Court Upholds NLRB against Taxi Company in Definition of Employee

If a company controls the vehicles drivers operate, mandates a dress code for those drivers, and restricts the drivers from pursuing other job opportunities, then those drivers are the company's employees. That was the ruling filed yesterday in the U.S. Court of Appeals for the Ninth Circuit in Friendly Cab Co. Inc. v. National Labor Relations Board (No. 05-73813), in which a California taxi company contended that its drivers were technically independent contractors, not employees for whom it had to withhold taxes, pay for worker's compensation insurance, and provide other protections of the National Labor Relations Act.

In the latest in a series of rulings by courts in California defining who is an employee and who is not under state or federal law, Circuit Judge Consuelo Callahan wrote for the unanimous court that the drivers of Oakland-based Friendly Cab Company Inc. are employees rather than independent contractors and therefore are covered by collective bargaining rules under federal law. The decision affirmed the conclusion of the National Labor Relations Board, which got involved when the company owners refused to meet and engage in collective bargaining with the East Bay Taxi Drivers Association in 2002.

Friendly owners charge drivers between $450 and $600 a week for the right to use the taxis, choose their own work hours, and keep the fares. The court noted that such lease arrangements usually mean drivers are independent contractors, but that in Friendly's case the company exercises extensive control over its drivers. Most important, the court said, the company prohibits drivers from using the cabs for their own businesses. They cannot solicit customers for themselves, hand out private business cards to their passengers, or take calls for service on personal cell phones. "These limitations do not allow Friendly's drivers the entrepreneurial freedom to develop their own business enterprises like true independent contractors," Callahan said in the 3-0 ruling.

Other factors contributing to the court's decision included Friendly's requiring drivers to carry advertisements without receiving revenue, imposing a strict dress code, requiring training in excess of government regulations, imposing discipline for refusing or delays in responding to dispatches, requiring drivers to accept vouchers subject to graduated "processing fees," and prohibiting subleases. "Although some of these factors individually may not constitute substantial control, the NLRB reasonably concluded that these factors taken together overcame any evidence of independent contractor status," Callahan wrote.

With this decision, the company's 90 to 100 drivers have the right to unionize, a right they have sought for more than five years.

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