Opinion ID: 349974
Heading Depth: 1
Heading Rank: 4

Heading: Reversal of the Board's Finding.

Text: 34 The facts relating to the independent contractor-employee controversy are not in question. We need only determine (1) whether the Board employed the correct legal standard in deciding this question and (2) if so, was this legal standard properly applied. 35 For the purposes of section 2(3) of the Act, 29 U.S.C. § 152(3), the term employee does not include any individual having the status of an independent contractor. In distinguishing between the two, both the Board and the courts must apply general agency principles, N.L.R.B. v. United Insurance Co., 390 U.S. 254, 256, 88 S.Ct. 988, 19 L.Ed.2d 1083 (1968), such as those found in the Restatement (Second) of Agency § 220(2) (1957). Associated Independent Owner-Operators, Inc. v. N.L.R.B., 407 F.2d 1383 (9 Cir. 1969). Of the considerations employed in reaching a decision under general agency law, the determination of who has the right to control and direct the work is foremost.SIDA of Hawaii, Inc. v. N.L.R.B., 512 F.2d 354 (9th Cir. 1975); Associated Independent Owner-Operators, Inc. v. N.L.R.B., supra. It must be tempered, however, by other considerations relevant to the relationship in its entirety. N.L.R.B. v. United Insurance Co., supra. Although the Board applied this right-of-control test, we disagree with its application of the test and its apparent failure to give sufficient weight to other indicia of independent contractor status. 36 Yet simple disagreement with the Board does not mandate reversal. We may not reverse the Board simply because we might have decided the case differently were it tried before us de novo, N.L.R.B. v. United Insurance Co., supra, nor may we reverse if the board has chosen between two fairly conflicting views of the issue. N.L.R.B. v. United Insurance Co., supra; SIDA of Hawaii, Inc. v. N.L.R.B., supra; Associated Independent Owner-Operators, Inc. v. N.L.R.B., supra. On the other hand, if the Board decision that the owner-operators are employees lacks substantial support in the record considered as a whole, we must reverse. Inasmuch as the determination of this issue will depend on the particular facts of the case, we shall first describe the factual setting before us. 9 37 The owner-operators own and operate dump trucks and perform hauling services for contractors. They deal either directly with the contractor or through an overlying carrier, who contracts with the contractor to provide hauling services and in turn subcontracts this work to the owner-operators for a fee of 5% of the minimum tariff for the work. An owner-operator generally will have such subcontractual, or subhaul, agreements with various overlying carriers; conversely, an overlying carrier will have subhaul agreements with various owner-operators. The overlying carriers do not supervise in any significant fashion the work of the owner-operators. Rejection of referrals from overlying carriers is common; an owner-operator often will turn down work he believes is too dangerous, unprofitable or that simply does not fit into his schedule. 38 The relationship between an owner-operator and a contractor generally is short-lived. An owner-operator may work for as many as 100 contractors in any given year, and sometimes will work for two different contractors during the course of one work day. 39 The California Public Utilities Commission (PUC) establishes the minimum tariff, which includes compensation for both labor and equipment. Owner-operators are free to negotiate for higher rates; the minimum tariff operates as a floor below which the rates may not fall. Owner-operators are usually paid by the hour, although sometimes their pay is based on mileage and tonnage rates. Unlike employee-drivers, who are paid on an hourly basis from the time they are told to report to work until the work day is finished, regardless of whether the equipment is in operation throughout that period, owner-operators are not paid for the time their equipment is inactive. Moreover, the contractors do not deduct state and federal income tax, social security, or disability insurance from the owner-operators' wages. The owner-operator keeps track of his own time and presents a bill for his services to the contractor or overlying carrier. This is then compared against the records kept by the contractor or overlying carrier to prevent padding of the bill. 40 Under the regulations of the PUC, the owner-operators must obtain a permit issued by the PUC, be bonded, and carry sufficient liability insurance. In addition, owner-operators are responsible for any traffic citations for overloading and spillage. 41 An owner-operator bears the entire cost of his enterprise. This usually includes his trucking equipment ($15,000 to $20,000), a service pick-up ($1,000 to $4,000), tools ($500 to $1,500), insurance premiums ($500 to $3,500), and office supplies, including for example, stationery, invoices, a typewriter and a calculating machine. In addition, he must pay all maintenance and operational expenses. 42 An owner-operator may hire a driver to operate his equipment, in which case he pays the driver an hourly wage and makes the standard deductions from the driver's pay. He may also subcontract the work to another owner-operator. In either case, he need not first receive permission for such substitution from, nor even report the substitution to, the contractor. If he hires a driver, this driver is under the exclusive control of the owner-operator. 43 At the jobsite, the owner-operators observe the same starting time, quitting time and lunch break as do employee-drivers. In most cases, the contractors direct the owner-operators where to load and to dump the materials and designate the routes to be taken. Contractors may have personnel, known as load checkers, who oversee the performance of the owner-operators. Contractors also often have spotters who tell the owner-operators where to dump the material. On occasion, contractors take disciplinary actions in the form of reprimands or docking pay for an owner-operator's poor performance. 44 In determining that the owner-operators are employees, the Board seized on several facts relating to the owner-operators' performance of their work at the jobsite and concluded that these facts indicated that the contractors had the right to control the manner and means by which the desired result was accomplished and that the relationship between the parties was therefore that of employer-employee. In so concluding, the Board, although recognizing the distinction between the right to control the manner and means and the right to control only the result, failed to draw this distinction properly. Moreover, the factors relied upon by the Board are not persuasive evidence of an employer-employee relationship. 45 The contractors' control of the loading and dumping sites and instructions to the owner-operators as to where to pick up and dump this material demonstrates the contractor's right to control the result of the work, not the manner or means of doing the work. Such instructions have little to do with the actual operation of the equipment, viz. the manner in which material is loaded, unloaded, and transported. See Associated Industrial Owner-Operators, Inc. v. N.L.R.B., supra. Nor does designation of the routes to be taken necessarily indicate that the contractors controlled the manner and means of accomplishing the desired result. Inasmuch as the owner-operators are paid by either the hour or by the mile, it certainly is in the contractors' best interest not to permit owner-operators to take circuitous routes to and from the jobsite. Control of this facet of the business merely prevents padding of the ultimate cost. In the same vein, neither the presence of load checkers, who make certain that the dump trucks do not take side trips, nor spotters, who direct the owner-operators where to dump the material, deprives the owner-operators of their independent status. The existence of the load checkers is simply a by-product of the method of payment. The spotters perform a function which involves primarily the final result of the owner-operator's services. 46 The Board also pointed to the fact that contractors reprimand owner-operators for standing around and talking, for dumping at a site not designated by the contractor, and for taking excessively long lunch breaks as an indication of the contractors' control. Clearly the designation of a dumping site is a part of the desired result, which is within the sphere of the contractors' control in an contractor-independent contractor relationship. Associated Independent Owner-Operators v. N.L.R.B., supra. As for reprimands for loafing and taking excessively long lunch breaks, these are to be expected from a contractor who wishes to complete a job on time. Such reprimands are not examples of interference with the manner and means by which an owner-operator loads his truck, transports material to a dump site, and unloads his truck. 47 Finally, the Board notes that the owner-operators are required to observe the same starting and quitting times and lunch breaks as the rest of the employees. Again, this is a necessary requirement by virtue of the need for cooperation among the various workmen at a construction site. Loaders load the dump trucks; the owner-operators must coordinate their work with these loaders. Such coordination would be more difficult if varying lunch hours were observed. We accorded the insignificant factor of prescribed working hours little weight in Associated Independent Owner-Operators v. N.L.R.B., supra, and do so again here. 48 Looking at the relationship in its entirety, it becomes even clearer that the owner-operators are independent contractors. Each operates an independent business of his own, see Restatement, supra, § 220(2)(b), in which the contractors exercise no control. See Joint Council of Teamsters No. 42 v. N.L.R.B., 146 U.S.App.D.C. 275, 282, 450 F.2d 1322, 1329 (1971) (MacKinnon, J., dissenting). Each is a skilled operator. Associated Independent Owner-Operators v. N.L.R.B., supra; Restatement, supra, § 220(2)(d). Being entrepreneurs, each must invest substantial sums in equipment and bear the risk of any loss attributed to his operation. See SIDA of Hawaii, Inc. v. N.L.R.B., supra; Brown v. N.L.R.B., 462 F.2d 699 (9th Cir.), cert. denied, 409 U.S. 1008, 93 S.Ct. 441, 34 L.Ed.2d 301 (1972). It is the owner-operator's responsibility to meet the regulations of the PUC so that he may operate legally. The success of an owner-operator depends upon his own skill and business acumen, and does not depend on that of any contractor. He may work as little as he wants or as much as he can, and for as many different contractors as will hire him. It is unlikely that he will work for any single contractor for an extended length of time. See Restatement, supra § 220(2)(f). He does not have a continuing relationship with a contractor in the same sense that an employee has a continuing relationship with an employer. His relationship is ongoing only in that he may do some more work for the contractor some time in the future. In short, owner-operators run businesses completely independent of the contractors, and in the main are not subject to their control. The contractors' only real concern is in the accomplishment of the job for which the owner-operators are hired, to wit, the loading, hauling and dumping of material. Any supervisory activity of the contractors is limited to that which is necessary to accomplish this goal. See Joint Council of Teamsters No. 42 v. N.L.R.B., supra, (MacKinnon, J., dissenting). 49 There are other indicia of the independent contractor status of the owner-operators. Although paid on an hourly basis, which is usually an indication of employee status, Restatement, supra § 220(2)(g), the hourly rate reflects amounts attributed to the use of the equipment as well as to the value of the labor. Thus, owner-operators are not paid for the time they are on the jobsite when their equipment is idle. Moreover, the contractors do not make any of the normal deductions from the pay of the owner-operators, contrary to the practice commonly employed with respect to true employees. Also contrary to the practice used in dealing with employees, each owner-operator is free to reach his own bargain with each contractor as to the amount he is to be paid, limited only by the minimum tariff set by the PUC. We note that all of these considerations were present in Associated Independent Owner-Operators v. N.L.R.B., supra, where we reversed a Board decision finding owner-operators of graders employees. 50 In addition, owner-operators may hire substitute drivers or subcontract the work to another owner-operator without prior permission, or any notification to, the contractor. This is clearly inconsistent with a finding that a personal employer-employee relationship exists. It is further evidence that the owner-operator's truck is his exclusive domain, and that its operation is beyond the authority of the contractor. 10 51 In determining whether the owner-operators are employees or independent contractors, the total factual context and all the incidents of the relationship must be assessed and weighed with no one factor being decisive. N.L.R.B. v. United Insurance Co., 390 U.S. at 258, 88 S.Ct. at 991. This the Board failed to do. Instead, it gave inordinate weight to isolated examples of contractor control at the jobsite, control which in the main involved only the result sought to be accomplished. 11 Given the exigencies of a construction site, the contractor's reasonable instructions as to trivial matters, such as the timing of the lunch hour, cannot transform what by every other indicia is a contractor-independent contractor relationship into an employer-employee relationship. Looking to the total factual context of the relationship which the owner-operators and contractors maintain, we hold that the Board erred in concluding that the owner-operators of dump trucks are employees. This holding does not depart from the spirit of our earlier holding in Associated Independent Owner-Operators, Inc. v. N.L.R.B., supra. 52 We deny enforcement of the Board's decision and order of September, 1975 and remand this case to the Board for further proceedings consistent with this opinion.