
ofIndiana).Fora partial
listofcourt
inthisongoing
seeCaseDocuments
Package
filings
litigation,
,FedExGround
Sys.Emp.
Pracs.Litig.ClassAction,
http://www.fedexclassactionlawsuit.com/assets/htm/
case-docs.htm
Oct.29,2009).
(lastupdated

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Pay No Attentionto theMan Behind the Curtain

133

FedEx drew several of its employment practices from Roadway
Package Systems, Inc. (RPS); FedEx acquired RPS in 1998 and christened it FedEx Ground Package Systems, Inc.102Within FedEx Ground
Package, Inc., is the Home Delivery Division, which employs the delivery drivers in the instant case. Interestingly,the employment status
of RPS deliverydrivers was discussed extensivelyin a trilogyof cases
decided by the NLRB. Such discussion has continued post-acquisition.
These discussions present a comparator ofFedEx's practices under the
traditional formulationofthe Restatement test.
1. Roadway 7103and Roadway 77104
As mandated by United Insurance, Roadway I weighed the delivtest.105At that time, the
ery drivers' status using the right-to-control
Board stressed that even if control was present, "foran independent
contractorrelationship to exist,the arrangement most typicallyshould
In light of
exhibit entrepreneurial or proprietary characteristics."106
that framework,the Regional Director's decision was that the delivery
drivers were independent contractorswho had an entrepreneurial inofoperation and abilityto minimize costs will
terest because "efficiency
The delivery drivers also maintained controlin
affecttheir income."107
"selecting their own routes, shiftingpackages between one another,
employing helpers and replacements, taking breaks at their discretion, and having the ability to performpersonal or commercial busiThe Board reversed the Regional Director.
ness duringthe workday."108
First, the Board found that RPS "drivers bear few of the risks and
enjoy little of the opportunitiesforgain associated with an entrepreneurial enterprise."109
Second, the Board concluded that "the Employer
has substantial controlover the manner and means of performingthe
pickup and deliveryofpackages."110
In rejecting the delivery drivers' entrepreneurial potential, the
Board found the following:(1) RPS controlledthe number of packages
and stops; (2) RPS assigned delivery drivers' service areas; (3) RPS
controlledthe cost ofthe deliveryservice to the consumer; (4) RPS controlled the compensation of the delivery drivers; (5) the delivery drivers lacked proprietaryinterest in the routes served; (6) the "core zone
TheirDisgruntled
FedEx'sNew"Employees":
102.ToddD. Saveland,
Independent
L.J.95,97 (2009).
Contractors
, 36Transp.
103.Roadway
/),288N.L.R.B.196(1988).
PackageSys.,Inc.(.Roadway
104.Roadway
,
ID, 292N.L.R.B.376(1989),enforced
PackageSys.,Inc.(Roadway
902F.2d34(6thCir.1990).
L 288N.L.R.B.at 198.
105.Roadway
280N.L.R.B.251(1986)).
MissionFoodsCorp.,
106.Id. (citing
107.Id.
108.Id.
109.Id.
110.Id.

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26 ABA Journal of Labor & EmploymentLaw 123 (2011)

supplement rate," a formof compensation, minimized the risk of loss
and opportunityforgain by balancing income among deliverydrivers;
(7) RPS's startup loan programminimized the risk fordeliverydrivers;
and (8) although the delivery drivers purchased their own vehicles,
these vehicles were purchased fromRPS and RPS released terminated
driversfromtheir obligation to pay forthese vehicles.111
With regard to control,the Board found that (1) RPS controlled
the schedule of the employee,"requiringmorningdeliveries, afternoon
pickups, and a return to the terminal by late afternoon";(2) RPS terminated driversforbeing late or failingto reportto work; (3) RPS had
a uniformrequirement, even if it was not always enforced;(4) RPS
required that vehicles be of a certain color and display the RPS logo;
(5) RPS maintained a grievance-likeprocedurefordrivers;(6) RPS had
paperwork requirements fordelivery drivers,which exceeded governmental requirements; and (7) deliverydrivers' use of replacement employees and helpers did not preclude employee status.112
The Board found that the followingfactors,although indicative
of independent contractorstatus, did not outweigh factorssupporting
employee status: (1) the delivery drivers were responsible forvehicle
expenses, workers' compensation, and unemployment compensation;
(2) RPS did not withhold taxes and benefits;and (3) delivery drivers
had a limited ability to increase workload through"flexing"113
and providing RPS with sales leads.114
Roadway II, decided only nine months afterRoadway /,presented
similar facts to Roadway /, and the result was the same.115The delivIn fact,in some regards, the
ery driverswere considered employees.116
case foremployee status in Roadway II appears to be strongerthan in
Roadway /. For example, there was evidence that RPS has changed the
core zone rate unilaterally,that drivers were not allowed to use their
vans to deliver forother companies, and that the deliverydriverswere
not allowed to negotiate any of their contractterms.117
Ultimately,the
Board listed a catalog of factorsthat supported employee status very
similar to those listed in Roadway 7.118

111.Id.
112.Id. at 198-99.
will
113."Flexing
meansthattheterminal
andsometimes
thedrivers,
manager,
transfer
to otherdrivers
whena driver
is overareas,stops,orpackagesfordelivery
A flex,
is
is inconvenient,
ora driver
failstoreport
forwork.
loaded,a delivery
however,
Id. at 197.
usuallytemporary."
114.Id. at 199.
115.Roadway
II), 292N.L.R.B.376,378(1989),enPackageSys.,Inc.(Roadway
902F.2d34 (6thCir.1990).
forced,
116.Id.
117.Id. at 377.
118.Id. at 378.

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Pay No Attentionto the Man Behind the Curtain

135

2. Roadway III 119
In 1998, RPS challenged the employmentstatus ofits deliverydrivers to the NLRB forthe third time in ten years.120In those ten years,
RPS had changed some ofthe policies and practices that the Board had
previouslyconstrued as evidence of employee status. Accordingly,RPS
maintained that it no longer
(1) requiresa uniform
startingtime;(2) maintainsa fleetofvehicles
forits drivers'use; (3) maintainsformsforthedriverstolease orpurchase vehicles;(4) releases terminateddriversfromtheirfinancial
obligations;(5) terminatesdrivers'agreementsat will and without
cause; and (6) assignscustomerserviceareas withoutgivingthedrivinterestin theseareas.121
ers a proprietary
Ultimately,the Board foundthat while some ofthese changes made the
employee status determination closer, the delivery drivers were still
employees under the NLRA.122
Of particular importance in the decision, because of the focus
in FedEx III , are two categories of analysis: (1) truck ownership and
(2) assignability of contract rights. With regard to truck ownership,
RPS required drivers to purchase or lease a vehicle followingRPS's
specificationsas a conditionofemploymentin all threeRoadway cases.
The differencein Roadway III was that the vehicles were no longer
supplied by RPS directly.In rejecting the contentionthat this change
favoredindependent contractorstatus, the Board found that RPS still
controlledthe vehicles because it required the trucks to be of a certain
color,bear RPS's logo, and be of specificationsthat did not easily allow
"modificationsor adaptations to othertypes ofuse."123
Additionally,RPS
maintained an indirectmechanism ofboth supplyingand financingvehicles.124Also, deliverydrivers in Roadway III were given the contractual right to use their delivery trucks for other commercial purposes
on non-RPS time. In rejectingthis as an indication ofindependent contractor status, the Board noted that none of the drivers at issue had
used their trucksforsuch otherpurposes.125In fact,only three ofRPS's
fivethousand drivers nationwide had done so.126Therefore,the Board
noted that "[t]his lack ofpursuit ofoutside business activityappears to
be less a reflectionofentrepreneurialchoice by the . . . driversand more
a matter ofthe obstacles created by their relationship with [RPS]."127
326N.L.R.B.842(1998).
119.Roadway
///),
PackageSys.,Inc.(Roadway
120.Id.
121.Id. at 843.
122.Id. at 854.
123.Id. at 851.
124.Id. at 851-52.
125.Id. at 851.
126.Id.
127.Id.

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136

26 ABA Journal of Labor & EmploymentLaw 123 (2011)

Perhaps the largest change was the ability of delivery drivers to
assign theircontractual rightsto routes unilaterally.This assignability
created a "proprietaryinterest"in the delivery driver's route.128However,the Board rejected the meaningfulnessofthis interestas creating
It declined to give controllingweight to
entrepreneurialopportunity.129
the change in assignability,findingthat RPS "has considerable control
over whether the driver may sell at all, to whom, and under what circumstances" and citingRPS's unilateral abilityto reconfigureroutes.130
However,leftunresolved was the issue ofwhether the deliverydrivers
who had sold their contractual rights "gained or profitedmaterially
fromthe sale of [their]service area[s]."131
The trio ofRoadway cases makes clear that controlremained the
primaryfocus ofthe employee status inquiry.However,controlshould
be analyzed froma broader perspective.As explained in Roadway III ,
it is errorto "emphasize [] minor details ofthe day-to-dayperformance
of the Company's work by the commission drivers and minimize[]
important aspects of the arrangement between the Company and
drivers."132
B.

CorporateExpress's Permission Becomes a Mandate
As with the Corporate Express and Roadway decisions, the D.C.
Circuit's decision in FedEx III interpreted"employee" under the NLRA.133The D.C. Circuit considered the ten Restatement factorsas well
as entrepreneurial opportunity.134
However, the court appeared to ignore United Insurance's 135prescriptionthat "all of the incidents of the
relationship must be assessed and weighed with no one factorbeing
decisive,"136even though it acknowledged United Insurance's principle.137In ignoringthis principle,the D.C. Circuit altered the Restatement test so that "while all the considerations at commonlaw remain
in play, an important animating principle by which to evaluate those
factorsin cases where some factorscut one way and some the other is
whether the position presents the opportunitiesand risks inherent in
The purported reason forthis was twofold:to
entrepreneurialism."138
make "linedrawing"easier139and to "bettercapture[] the distinctionbe128.Id. at 853.
129.Id.
130.Id.
131.Id.
132.Id. at 850(quoting
Standard
OilCo.,230N.L.R.B.967,968(1977)).
133.FedExHomeDelivery
v.NLRB{FedExIII), 563F.3d492(D.C.Cir.2009).
134.Id. at 496-98.
135.NLRBv.UnitedIns.Co.ofAm..390U.S.254(1968).
136.Id. at 258.
137.FedExIII , 563F.3dat 496.
138.Id. at497(citing
Corporate
ExpressDelivery
Sys.v.NLRB,292F.3d777(D.C.
Cir.2002)).
139.Id.

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Pay No Attentionto the Man Behind the Curtain

137

tween an employee and an independent contractor."140
The court based
its argument on the Restatement § 220 comment that "the full-time
cook is regarded as a servant [ratherthan as an independent contractor] although it is understoodthat the employerwill exercise no control
over the cooking."141
In the representation decision, the Regional Director did consider the delivery drivers' entrepreneurialism,but she did so within
the Restatement test and decided that the drivers did not have any
The Regional Director also
meaningfulentrepreneurialopportunity.142
considered the amount ofcontrolthat FedEx exhibited over its delivery
drivers.143In weighing the factors,the Regional Director appears to
have weighed the factorsequally,ultimatelydeciding that more factors
weighed in favorof a findingof employee status.144FedEx committeda
"technical"unfair labor practice by refusingto bargain with the newly
certifiedunion in orderto obtain appellate court review ofthe underlyThe Board, withoutweighing the
ing bargaining unit determination.145
affirmed
the
Director's
factors,
Regional
findingsboth as to the "technical" unfairlabor practice and the underlyingbargaining unit certification.146In reversing these decisions, the D.C. Circuit explicitly found
that the Board "cannot be said to have made a choice between two
fairlyconflictingviews" when the Board chose to apply the traditional
version of the Restatement test over the newly formulated entrepreneurial opportunity-focusedRestatement test approved in Corporate
Express.147
Generally,the facts in this case were similar to those presented
in Roadway III.148With those facts,the D.C. Circuit made findingssignificantlycontraryto the Roadway cases. It did so in three distinct
areas: the delivery drivers' proprietaryinterest, ownership of equipment, and controlin the manner and means of reaching mutual business objectives.149

140.Id. (quoting
,292F.3dat 780).
Corporate
Express
141.Corporate
Restatement
(Second)ofAgency
, 292F.3dat 780(quoting
Express
inoriginal).
§ 220cmt.d (1958))(alteration
142.FedExHomeDelivery
CFedExI), NLRBCase Nos.l-RC-22034,
l-RC-22035,
slipop.at 35(Sept.20,2006).
143.Id. at 35-36.
144.Id. at 41.
145.FedExHomeDelivery
(FedExII), 351N.L.R.B.No.16,slipop.at 1 (Sept.28,
2007).
146.Id. at 3.
147.FedExHomeDelivery
v. NLRB (FedExIII), 563 F.3d492,504 (D.C. Cir.
2009).
148.Compare
III),326N.L.R.B.842,843-48
Roadway
PackageSys.,Inc.(Roadway
(1998),withFedEx7,NLRBCaseNos.l-RC-22034,
l-RC-22035,
slipop.at 6-33.
149.FedExIII, 563F.3dat 492.

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138

26 ABA Journal of Labor & EmploymentLaw 123 (2011)

1. ProprietaryInterestin DeliveryRoutes
Under the Operating Agreement between FedEx and its drivers,
"Contractors can assign at law their contractual rightsto theirroutes,
without FedEx's permission."150
The court noted that this is "an unusual feature for an employer-employeerelationship."151It then engaged in a limited analysis ofthe entrepreneurialquality ofthis right.
Ultimately,the D.C. Circuit took the position that because "at least two
contractorswere able to sell routes fora profitranging from$3,000 to
"152this was directevidence of
nearly $16,000,
entrepreneurialopportuThe
reasoned that since two of the contractorswere able
court
nity.153
to sell routes, all contractorshad the same opportunityand therefore
In making this
possessed at least some entrepreneurialopportunity.154
determination,the court did not attempt to counterbalance the control
that FedEx maintained over the assignments or deeply analyze the
quality ofthe entrepreneurialopportunity.
2. Ownership ofEquipment
The D.C. Circuit weighed, as evidence of independent contractor
status, the deliverydrivers'abilityto use the vehicles forcommercialor
personal purposes. In doing so, the court noted that at least one driver
had previously used his vehicle forother commercial purposes in the
past, although none of the currentdrivershad.155Once again, the D.C.
Circuit did not engage in any inquiryas to the potential limitationsimposed on delivery drivers by their relationship with FedEx regarding
use of the vehicles forother commercial purposes or the quality of the
entrepreneurialopportunitygained by ownership ofthe equipment.
3. The Manner and Means ofReaching Mutual
Business Objectives
The D.C. Circuit also considered evidence indicative of controlbut
did so under the guise of entrepreneurial potential. Specifically,the
court cited the followingin favorofindependent contractorstatus:
[The] StandardContractorOperatingAgreementthat specifiesthe
contractor
is not an employeeofFedEx "forany purpose"and confirmsthe"mannerand meansofreachingmutualbusinessobjectives"
is withinthe contractor's
and FedEx "maynot prescribe
discretion,
150.Id. at 500.
151.Id.
152.Id.(citing
FedEx/,NLRBCaseNos.l-RC-22034,
l-RC-22035,
slipop.at30-32,
38-39).
153.Id.
154.Id. at502(quoting
C.C.E.,Inc.v.NLRB,60F.3d855,860(D.C.Cir.1995))("[I]t
is theworker's
retention
oftherighttoengagein entrepreneurial
rather
than
activity
hisregular
exercise
ofthatrightthatis mostrelevant
forthepurpose
ofdetermining
whether
heis an independent
contractor.").
155.Id. at 498-99.

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Pay No Attentionto the Man Behind the Curtain

139

hoursofwork,whetheror when the contractors
take breaks,what
routes they follow,or other details of performance";
"contractors
are notsubjectto reprimandsor otherdiscipline";contractors
must
providetheirown vehicles,althoughthe vehiclesmust be compliantwithgovernment
and
regulationsand othersafetyrequirements;
"contractors
are responsibleforall the costsassociatedwithoperatingand maintainingtheirvehicles."156
This Standard ContractorOperator Agreementcan be foundin similar
formin the previous Roadway cases.157
Later, the courtconsidered the aspects ofthe contractthe Regional
Director considered favoringemployee status:
FedEx requires:contractors
to wear a recognizableuniform
and conformto groomingstandards;vehiclesofparticularcolor(white)and
withina specificsize range;and vehiclesto displayFedEx's logoin a
waylargerthanthatrequiredbyDOT regulations.The companyinsistsdriverscompletea drivingcourse(orhave a yearofcommercial
drivingexperience,whichneed notbe withFedEx) and be insured,
and it "conductstwo customerservicerides per year"to audit performance.
FedEx providesincentivepay (as well as fuelreimbursementsin limitedinstances)and vehicleavailabilityallotments,
and
have a vehicleand driveravailablefordeliveries
requirescontractors
FedEx can reconfigure
routes
TuesdaythroughSaturday.Moreover,
ifa contractor
cannotprovideadequate service,thoughthe contractorhas fivedaysto proveotherwise,
and is entitledto monetary
compensationforthediminishedvalue oftheroute.158
To deal with the problem posed by the significantfactors of controlor, under the new test, limitations on entrepreneurial opportunity
the D.C. Circuit argued that this control was a matter of customer
demand.159
Therefore,the D.C. Circuitminimized significantareas ofemployer
control, including appearance requirements, mandatory monitored
customerservice rides, and compulsoryroute coverage during specified
In dismissing FedEx's demonstrable control,the D.C. Circuit
periods.160
foundthat "those distinctions,though not irrelevant,reflectdifferences
in the type of service the contractorsare providingrather than differIn particular,the court cited
ences in the employmentrelationship."161

156.Id. at 498 (citingFedExHomeDelivery
{FedEx/),NLRBCase Nos.1-RC22034,l-RC-22035,
slipop.at 10-14(Sept.20,2006)).
157.Roadway
PackageSys.,Inc.(RoadwayIII), 326N.L.R.B.842,843-44(1998);
Roadway
PackageSys.,Inc.(.Roadway
/),288N.L.R.B.196,196-97(1988).
158.FedExIII , 563F.3dat 500-01(citations
omitted).
159.Id. at501( [FedEx]is anintermediary
between
a diffuse
and
groupofsenders
a broadly
diverse
Withthismodelcomescertain
customer
demands,
groupofrecipients.
including
safety.").
160.Id. at 500-01.
161.Id. at 501.

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140

26 ABA Journal of Labor & EmploymentLaw 123 (2011)

the uniqueness of FedEx's practice of sending packages to a diffuse
group of senders and receivers; namely,FedEx's customers demanded
safety,and, therefore,the above listed factorswere not evidence of an
employmentrelationship.162
By engaging in this analysis, the D.C. Circuit was able to transformindicia of control,and hence employee status, into a business justificationthat evidenced nothing.
III. The Effect of Replacing Control with
Entrepreneurial Opportunity
The FedEx III decision creates some peculiarities in determinations of employee status. It does so because of the test's unique and
one-sided considerations. The newly formulatedtest appears to operate entirelyindependent ofprevious controlanalysis. In particular,the
new test minimizes controlby balancing employerneeds while assessing entrepreneurialismwithout engaging in any balancing considerations. The result is a findingof independent contractorstatus based
on the slightestfindingsof entrepreneurialism.163
A general comparison between the operations of the traditional
Restatement test in the Roadway, FedEx J, and FedEx II cases; the
new formulationofthe Restatement test based on entrepreneurial opportunities in FedEx III; and the economic realities test in Silk provide a starting point in addressing the strengths and weaknesses of
the entrepreneurial opportunitytest. All three formulations,in their
modernform,take into account entrepreneurial opportunity.However,
all three tests view entrepreneurial opportunitythrough a different
lens.
Under the traditional Restatement test, if a party establishes a
prima facie showing of entrepreneurial opportunity,the court then
analyzes the limitations or control that the employer maintains over
the entrepreneurial opportunity.164
If the opportunityis considered
legitimate, it then becomes evidence of an independent contractor
relationship, but it is not dispositive.165Instead, the entrepreneurial
opportunityfactoris weighed among the other relevant factors.166
Similarly,under the economic realities test, if an employermakes
a prima facie showing ofentrepreneurialopportunity,
the court probes
further,conductingan analysis into the nature of the relationship between the employerand worker.167
This analysis focuses on the worker's
162.Id.
163.Id. at 504(Garland,
J.,dissenting).
164.Roadway
PackageSys.,Inc.CRoadway
III), 326N.L.R.B.842,846-48(1998).
165.NLRBv.UnitedIns.Co.ofAm..390U.S.254.258(1968).
166.SeeAriz.Republic,
349N.L.R.B.1040,1045(2007);St.Joseph
345
News-Press,
N.L.R.B.474,479-80(2005)(discussing
entrepreneurial
activity
amongother
factors).
167.Bartelsv.Birmingham,
332U.S.126,130(1947)(defining
tocon"employee"
form
withcommon
lawrules,as opposed
toeconomic
testrules).
reality

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Pay No Attentionto the Man Behind the Curtain

141

dependence on the employer for the worker's livelihood.168Therefore,
the employermust show that the worker'sentrepreneurialopportunity
is both real and meaningful.Under both the traditional Restatement
test and the economic realities test, the additional scrutinyof the opportunitybeyond the prima facie showing acts as a check against provision of superficialentrepreneurialopportunities.
However,the entrepreneurialopportunitytest in FedEx III appears
to operate in a materially differentmanner. If a party establishes a
prima facie showing of entrepreneurial opportunity,this showing then
becomes direct evidence of independent contractorstatus without any
consideration of counterbalancing factors.169
There is no inquiry into
the quality or limitations on the potential entrepreneurialism;instead,
the only considerationis whether the entrepreneurialopportunityprovides the possibilityforgain, no matter what size, and no matter how
Further troubling is the
dependent the worker is on the employer.170
apparent weight that the court accords this evidence. All of the additional Restatement factorsare viewed throughthe lens of entrepreneurialism. Not only does this upset over fiftyyears of court decisions
focusingon controlas the primaryfactorin employee status determinations, but it entirelydiscounts certain Restatement factorsthat are
unrelated to entrepreneurialism such as job skill, length of employment, and whether the disputed work is part of the regular business
of the employer.Ultimately,FedEx III creates an entirely new legal
scheme foremployee status determinations that benefitemployers by
increasing the likelihood of a findingof independent contractorstatus.
The new employee status scheme is illustrated by examining three
particular areas in which the D.C. Circuit found evidence of entrepreneurial opportunityeither supporting independent contractorstatus
or negating employee status.
A.

ProprietaryInterestin DeliveryRoutes
The D.C. Circuit foundthat assigning contractual rightsforprofit
is evidence ofindependent contractorstatus. In doing so, the courtused
a two-part analysis. First, it found that there was a potential for entrepreneurial gain. Then after findingthat routes had been sold for
money,the court determined that the drivers had exercised an entrepreneurial opportunity.There was no furtherassessment ofthe driver's
entrepreneurialism.This lack ofanalysis exposes a potential weakness
of the entrepreneurial opportunitydoctrine.As applied in FedEx III ,
existence of any prior transaction of entrepreneurial quality, no matter how superficial,overrides consideration ofthe controlthe employer
168.Id.
169.FedExHomeDelivery
v. NLRB {FedExIII), 563 F.3d492,500 (D.C. Cir.
2009).
170.Id.

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26 ABA Journal of Labor & EmploymentLaw 123 (2011)

exercises over the entrepreneurialinterest.The FedEx III majorityassumed, withoutfact-basedinquiry,that profit-makingon a proprietary
interest is evidence of entrepreneurialism. In doing so, the court focused exclusively on the history of the interest. Specifically,the D.C.
Circuit relied upon the fact that two drivers exhibited entrepreneurialism by selling their routes and consequently imputed this ability to
The D.C. Circuit's holding,
everyother driverin the bargaining unit.171
of
the
effects
failed
to
consider
however,
employercontrolon the worker's entrepreneurialopportunity.FedEx maintained significantcontrol
over the initial method of route assignment, preventingentrepreneurialism. Drivers could not alter the terms of the Operating Agreement.
This eliminated the ability of delivery drivers to negotiate nearly all
oftheircompensation,and limiteddrivers'negotiationpower to request
the towns they wanted included in their routes.172Negotiations were
limited to routes that had not already been assigned.173Once routes
had been assigned, drivers could also negotiate to add or subtract
towns fromtheirroutes,but these again were limited by availability.174
Althoughthese negotiations appeared to be entrepreneurial,theywere
not because there is a differencebetween assessing value, which all
employees do, and adding value, which is generally only available to
entrepreneurs.
It is commonplace in employmentrelationships to make monetary
value judgments. For example, an individual squarely within the confinesof an employmentrelationship may choose a job that pays higher
wages than another.The employee is not an entrepreneurforselecting
a job with higher compensation,and the employee's choice should not
be evidence of independent contractorstatus. Delivery drivers are in
the same situation,regardless ofthe proprietaryinterest.Between two
routes that require the same amount of effort,the driver selects the
route that pays more. Choosing the more valuable proprietaryinterest
is not inherentlyentrepreneurial;instead a proprietaryinterest only
becomes entrepreneurial by the potential to add value to the asset.
Without that added value, there is absolutely no differencebetween
the wage calculation ofthe employee and the total value ofthe driver's
selection. Because of FedEx's control,the delivery drivers cannot add
value and thus exhibit entrepreneurialismin their route selections.
So then where can the deliverydriver's entrepreneurialpotential
be exhibited? Perhaps they can enhance the value of the route post171.Id.
FedExHome
is a fixedperdiempayment.
172.Thecorezonedensity
payment
{FedExI),NLRBCaseNos.l-RC-22034,
l-RC-22035,
slipop.at56-57(Sept.20,
Delivery
an increase.
Id.
eversuccessfully
2006).Onlyonedriveroutofthirty-six
negotiated
at 56,n.72.
173.Id. at 13-14.
174.Id. at 21-22.

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Pay No Attentionto the Man Behind the Curtain

143

assignment throughtheir "ability to exercise good business judgment,
to followsound management practices, and to be able to take financial
risks in order to increase [his] profits."175
Unfortunately,this formof
did
not
exist
for FedEx delivery drivers
entrepreneurial opportunity
because the drivers could not exhibit the qualities of individuals exAs the Reercising "business judgment" or "management practices."176
Director
found:
gional
CustomerscontactFedEx Home ratherthan contractors
to arrange
deliveries.Contractors
do notset thepricesto be chargedfordeliveries or determinewhen and wheredeliverywill be made. Customer
complaintsaboutdeliveriesare usuallydirectedto FedEx Homeand
investigatedby terminalmanagementat the particularterminal
involved.Contractorsare not responsibleforsolicitingcustomers,
althoughtheymay tryto maintaingood customerrelationsto encouragebusiness.177
The controlexercised by FedEx prevented the routes fromincreasing
in value. The Regional Director found that "there is little room forthe
contractorsto influencetheir income through their own effortsor ingenuity,as their terminal manager determines,forthe most part, how
In the end, the drivercould
many deliveries theywill make each day."178
do little or nothingto create value, as an entrepreneurwould.
Further hampering the entrepreneurialismofthe deliverydrivers
was the fact that the Operating Agreement,the very document that
secured the proprietaryinterest, was terminable at will. In particular, the Operating Agreementhad an initial one- or two-yearterm and
thereaftera one-year renewal term. Upon each expiration,the Agreement was nonrenewable upon thirty-days'writtennotice by eitherparThis fact was ignored by the D.C. Circuit. However, in terms of
ty.179
entrepreneurial opportunity,this is of great importance. FedEx's ability to unilaterally terminate the proprietaryinterest obviously limits
its value. Even if delivery drivers did manage to add some value to
their routes, they have no guarantee of reaping the benefits of their
entrepreneurialism.And while one could blame the entrepreneur for
agreeing to this contractual term, both the dissent and the Regional
Director noted FedEx offersthe contract on a "take-it-or-leave-it"
basis.180So while the majoritycorrectlystates that a proprietaryinterest
175.Roadway
III), 326N.L.R.B.842,852(1998)(quotPackageSys.,Inc.(.Roadway
OilCo.,230N.L.R.B.967,972(1977)).
ingStandard
176.Id.
177.FedEx/,NLRBCaseNos.l-RC-22034,
l-RC-22035,
slipop.at 26.
178.Id. at 56.
179.Id. at 16.
180.FedExHomeDelivery
v.NLRB{FedExIII), 563F.3d492,510(D.C.Cir.2009)
FedEx/,NLRBCase Nos.l-RC-22034,
(Garland,
J.,dissenting)
(quoting
l-RC-22035,
slipop.at 34-37).

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144

26 ABA Journal of Labor & EmploymentLaw 123 (2011)

it is
is "an unusual feature foran employer-employeerelationship,"181
be
interest
a
that
unusual
unilaterally
may
proprietary
undeniably
This unilateral, at-willterterminatedby the grantorofthe interest.182
mination is simplyanother indication ofthe extensive controlretained
by FedEx and furtherillustrates how this controlnegatively impacts
the quality ofthe driver'sentrepreneurialopportunity.
FedEx III represents a significantdeparture fromboth the traditional Restatement test and the economic reality test, which investigate entrepreneurialopportunitybeyond face value. Prior to FedEx III ,
workers were protectedfromlosing their rights on the basis of superficial entrepreneurialopportunities.Under the economic realities test,
two sales, resulting in profitsof $3,000 and $16,000, out of 40 routes
and 38 contractors,would not exhibit the independence of the FedEx
workersrequired to establish independent contractors.183
Similarly,the
test.
That fact
the
control
under
would
be
drivers
employees
delivery
is proven by the decisions of the Regional Director and the NLRB in
this case, as well as the decisions in Roadway /,//,and III. All ofthose
decisions applied the controltest and established that FedEx and its
predecessor Roadway controlledtheir deliverydriversto such a significant extent that theywere considered employees.
What is leftin the aftermathis the exact opposite. The employer
benefits from unilaterally assigning rights and maintaining control
over these rights,which can later be monetized. And in the event the
rightsare monetized by workers,this becomes directevidence ofentrepreneurial opportunityand overrides any concerns regarding control.
Moreover,under FedEx III , the courts should not question the entrepreneurial value ofthis direct evidence by determiningthe actual role
the worker had in bolstering the rights' value. Functionally,it is the
economic realities test absent reality,without any balancing inquiry
assessing workerdependence on the employer.184
B.

Ownership ofEquipment
At all times prior to the FedEx III decision, FedEx required delivThis requireery drivers to purchase or lease their delivery trucks.185
ment remained in the FedEx III case.186Until FedEx III , ownership of
equipment alone was not evidence of independent contractorstatus.

181.Id. at 500.
182.Id. at 512(Garland,
J.,dissenting).
183.FedEx/,NLRBCaseNos.l-RC-22034,
l-RC-22035,
slipop.at 9-10.
332U.S.126,130(1947).
184.SeeBartelsv.Birmingham,
185.RoadwayPackageSys.,Inc.(RoadwayIII), 326 N.L.R.B.842,858 (1998);
, 902
//),292N.L.R.B.376,385 (1989),enforced
Roadway
PackageSys.,Inc.(Roadway
F.2d34 (6thCir.1990);Roadway
/),288N.L.R.B.196,196
PackageSys.,Inc.{Roadway
(1988).
186.FedExIII , 563F.3d492at 498.

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Pay No Attentionto the Man Behind the Curtain

145

Instead, it was subject to control analysis in which the quality of the
ownershipwas analyzed.
The D.C. Circuit's reversal of this principle furtherexposes the
minimal nature of the entrepreneurial opportunity requirements.
This constructionofentrepreneurial opportunityis so attenuated that
the employer can prove that entrepreneurial opportunityexists simply by forcingtheir workers to buy their own equipment. In FedEx /,
where drivers were also required to purchase their own trucks, the
Regional Director found that "only one former multiple route contractor at Jewel Drive and no current contractors at either Wilmington terminal have ever [used their trucks for other commercial
purposes]."187In rejecting the fact that drivers owned their vehicles
as evidence of independent contractor status, the Regional Director
cited Roadway /IPs proposition that this result was created by obstacles imposed by FedEx.188
Instead of engaging in factual analysis, as done in FedEx I and
Roadway III , the D.C. Circuit generalizes with a tone-deaffootnote:
We recognizeFedEx seeks to "make full use of the Contractor's
are onlyobligated
but it is undisputedthe contractors
equipment,"
to provideservicefivedays a week. Our precedentspeaks to this:
as the driversworkonly40 to 50 hoursperweek forthe
"Moreover,
it
Company, seems that theirschedulesdo not precludethemfrom
takingon additionalhaulingbusinessduringtheiroff-hours."189
Therefore,workers can be penalized because a company requires them
to work only fortyto fiftyhours per week because "their schedules do
not preclude them fromtaking on additional hauling business during
There are two potential assumptions at play: that
their off-hours."190
individual workers can regularly work more than fortyto fiftyhours
per week or individual workers can hire and manage other employees
to do the work. Each assumption is problematic.
The D.C. Circuit creates an impossibly high hourly bar. While
some might claim that the footnote is referringto the equipment,
the language is remarkably clear: "As the drivers work only 40 to
50 hours per week forthe Company, it seems that their schedules do
not preclude them fromtaking on additional hauling business during
If an individual worker cannot claim a forty-to
their off-hours."191
for a single employer as evidence of being an
workweek
fifty-hour
of hours worked will almost never favor
the
amount
then
employee,
l-RC-22035,
187.FedExHomeDelivery
{FedExD, NLRBCase Nos.l-RC-22034,
slipop.at 52(Sept.20,2006).
188.Id.
C.C.E.,Inc.v.NLRB,60 F.3d855,8b0
189.FedExIII, 563F.3dat 499n.5(quoting
(D.C.Cir.1995)).
190.Id.
191.Id. (emphasis
added).

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146

26 ABA Journal of Labor & EmploymentLaw 123 (2011)

a findingof employee status. Workers in the gray area of employee
status determination will now be penalized for their full-time status. Additionally,by focusing on the individual and not attaching the
hours to the equipment, the vast majority of the American workforce
would fail to capitalize on their entrepreneurial opportunities every
week.
Even assuming the forty-to fifty-hourdetermination is linked
with the equipment provided by the alleged independent contractor,it
still fails to considerthe realities ofthe situation. Individual workersindividuals who have not hired other employees- should not be penalized fortheir decision to remain solo. The reality ofthe situation is that
an individual worker,working fortyto fiftyhours per week, will not,
because of external constraints,regularlywork additional hours. This
is the underlying assumption of the Regional Director's findingthat
the deliverydrivers'decision not to work additional hours was not one
ofentrepreneurialchoice.192
It is true that some individuals will take advantage oftheir situation and work more than fiftyhours per week or hire additional laborers to maximize the benefit of their equipment purchase. Yet this is
not replicable forall individuals, nor is it desirable to all individuals.
The evidence in FedEx III indicates that it was not replicable or desirable for any of the current delivery drivers. Finally, it seems follyto
conclude that by purchasing a van in orderto work forFedEx full-time
that these individuals are, in reality,purchasing a van to work two
deliveryjobs or to trytheir hand at building a deliveryenterprise.Yet
that is exactly what the FedEx III court concludes.
The number of hours worked is not a serious concern under the
traditional conception ofthe Restatement test because the calculus is
much more complex. The test does not simply conclude, on the basis
of hours, that the chance for entrepreneurialism exists.193Instead,
it analyzes the complexityof the employer-employeerelationship to
determine precisely why an individual has not exercised an entreThe same is true forthe economic realities
preneurial opportunity.194
test, which analyzes dependence. The obvious truth is that when an
individual spends fortyto fiftyhours per week working exclusively
forone entity,that individual is dependent upon that entity.To prove
the point, if a FedEx delivery driver were to lose the flow of packages from FedEx, the driver's package delivery business, the heart
of the driver's supposed entrepreneurialism, would be in ruins and
worthless.
192.FedEx/,NLRBCaseNos.l-RC-22034,
Roadl-RC-22035,
slipop.at52(citing
wayPackageSys.,Inc.(.Roadway
III), 326N.L.R.B.842,851n.36(1998)).
193.Roadway
III , 326N.L.R.B.at 851.
194.Id.

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Pay No Attentionto the Man Behind the Curtain

147

The Manner and Means ofReaching Mutual
Business Objectives
The impact of the D.C. Circuit's decision goes beyond superficial
constructionof entrepreneurial opportunity.It extends to subordination of other relevant factorsunder the traditional Restatement test.
Specifically,the D.C. Circuit purportsto allow the employerto restrict
a delivery driver's entrepreneurial opportunityin two instances: customer demand and governmentregulation.195The newly interpreted
breadth of the customer demand categoryis strikingand carves out a
heretoforeunrecognized exception to the Restatement test.
The FedEx III decision minimizes the importance ofemployercontrolby claiming that controlis related to customerdemand. In particular,the courtfindsa connectionbetween customer demand and forcing
delivery drivers to wear FedEx uniforms,having delivery trucks display the FedEx logo (larger than government regulations mandate),
and having drivers complete a safetycourse.196
Torturingall logic,the D.C. Circuit foundthat these controlswere
related to customer preferencebecause first,FedEx's business model
was unique and necessitated "certain consumer demands, including
second, a uniformis "oftenat least in part" a means ofensursafety";197
and third,"once a driver wears FedEx's logo,
ing customer security;198
FedEx has an interestin making sure her conduct reflectsfavorablyon
that logo."199
The flaws in this reasoning are numerous. The court makes a factual findingthat FedEx's business model necessitated the consumer
demand of safety,despite the fact that the decisions of the Regional
Director and NLRB are silent on this issue. Significantly,the NLRB in
Roadway III did not discount the requirement that the delivery drivers wear uniformsdespite Roadway having a nearly identical business
model and customerbase.200
Further,there is no factual findingthat links wearing a FedEx
uniformto ensuring customer security.Instead, the positive link is
established, according to the court, because uniforms"often at least
in part" have that purpose. To establish this fact,the court cites IRS
regulations and not the record or even case law. Additionally,despite
the factthat the court appears to acknowledge the limited relationship
between uniformsand security,it accords no weight at all to a finding of controlbased upon the multipurpose role of uniforms.Instead,
C.

195.FedExIII, 563F.3dat 501.
196.Id. at 500-01.
197.Id. at 501.
198.Id.
199.Id.
200. Roadway
III), 326N.L.R.B.842,853(1998).
PackageSys.,Inc.(Roadway

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148

26 ABA Journal of Labor & EmploymentLaw 123 (2011)

because FedEx can mandate uniformuse for security,it attains the
rightto exercise even greater control,beyond the customer demand of
security,over the contractor.
Employers can now exercise the controlthey desire without risk
ofturningindependent contractorsinto employees.Under the Restatement test, control is control. Some of the same factors considered in
FedEx III were also considered in Roadway III - such as required use
ofuniformsand the companylogo- and no customerdemand exception
was found forthem.201
The Restatement test does not contain the employerprotectionprovided in FedEx III . Instead, it provides a trade-off
forthe employer- exercise controlat the risk of gaining an employee.
As it pertains to the economic reality test, these displays of control,
and in particular the items in dispute in the instant case, are of minimal consequence. Under the economic reality test, by exercising more
controlthe employermakes it more likely that a worker is dependent
upon the employer,increasing the likelihood of an employee finding.
The FedEx III ruling destroysthis equation.
IV. Conclusion
FedEx Ill's change of the NLRA's legal landscape is clear and significant.Every employerhas the ability to appeal adverse Board decisions to the D.C. Circuit. No longer is the reality of the employment
relationship at issue; instead it is the potentiality.And that is a dangerous diminutionofrightsforthe American worker.
Beforethis groundbreakingdecision,the American worker'srights
under the NLRA were protected by a thorough analysis of the employer's control.Where the employer expressly controlled the actions
of a worker,it was evidence of employee status. Where the employer
did not controlthe actions of a worker,it was evidence of an independent contractorrelationship.There was a balance and fairness to this
analysis- a balance decisively upset by FedEx III.
In the eyes of the D.C. Circuit, control is no longer a factor.An
employer is free to engage in as much control as it wishes. Under
FedEx III , all that matters is that the employee be given an opportunityforentrepreneurship.However, the court does not balance the
factors of entrepreneurialism. Instead it adopts a two-step process:
(1) identify an entrepreneurial potential and (2) determine if any
worker has actually gained monetarily fromthat potential. There is
no effortto determine if the potential for entrepreneurialism is capable of repetition; no effortto determine if a monetary gain is, in
fact,entrepreneurial in nature; and no effortto determine if the entrepreneurial opportunityhas a meaningful existence separate from
employer control. Drawing an analogy fromthe control test, it is as
201.Id.

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Pay No Attentionto the Man Behind the Curtain

149

if the court determines that a worker is an independent contractor
because, in at least some areas, the employer did not exhibit control
over the worker.As a result, the entrepreneurial opportunitytest is
missing half of its analysis - the analysis of reality and equity.
The unbalanced entrepreneurialopportunitytest has several profound effectsupon worker status. First, it greatly increases the likelihood ofworkermisclassificationby significantlyexpanding the number
of workers who may be legally classified as independent contractors.
Second, and perhaps most importantly,the reformulatedtest encourages employersto provide superficialentrepreneurialopportunitiesfor
employees,furtherexaggerating the workermisclassificationproblem.
By doing so, the employercan avoid enforcementofthe NLRA against
it, and, possibly in the future,other federal employmentlaws. If there
are any doubts as to some employers'willingness to do this, one must
only consider the instant case. The decision in Roadway I led to the
changes in the employmentrelationship in Roadway III that resulted
in changes in the structure of FedEx's business in FedEx III. Finally,
the reformulatedtest has the potential to stripindependent contractors
ofthe veryindependence on which their title is based. None ofthese results increases the effectivenessofthe policies ofthe federal labor and
employmentsystem. Instead, FedEx III seriously undermines them.

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