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National Labor Relations Board v. Nu-Car Carriers

June 13, 1951


Author: Goodrich

Before GOODRICH, STALEY and HASTIE, Circuit Judges.


The National Labor Relations Board brings this action for a decree enforcing its cease and desist and reinstatement order against respondent. The Board found that respondent violated Sections 8(a)(1) and 8(a)(3) of the Labor Management Relations Act of 1947, 29 U.S.C. § 158 (Supp. 1950), by interfering with concerted activities of its employees, and particularly in discharging one of them. Jurisdiction is undisputed. The substantial issue in the case is whether respondent's drivers are "employees" within the meaning of the Act. Unless they are, the provisions concerning unfair labor practices are irrelevant to this case, for by its very terms the 1947 Statute excludes from its operation "any individual having the status of an independent contractor." 29 U.S.C. § 152(3) (Supp. 1950).

The statute however does not define the status of an independent contractor. We are therefore thrown back upon common law concepts. The Restatement of Agency does not define independent contractor either, but it gives a list of matters of fact to be considered in deciding whether one acting for another is a servant or an independent contractor. It states however that, "The important distinction is between service in which the actor's physical activities and his time are surrendered to the control of the master, and service under an agreement to accomplish results or to use care and skill in accomplishing results." Restatement, Agency § 220 (1933). We may add to this Judge Learned Hand's statement:

"The test lies in the degree to which the principal may intervene to control the details of the agent's performance; and that in the end is all that can be said * * *." Radio City Music Hall Corp. v. United States, 135 F.2d 715, 717 (2d Cir. 1943).*fn1

Both the trial examiner and the Board used the "conventional, common law test of the 'right to control'" and found that the agreement under which the drivers operated "placed all essential controls over the equipment and the manner and details of the work performed, in the hands of the Respondent." 88 N.L.R.B. 75 (1950). It concluded therefore that the drivers were employees and not independent contractors. Respondent does not quarrel with the legal test applied by the Board, but contends that its conclusion was wrong.

We need not venture into the question of whether the ultimate conclusion of employer-employee relationship based upon undisputed underlying evidentiary fact is one of fact or law.*fn2 Whether the Board's finding be viewed as one of fact or as a conclusion of law, we think it is correct. The degree of control over the work of its drivers which respondent had the right to exercise under the "sale" and "lease" agreements is so great as to make the drivers clearly "employees" within the coverage of the Labor Relations Act, and not "independent contractors."

Here are the facts which have led us to this conclusion. Respondent, Nu-Car Carriers, Inc., is engaged in the business of transporting new automobiles to dealers from assembly plants of the Ford Motor Company. Its New Jersey terminal, located in Raritan adjacent to a Lincoln-Mercury plant is the only one here involved. It was opened in April, 1948. Before beginning operations or engaging any drivers respondent entered into an agreement with the local A.F. of L. Teamsters Union. The agreement provided that respondent was to operate only under the "owner-operator system" and to contract only with union members.

The "owner-operator" plan was as follows: The "owner-operator" and the company were to execute simultaneously two documents called "Agreement of Sale" and "Lease of Equipment Agreement." In the sale agreement the company agrees to sell a tractor to the owner-operator for a cash down-payment of $200 and an interest-free note for the $1800 balance. This balance is to be paid at a stated mileage rate out of earnings under the accompanying lease agreement. By the lease agreement the owner-operator agrees to lease the tractor to the company for use with an automobile-carrier trailer supplied by the company. The lease is for a year and is automatically extended from year to year, but is terminable by either party on 10 days' written notice. Under it the owner-operator agrees to work exclusively for the respondent and operate and maintain the tractor at his own expense in return for a stated compensation per mile.

By June, 1948, when the alleged unfair labor practice occurred, respondent had 28 drivers operating out of its Raritan terminal, all under the system outlined above. None of these owned his tractor or trailer before he came to work for respondent, and each "purchased" and leased back to respondent only one tractor. The company handles each year at its Raritan terminal $10,000,000 worth of new automobiles, all of which it delivers by truck.

The rights and obligations of the parties are set out in the sale and lease agreements in detail. They provide*fn3 that title is to remain in the company during the term of the lease and reserve to the company the option to purchase the tractor at the average "as is" value upon the termination of the agreement for any reason. Payment on the note may be postponed on request in the event that the company fails to provide driver with a gross income of $100 per week. The company reserves the right to terminate the agreement if the driver "does not operate in harmony with and to the best interests of all persons" in the automotive industry with whom he has contact.

The agreements themselves, without more, make it clear that respondent's drivers were not independent contractors even under the strictest of common law agency tests. The lease provides that the tractor is to be used solely "under the direction and supervision of the Company," and that "the operation of all leased vehicles and equipment shall [be] under exclusive and direct supervision and control of the Company." If the company has not reserved by this language the right to control the manner and means of driving these tractor-trailers and loading and unloading them, there are not words in the English language capable of doing so. There is no provision requiring the driver to be on the job so many days a week and so many hours a day, but in the very nature of the work this is not to be expected. Regularity and availability are guaranteed by the provisions that the driver must work "exclusively and loyally for the Company" and "be subject to call by Company for the rendering of service with equipment at all times."

Respondent relies heavily on two things: (1) the fact that each driver owns the truck which he drives and (2) the method of compensation. If the driver "owns" the truck, his ownership is qualified in ways not usual for owners. He gets no right to possession of the tractor. The most he gets is the right to drive it on company business when instructed to do so. "Title" remains in the company for the duration of the lease. The company reserves at all times the right to repurchase the vehicle. The fact of ownership of tools or equipment is helpful in deciding whether one is an independent contractor only because of the inference of right of control arising from ownership. But if the owner, as part of the agreement to perform service, surrenders complete dominion over the instrumentality and the right to decide how it shall be used, as here, then the fact of ownership loses its significance. These sale and lease agreements give the company such extensive dominion and control over the operation of the tractor as to render the owner-operator's ownership, if such it is, meaningless on the question of whether he is an employee.

Turn now to the method of compensation under these agreements. The driver's compensation is computed by crediting him with a gross "rental" of so much per mile varying with the number of cars hauled per load and the length of the trip. From this sum deductions are made for fuel, repairs, insurance, etc. charged to the company, and for withholding and social security taxes. The company guarantees minimum net earnings of 11 cents per loaded mile. All fuel and maintenance is to be ...

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