Opinion ID: 427313
Heading Depth: 2
Heading Rank: 2

Heading: The Orlando Decision

Text: 59 In Orlando we held that cab drivers were employees where they operated under a twelve-month contract, which the company styled a sale of services to the driver rather than a lease. As in the present case, the Orlando contract recited the parties' intention not to create an employment relationship and avowed that drivers were to work free from interference or control by the company. We pointed out, however, that in practice certain controls imposed on the manner in which the drivers performed their duties created a de facto employment relationship. We adverted to five basic control factors as indicating that an employment relationship existed. The Board contends the same five factors justify its refusal to apply Seafarers to Suburban. We consider each in turn below.
60 Unlike the drivers in Seafarers, the Orlando drivers were required by the company to maintain trip sheets that chronicled each driver's movements and fares. 628 F.2d at 264 (emphasis added). And in Orlando, the trip sheet was required by the owner in its own interest. Here, as previously noted, ordinances of the Airport, Bloomington and Richfield require the maintenance of trip sheets, but fares are not reported on the trip sheets. 27 Courts have consistently held that regulation imposed by governmental authorities does not evidence employer control. See, e.g., NLRB v. Associated Diamond Cabs, Inc. (Diamond Cabs), 702 F.2d 912 (11th Cir.1983); Air Transit v. NLRB, supra, 679 F.2d at 1100; Seafarers, supra, 603 F.2d at 875-76. The Eleventh Circuit recently reached the same conclusion regarding ordinance-mandated trip sheets. Diamond Cabs, supra, 702 F.2d at 921-922, 923. 61 The Board rejoins that, because Suburban imposes a trip sheet requirement far in excess of that necessary for lessees to comply with applicable law, the company has transformed a requirement by three municipalities 28 into a blanket rule that trip sheets be kept for all trips. 262 NLRB No. 89, at 3-4 (emphasis added) (JA 60-61). In overestimating the sweep and significance of the blanket rule, the Board's rejoinder falls short for two reasons. First, given the geographical configuration of the relevant municipalities, most of Suburban's business undoubtedly originates at, terminates in, or passes through highways in the Airport, Bloomington, or Richfield. An examination of the official map of Minnesota, of which we take judicial notice, 29 reveals that the other three communities in Suburban's service area are adjacent to, and most of the principal highways cut across the borders of, Bloomington, Richfield and the Airport. Almost 60 percent of the inhabitants of the area serviced by Suburban reside in Bloomington and Richfield, see pages 367-368 supra, and, in addition, runs to and from the Airport must constitute a very substantial portion of the business of any taxi company in the area. Thus, most taxi runs probably would touch upon the Airport or a municipality that requires trip sheets--even those runs that might originate or terminate in other communities. In such circumstances, Suburban's log sheet requirement is a relatively minor, reasonable precaution taken to ensure strict compliance with applicable law. 62 Second, and more to the point, the Board adverts to nothing in the record which suggests that Suburban makes any use of the trip sheets. Nor has our own examination of the record unearthed any such evidence. The Board's conclusion appears to rest on its observation that sheets are to be turned in to the Suburban garage rather than to the municipality requiring the records. Brief for Respondent at 23; see General Counsel's Exhibit No. 12 (JA 208) (sample trip sheet) (Sheet Must Be Turned Into The Suburban Garage In Accordance With City Ordinance). But this is not evidence that Suburban makes any use of the sheets to control operations; rather, it is a service for ensuring compliance with municipal requirements. See Tr. 443 (JA 1974) (testimony of Jeffrey M. Feldman, President, Minneapolis Yellow Taxi Company, Inc.) (Suburban supplies blank trip sheets to its lessee drivers at their request free of charge so that le[ssee] drivers can record their starting, their pickups and their drop offs as it states in accordance with city ordinances.) (emphasis added). Nor has the Board made any finding that such use was made; in fact, the Board appears now to rely on the company's failure to come forward with allegations that it makes no use of the information. See Brief for Respondent at 23 n. 4. Reasonable efforts to ensure compliance with governmental regulations do not evidence control unless pervasive control by the employer exceeds to a significant degree the scope of the government control. Diamond Cabs, supra, 702 F.2d at 922; accord Air Transit, Inc. v. NLRB, supra, 679 F.2d at 1100; Seafarers, supra, 603 F.2d at 875-76; NLRB v. Cement Transport, Inc., 490 F.2d 1024, 1027 (6th Cir.1974), cert. denied, 419 U.S. 828, 95 S.Ct. 47, 42 L.Ed.2d 52 (1974); SIDA of Hawaii, Inc. v. NLRB, 512 F.2d 354, 359 (9th Cir.1975); NLRB v. Deaton, Inc., 502 F.2d 1221, 1226-28 (5th Cir.1974), cert. denied, 422 U.S. 1047, 95 S.Ct. 2665, 45 L.Ed.2d 700 (1975); Local 814, I.B.T., 223 N.L.R.B. 752, 753, enforcement ordered, 546 F.2d 989 (D.C.Cir.1976); Portage Transfer Co., 204 N.L.R.B. 117 (1973); Reisch Trucking & Transportation Co., 143 N.L.R.B. 953 (1963). Since the record is devoid of evidence of pervasive control that significant[ly] exceeds the scope of government control, the trip or log sheets do not support a finding of substantial employer control.
63 The Orlando court found that the company significantly regulated the drivers' hours, largely by closing its central office for three hours during the middle of the day and by assigning cabs on a first-come, first-served basis. 628 F.2d at 265. There is no similar evidence here that Suburban closes its garage, and the wide variety of leases offered, see pages 368-369 supra, precludes the possibility of exerting control by assigning cabs on a first-come, first-served basis. In fact, the ALJ in Suburban found that freedom to choose one's own hours distinguished lessee and commissioned drivers: 64 There are no minimum performance standards or hours of work set for lessees as there are for commission drivers, who, alone, punch time cards and may be disciplined and ultimately discharged for not meeting minimum standards in terms of both revenue per mile and per shift. Detailed records are kept of the performance of commission drivers on driver performance cards. Commission drivers normally work a 9 1/2 hour shift which may reach 11 hours in times of emergency. There are no limits on the hours lessees may work. 65 ALJ Decision, supra note 1, at 27 (JA 40) (footnote omitted). 30 Finally, Suburban's drivers may add extra hours to any lease period by paying $3 for each additional hour. See Newsletter from J. Feldman, Suburban (undated) (JA 215). Unlike Orlando, therefore, Suburban does not significantly regulate its drivers' hours.
66 The Orlando cab company substantially controlled the passenger selection of its drivers through its own system of airport starters and by means of its radio dispatch system. 628 F.2d at 264-65. 67 Because, pursuant to ordinance, the starters at issue in the present case are employed by the Airport, not Suburban, see page 369 supra; Tr. 422, any control exerted by starters cannot support a finding that Suburban controls the conduct of its lessee drivers' day-to-day operations. 31 See, e.g., Diamond Cabs, supra, 701 F.2d at 921-922 ([R]egulation imposed by governmental authorities does not evidence control by the employer.). In its Supplemental Decision, however, the Board stated that 68 It is possible for the mandatory legal requirement to become so detailed, and consequently bind the parties so closely together operationally, that compliance prevents the existence of an independent contractor relationship, and rather ensures that of employer-employee. 69 262 NLRB No. 89, at 5 (JA 62) (emphasis added). The Board cites no authority for this proposition. Nor is that this case. The ordinances here do not destroy the basic freedom of the drivers to operate their businesses independently. The Airport's use of starters, therefore, cannot support the Board's decision. 70 With respect to the radio dispatch system, Suburban's lessees are free to refuse any radio call. The ALJ made the following finding: 71 [C]hief Dispatcher James Le Tourneau testified that under [Suburban's] policy, lessees are free to refuse orders for runs, without penalty, and dispatchers are so instructed. Le Tourneau's testimony, corroborated by ... [Suburban's] witnesses, including lessees Bruce Stein and Robert Pace, comports with the weight of the evidence, and is credited. 72 ALJ Decision, supra note 1, at 25 n. 49 (JA 38) (emphasis added). This is in marked contrast to the circumstances in Orlando, in which drivers lacked the freedom to reject calls assigned by the dispatcher. In that case, the owner candidly and tellingly threatened to refuse to rent cabs to drivers who refused calls. 628 F.2d at 265. There is no evidence that Suburban made threats not to renew leases to drivers who refused radio calls. Moreover, that drivers sometimes do choose to forego business by refusing to respond to radio calls, see ALJ Decision, supra note 1, at 25 n. 49 (JA 38), evidences independence. See Diamond Cabs, supra, at 923-924. We conclude, therefore, that the record as a whole does not contain substantial evidence to support the Board's finding that the company uses its radio dispatch system to exert control over the drivers.
73 In Seafarers we observed that the compensation (rent) received by the company for the lease of its cabs was not related to the amount of fares collected by the drivers. 603 F.2d at 880-81. In Orlando, on the other hand, we found that the company closely monitored fares chronicled on trip sheets and, on that basis, had changed the financial details of the drivers' lease arrangement seven times in six months. Thus, because the company's compensation was effectively tied to the revenues generated by the drivers, we concluded, upon consideration of all the circumstances, that the goodwill of the enterprise inured to the Orlando company, not to the drivers. 628 F.2d at 265. 74 The Board contends that Suburban also adjusts its leasing rates in relation to the drivers' total revenues: 75 Respondent has experimented with several different types of leases, and has unilaterally changed the financial terms of the lease arrangement. These unilateral changes, coupled with [Suburban's] ability, through the trip sheets, flat rate agreements, airport delivery rates, and charge slip system, 32 to monitor a driver's overall business, suggest that [Suburban's] standard rental fees may be directly related to, and vary according to, the total volume of business generated by the lessees. 76 262 NLRB No. 89, at 7-8 (JA 64-65) (emphasis added) (footnote omitted). The record does not support this assertion. As the underscored language indicates, the Board's assertion is weak. The Board did not find that Suburban in fact adjusts lease rates in relation to total receipts. Instead, the Board only infers the suggest[ion] that such adjustment may take place. In Orlando, on the other hand, we premised our finding that goodwill inured to the company on an actual practice of making adjustments, not on the potentiality for doing so. See 628 F.2d at 265. 77 Even the Board's tentative inference is unfounded, since virtually all of the procedures the Board views as conducive to the monitoring of drivers' total receipts are unrelated to the vast bulk of the drivers' business. The record shows that 95 percent of a driver's total business is derived from meter rates set by municipalities; only five percent is derived from flat-rate agreements and airline baggage deliveries. See Tr. 430-31 (JA 170). As to trip sheets, we have already noted that there is no evidence that Suburban makes any use of them whatsoever. See pages 373-374 supra. The Board has not demonstrated that Suburban's rental income is tied to the drivers' total revenues. See Blue Bird Cab Co., NLRB No. 5-RD-811, slip op. at 11 (June 10, 1983) (To the extent rental fees are not a percentage of the fares collected by drivers, ... the [putative] Employer does not receive the benefits of any 'goodwill' created by the driver.). 78 Moreover, there is evidence in the record to suggest that drivers are able to create goodwill that inures to them personally. One driver testified that 30 percent of his business was derived from patrons who called for his own, personal services. See Tr. 294 (JA 149). That drivers are free to make their own arrangements with clients and to develop their own goodwill militates in favor of finding them substantially independent in their operations. SIDA of Hawaii, Inc. v. NLRB, supra, 512 F.2d at 357-58. 79 Of course, both parties to the working relationship derive benefit from the goodwill created by the entire Suburban operation. Goodwill is a two-way street in any independent-contract relationship that possesses, as this one does, some of the features of a franchise (e.g., a company logo, company advertising, and a centralized radio dispatch system). But this is not the precise sense in which we spoke of goodwill in our Orlando decision. Rather, we were there concerned solely with the practice of varying rental rates on the basis of drivers' total amounts of business. Such a practice might suggest that the leasing fees charged are actually commissions disguised as rents. There is no evidence that such evasion takes place in the present case.
80 The company in Orlando prescribed an elaborate dress code for its drivers, 628 F.2d at 265, in sharp distinction to the situation in Seafarers, where drivers were expected only to be neat and clean, and not to wear sandals. See Seafarers, supra, 603 F.2d at 868, 902. In the present case, moreover, Suburban neither establishes nor enforces any dress code at all. After describing Minneapolis Yellow's comprehensive dress code for commissioned drivers, the ALJ concluded: I find that lessees ... are not subject to dress and grooming codes .... See ALJ Decision, supra note 1, at 27 (JA 40). 81