Carnation Co.

National Labor Relations Board - Board Decisions

Sep 6, 1968

172 N.L.R.B. 1882 (N.L.R.B. 1968)

1882 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Carnation Company and Sales Drivers and Help-
ers, Local No. 274, International Brotherhood of
Teamsters , Chauffeurs , Warehousemen and Help-
ers of America . Case 28-CA-1460
SEPTEMBER 6, 1968
DECISION AND ORDER
By CHAIRMAN MCCULLOCH AND MEMBERS FANNING
AND BROWN
On March 4, 1968, Trial Examiner William E.
Spencer issued his Decision in the above -entitled
proceeding , finding that Respondent had engaged
in and was engaging in certain unfair labor prac-
tices and recommending that it cease and desist
therefrom and take certain affirmative action, as set
forth in the attached Trial Examiner's Decision.
Thereafter, the General Counsel, Respondent, and
Charging Party filed exceptions to the Decision and
supporting briefs. The General Counsel and
Respondent also filed answering briefs.
Pursuant to the provisions of Section 3(b) of the
National Labor Relations Act, as amended , the Na-
tional Labor Relations Board has delegated its
powers in connection with this case to a three-
member panel.
The Board has reviewed the rulings of the Trial
Examiner made at the hearing and finds that no
prejudicial error was committed . The rulings are
hereby affirmed. The Board has considered the
Trial Examiner 's Decision, the exceptions and
briefs, and the entire record in the case, and hereby
adopts the findings,' conclusions , and recommenda-
tions of the Trial Examiner with the following
modifications:
The Trial Examiner found , and we agree , that the
wholesale2 and retail drivers with whom Respon-
dent entered into distributorship agreements are
employees of Respondent , rather than independent
' The Trial Examiner stated that the current collective-bargaining agree-
ment has an effective date of May 25, 1966, whereas the record shows that
the contract was entered into on May 25 but has an effective date of May
1, 1966 Also, the parties stipulated that as of the date of the hearing,
Respondent had 30 instead of 36 retail route drivers covered by the collec-
tive-bargaining agreements
2 It is apparent from examining the retail and wholesale agreements that
in his discussion under section 3 "Indicia of employee status," the Trial Ex-
aminer was referring only to the wholesale agreement in the first part and
was referring specifically to the indicia of employee status under the retail
agreement at the end of that section
s With respect to certain factors that the Trial Examiner relies on in find-
ing the drivers to be employees, we note certain variations in the wording
of similar clauses in the wholesale and retail agreements However, these
minor differences in contract language do not affect in any way our agree-
ment with the Trial Examiner 's reliance on such factors as indicia of em-
ployee status ( I) With respect to the independence in hiring helpers or
substitutes , the Trial Examiner stated that when the distributor dies or
becomes incapacitated because of illness or injury, Respondent has the
right to begin serving the distributor 's accounts This language is contained
contractors .3 We therefore conclude that Respon-
dent violated Section 8(a)(1) and (5) of the Act by
(a) offering opportunity to soliciting , and inducing
its driver employees to enter into individual con-
tracts of employment with Respondent in deroga-
tion of their bargaining representative , and (b)
modifying , through such contracts with its driver
employees , its existing collective -bargaining agree-
ment with the Union without complying with the
requirements of Section 8(d) of the Act. In addi-
tion , the uncontradicted testimony reveals that
Respondent also violated Section 8 ( a)(1) and (5)
of the Act by causing employees Ronald Ferroni,
Hugh Gibson , Robert Treadway , and Earl Riddle,
to terminate their employment by eliminating their
routes and/or attempting to transfer them to less
desirable routes or jobs because they would not
enter into individual contracts covering wages,
hours, and conditions of employment in contraven-
tion of the existing collective-bargaining agreement.
We shall therefore amend the Order so as to
require the immediate and full reinstatement with
reimbursement for loss of earnings , if any, of
Ronald Ferroni , Hugh Gibson , Robert Treadway,
and Earl Riddle , as well as of the employees who
entered into individual contracts with Respondent,
to their former or substantially equivalent positions
without prejudice to their seniority or other rights
and privileges . In addition , we shall order that the
collective -bargaining agreement with the Union be
revitalized and be declared binding until such con-
tract is terminated . In this respect, we shall order
Respondent to pay such sums as would have been
paid into the health , welfare, and pension fund had
Respondent not repudiated the collective-bargain-
ing agreement.
ORDER
Pursuant to Section 10(c) of the National Labor
Relations Act, as amended , the National Labor
in the wholesale agreement The retail agreement provides that if the dis-
tributor becomes temporarily incapacitated he must immediately obtain a
responsible substitute and in default thereof the Respondent may assign a
substitute to conduct the business for which service the distributor agrees
to pay Respondent a certain sum per day , ( 2) The Trial Examiner found
that Respondent has the unilateral right to terminate the agreement on I
day's notice The record shows that the wholesale agreement provides that
the Respondent may terminate the agreement on I day's written notice if
the distributor sells or distributes products of other producers , distributors,
or suppliers , or shall fail to make deliveries to its customers promptly, or
shall fail to make payments at the time specified in the agreement The
wholesale agreement also provides for termination by either party on 30
days' written notice The retail agreement can be terminated ( a) by either
party for cause if a default is not cured within 5 days after receiving notice
to do so, ( b) by exercise of Respondent 's option to repurchase the business,
or (c) by 60 days ' notice of termination to be given in writing by eitherpar-
ty, (3) The Trial Examiner 's finding that Respondent retained substantial
control over the distributor 's advertising appears only in the wholesale and
not the retail agreement
172 NLRB No. 215
CARNATION COMPANY
Relations Board hereby orders that the Respon-
dent, Carnation Company, Phoenix, Arizona, its of-
ficers, agents, successors, and assigns, shall take the
following action:
1. Cease and desist from:
(a) Failing or refusing to bargain collectively
with Sales Drivers and Helpers, Local No. 274, In-
ternational Brotherhood of Teamsters, Chauffeurs,
Warehousemen and Helpers of America, as the ex-
clusive representative of all its employees in a unit
composed of all Respondent's plant and warehouse
employees and drivers, excluding supervisors and
guards.
(b) Continuing or giving effect to any distributor
agreements, wholesale or retail, executed with em-
ployees in the previously described appropriate
unit.
(c) Dealing individually with any of its em-
ployees in the aforesaid unit in derogation of their
bargaining representative.
(d) In anylike or related manner, interfering
with, restraining, or coercing its employees in the
exercise of their right to self-organization, to form
labor organizations, to join or assist Sales Drivers
and Helpers, Local No. 274, International Brother-
hood of Teamsters, Chauffeurs, Warehousemen
and Helpers of America, or any other labor or-
ganization, to bargain collectively through
representatives of their own choosing, and to en-
gage in concerted activities for the purposes of col-
lective bargaining or other mutual aid or protec-
tion, or to refrain from any and all such activities,
except to the extent that such right may be affected
by an agreement requiring membership in a labor
organization as a condition of employemnt, as
authorized in Section 8(a)(3) of the Act, as
modified by the Labor-Management Reporting and
Disclosure Act of 1959.
2. Take the following affirmative action which
the Board deems necessary and appropriate to ef-
fectuate the policies of the Act:
(a) Bargain, upon request, with the Union, in the
unit found to be appropriate, with respect to wages,
hours, and working conditions, including distribu-
torship agreements.
(b) Notify individually, and by the posting of the
notice attached hereto, all employees in the unit
found to be appropriate with whom the Respondent
has made individual contracts that it will no longer
offer, solicit, enter into, continue, or enforce such
contracts, but without prejudice to the assertion by
the employees affected of any legal rights they may
have acquired under such contracts.
' In the event that this Order is enforced by a decree of a United States
Court of Appeals , there shall be substituted for the words "a Decision and
1883
(c) Offer Ronald Ferroni, Hugh Gibson, Robert
Treadway, Earl Riddle, and all unit employees with
whom Respondent has made individual contracts
immediate and full reinstatement to their former or
substantially equivalent position without prejudice
to their seniority and other rights and privileges.
(d) Notify the above-named and described em-
ployees, if presently serving in the Armed Forces of
the United States, of their right to full reinstate-
ment, upon application, in accordance- with the
Selective Service Act and the Universal Military
Training and Service Act, as amended, after
discharge from the Armed Forces.
(e) Make whole the above-named and described
employees for any loss of pay they may have suf-
fered by reason of the unfair labor practices herein
found, by payment of a sum of money equal to the
amount they would normally have earned as wages
from the date of their termination to the date of
Respondent's offer of reinstatement, less any
earnings during such period in accordance with the
formula prescribed by the Board in F. W. Wool-
worth Company, 90 NLRB 289, together with 6
percent interest per annum, to be computed in ac-
cordance with Isis Plumbing & Heating Co., 138
NLRB 716.
(f) Reactivate, acknowledge the validity of, and
abide by the terms of the collective-bargaining con-
tract, effective May 1, 1966, until such contract is
terminated.
(g) Pay into the Teamsters health, welfare, and
pension fund, such sums as would have been paid
into said plan absent Respondent's repudiation of
the collective-bargaining agreement.
(h) Preserve and, upon request, make available
to the Board or its agents, for examination and
copying, all payroll records, social security payment
records, timecards, personnel records and reports,
and all other records necessary to analyze the
amount of backpay due under the terms of this
Order.
(i) Post at its place of business in Phoenix,
Arizona, copies of the attached notice marked "Ap-
pendix. "4 Copies of said notice, on forms provided
by the Regional Director for Region 28, after being
duly signed by the Respondent's authorized
representative, shall be posted by Respondent
immediately upon receipt thereof, and be main-
tained by it for 60 consecutive days thereafter, in
conspicuous places, including all places where
notices to employees are customarily posted.
Reasonable steps shall be taken by the Respondent
to insure that said notices are not altered , defaced,
or covered by any other material.
Order" the words "a Decree of the United States Court of Appeals Enforc-
ing an Order."
1884 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
(j) Notify the Regional Director for Region 28,
in writing , within 10 days from the date of this
Order , what steps have been taken to comply
herewith.
IT IS FURTHER ORDERED that the complaints be,
and it hereby is, dismissed insofar as it alleges un-
fair labor practices not found herein by the Board.
WE WILL pay into the Teamsters health, wel-
fare , and pension fund , such sums as would
have been paid into said plan absent the repu-
diation of the collective-bargaining agreement.
CARNATION COMPANY
(Employer)
APPENDIX
NOTICE TO ALL EMPLOYEES
Pursuant to a Decision and Order of the Na-
tional Labor Relations Board and in order to effec-
tuate the policies of the National Labor Relations
Act, as amended , we hereby notify our employees
that:
WE WILL NOT enter into , continue, or en-
force any individual contracts with our drivers.
WE WILL NOT deal individually with drivers
concerning their terms and conditions of em-
ployment in derogation of their bargaining
representative.
WE WILL NOT in any like or related manner
interfere with , restrain , or coerce our em-
ployees in the exercise of the rights guaranteed
by Section 7 of the National Labor Relations
Act, as amended.
WE WILL bargain collectively with Sales
Drivers and Helpers , Local No. 274, Interna-
tional Brotherhood of Teamsters , Chauffeurs,
Warehousemen and Helpers of America, as the
exclusive representative of all our plant and
warehouse employees and drivers , regarding
wages, hours, and working conditions , includ-
ing any and all distributorship agreements.
WE WILL offer to Ronald Ferroni , Hugh Gib-
son, Robert Treadway, Earl Riddle , and all
drivers with whom we have individual con-
tracts immediate and full reinstatement to their
former or substantially equivalent positions as
drivers, without prejudice to their seniority or
other rights and privileges , and make each
whole for any loss of pay suffered by reason of
the unfair labor practices found by the Board.
WE WILL notify the above-named and
described employees if presently serving in the
Armed Forces of the United States of their
right to full reinstatement , upon application, in
accordance with the Selective Service Act and
the Universal Military Training and Service
Act, as amended, after discharge from the
Armed Forces.
WE WILL reactivate, acknowledgethe validity
of, and abide by the terms of the collective-
bargaining contract.
Dated By
(Representative ) (Title)
This notice must remain posted for 60 consecu-
tive days from the date of posting and must not be
altered , defaced, or covered by any other material.
If employees have any question concerning this
notice or compliance with its provisions , they may
communicate directly with the Board 's Regional
Office, 500 Gold Ave., Post Office Box 2146, Al-
buquerque, New Mexico 87101, Telephone
247-2582.
TRIAL EXAMINER'S DECISION
Statement of the Case
WILLIAM E . SPENCER , Trial Examiner: Upon a
charge filed by the Union herein on December 13,
1966, the General Counsel of the National Labor
Relations Board , hereinafter the Board , filed his
complaint dated March 30, 1967, and an amended
complaint dated May 5, 1967, alleging that the
Respondent was in violation of Section 8(a)(1) and
(5) and 8 ( d)(1), (2), (3), and (4), of the National
Labor Relations Act, hereinafter called the Act.
Respondent in its duly filed answer admitted the ju-
risdiction of the Board but denied that it had en-
gaged in any of the violations of the Act charged to
it.
Pursuant to notice , a hearing , with all parties par-
ticipating , was held before me in Phoenix, Arizona,
on May 23, 24, and 25, 1967.
On the basis of the entire record in this proceed-
ing, my observation of witnesses appearing before
me, and consideration of briefs filed respectively by
the General Counsel , the Charging Party, and the
Respondent , I make the following:
Findings of Fact
1. JURISDICTION
Respondent is engaged in the processing and dis-
tribution of dairy products in and from numerous
plants and facilities in the several States , including
an operation in Phoenix , Arizona , where it dis-
tributes dairy products to retail and wholesale
customers throughout the Phoenix metropolitan
area . During a representative 12-month period, it
sold and distributed products of a gross value in ex-
CARNATION COMPANY
cess of $500,000, and purchased and received
goods and materials of a value in excess of $50,000
at its place of business in Phoenix, directly from
States other than Arizona.
II. THE LABOR ORGANIZATION INVOLVED
Sales Drivers and Helpers , Local No . 274, Inter-
national Brotherhood of Teamsters , Chauffeurs,
Warehousemen and Helpers of America , called the
Union herein , is a labor organization within the
*-aning of the Act.
III. THE UNFAIR LABOR PRACTICES
A. The Issues
The Respondent , engaged in the processing and
distribution of dairy and certain other products in
and from its operation in Phoenix , as part of a mul-
tiemployer group has long recognized and bar-
gained with the Union . Its current agreement, effec-
tive May 25, 1966, with an expiration date of April
30, 1968, like earlier agreements , covers the work
of Respondent's retail and wholesale route drivers.
On August 1, 1966, Respondent entered into the
first of a series of distributorship agreements with
certain of its employees , by which , according to its
contention , they became independent contractors
and as such were properly excluded from the bar-
gaining unit . As of the date of the first agreement,
there were approximately 25 wholesale drivers and
83 retail route drivers who were subject to the
union contract . As of the date of the hearing
herein , there were some 4 wholesale and 36 retail
route drivers admittedly covered by the union
agreement , while the number of "owner-operators"
numbered 10 wholesale and 28 retail.
The threshold issue is whether the employees
who entered into the distributor agreements ceased,
with the execution of the said agreement , to be em-
ployees and became independent contractors. If the
answer is in the negative , i.e., bona fide indepen-
dent contractors were not constituted under the
distributorship agreement , the Respondent has un-
lawfully refused to bargain with respect to these
employees ; if the answer is in the negative, there
remains the General Counsel 's contention that the
Respondent unlawfully circumvented its bargaining
obligations by failing to give the Union sufficient
notice and opportunity to bargain on the matter of
the distributorship agreements.
I accept Respondent 's contention that its motiva-
tion in setting up a system of distributorships was
economic . This does not however resolve the issue
of whether it afforded the Union sufficient notice
and opportunity for bargaining in the matter as
required by law as a part of its bargaining obliga-
tions.
1885
B. The Distributor Agreements
The distributor agreements are of two types,
wholesale and retail . The wholesale distributors sell
exclusively to wholesale customers such as groce-
ries , schools, etc ., while the retail distributors sell to
individual family consumers . The distributor is
granted the right to sell Respondent 's products in a
defined geographic area . It is binding on both
parties and cannot be unilaterally altered. The
wholesale distributors purchase the accounts
receivable in their territory , the price being the out-
standing balances on a specified date . The distribu-
tors purchase delivery trucks from the Respondent,
and in the case of wholesale distributors , sometimes
display cabinets . The trucks are sold on the basis of
conditional sales contracts with the price payable in
monthly installments.
Each distributor is required to assign his accounts
receivable to Respondent and to execute a trust
agreement setting up a joint bank account. The
trust agreements provide that proceeds from a
delivery route be deposited in a joint banking ac-
count and that funds may be withdrawn only over
the joint signatures of the distributor and a
representative of Respondent . The instruments in-
corporating these provisions state that they are in-
tended as security for the indebtedness created by
aforementioned purchases from the Respondent by
the distributor.
The retail agreement provides that the distribu-
tors pay each Wednesday for all products delivered
to them during the previous seven days. The
wholesale agreement provides that purchase shall
be on a cash basis . Prices charged are Respondent's
current published dock prices for wholesale or
retail distributors as the case may be. The
wholesale agreement provides that these prices may
not be changed without advance notice.
Respondent continues to employ salesmen who
solicit new business in the territories of both
wholesale and retail distributors.
Further details on the agreements appear in the
subdivisions which follow where the respective
positions of the parties are developed.
The wholesale and retail distributor agreements
contain , respectively , identical language , and the
so-called trust agreements and assignment of ac-
counts attached respectively to the contracts, were
executed by the same persons executing the con-
tracts to which they were attached. Therefore the
status of all persons signing the wholesale and retail
distributor agreements and attachments are, respec-
tively , for purposes of these findings , the same.
C. Indicia of Employee Status
With respect to the distributor agreements, the
General Counsel relies principally upon the follow-
ing provisions, substantially as summarized in his
brief.
1886 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Respondent has the option of furnishing the dis-
tributor with advertising material which the dis-
tributor must install and maintain at his own ex-
pense . In the event the installation does not mea-
sure up to Respondent 's unilaterally established
standards , Respondent has the right to require the
distributor to remove and replace it at the distribu-
tor's expense . If the distributor fails to comply with
Respondent 's demand , or request , Respondent
reserves the right to remove and replace the adver-
tising installations at the distributor 's expense.
The distributor is required not to handle or deal
in any competitive dairy product of another
producer, distributor, or supplier which the Respon-
dent has agreed to supply to the distributor.
The distributor in the performance of the agree-
ment is required to use only vehicles of which he is
the registered owner.
The distributor is required to paint vehicles used
in the performance of the contract in a specific
manner and thereafter paint and maintain the con-
dition of the paint to the satisfaction of Respon-
dent , with right reserved to the Respondent to noti-
fy the distributor when Respondent considers that
such vehicle needs maintenance painting and to do
it itself at the distributor 's expense if the latter fails
to comply with the notice.
The distributor is required to maintain in effect
substantial bodily injury and property damage in-
surance , and to provide workmen's compensation
and deliver the certificates for the aforesaid to the
Respondent . It is required that such certificates
contain a provision requiring the insurance com-
pany to give the Respondent 10 days' advance
notice of any cancellation or material change.
The agreement runs for 5 years, but the Respon-
dent , or the distributor , may cancel the entire con-
tract at any time on 30 days' notice.
The distributor must resell to the Respondent all
accounts receivable within the area serviced by him
together with any other accounts receivable he
may be serving at the termination of the agreement.
The distributor may not sell, pledge , or encumber
the aforesaid nor dispose of his business or ac-
counts in any fashion not in conformity with the
terms of the agreement.
Once the Respondent buys back the accounts
aforesaid , the wholesale distributor is not permitted
to compete within a radius of 50 miles from
Phoenix though at the time of the said purchase he
may have been servicing no more than I square
mile in this area.
The Respondent is given the right to terminate
the entire agreemnet upon 1 -day written notice if
the distributor does not make prompt deliveries or
sells or distributes the competitive products of
others than the Respondent , or does not make pay-
ments on time and in the manner specified in the
agreement.
If Respondent elects to terminate the agreement
because of the failure of the distributor to perform
its obligations under the agreement , Respondent
obtains title to the distributor 's trucks, purchased
from the Respondent under the agreement , and the
distributor loses all he has paid the Respondent for
them up to the time the agreement is terminated.
If the distributor dies, or becomes incapacitated
because of illness or injury, the Respondent has the
right to begin at once serving the distributor's ac-
counts.
Under the agreement , the distributor is not per-
mitted to assign his contract without the Respon-
dent 's prior written consent nor transfer any rights
thereunder to any other party by operation of law.
The assignment of accounts receivable include
not only those then existing but also those
thereafter arising.
The trust agreement , required to be executed by
the distributor, provides that immediately upon
receipt of any proceeds from the sale of products
under the agreement , the distributor must deposit
such proceeds in a certain named bank and such
funds may not be withdrawn except on the cosigna-
tures of officers or agents of the Respondent. It is
further provided that the distributor may not
withdraw any sums for living expenses except with
the consent of Respondent , while any sums which
may become due to Respondent under the condi-
tional sales contract of certain motor vehicles
remain unpaid . This trust agreement applies to both
retail and wholesale distributors.
With more particular reference to the retail dis-
tributors ' agreements , it is provided that if the dis-
tributor defaults in the performance of any obliga-
tion of the agreement and does not cure it within 5
days, Respondent has the right to terminate the
agreement at any time thereafter by written
notice, a reciprocal right is granted the distributor;
upon termination of the agreement for any cause
the distributor must deliver to the Respondent all
route books and lists of customers and use his best
efforts to turn over to the Respondent all the
customers served by him in the territory assigned to
him, and in such eventuality the distributor is
prohibited from engaging in the selling and dis-
tributing of dairy products at retail in Phoenix or
within a radius of 150 miles from Phoenix for 2
years thereafter ; at any time Respondent should
choose ' to exercise its option to repurchase , the dis-
tributor is required to sell back to the Respondent
accounts receivable, vehicles, customers lists, good
will, etc ., and terms for the repurchase of vehicle is
set forth allowing for depreciation up to 3 years
after which no repurchase cost accrues to the
Respondent; the distributor has the right to sell and
deliver dairy products in his assigned territory, but
the right , title, or interest in or to the customer in
the territory remains the property of the Respon-
dent.
CARNATION COMPANY 1887
D. Indicia of Independent Contractor Status
Among the more salient factors supporting the
Respondent's position that the distributor agree-
ments constituted independent contractors of
former employees are the following, briefly sum-
marized.
The distributors are granted exclusive territories,
respectively, for their operation, territories that
could not be changed unilaterally.
They are not required to undergo any training at
Respondent's direction and are not supervised.
They are not required to attend sales, safety, or
other meetings as in the case with Respondent's
employees.
They set their own hours and sequence of work;
are not required to wear uniforms; pay their own
license fees, taxes, health and liability insurance,
workman's compensation, etc; buy and operate
their own trucks; purchase gas, oil, etc., and garage
their equipment, according to their own choice.
They hire their own helpers and substitutes.
Their compensation is whatever profits they
make between the cost to them of the product and
the price they sell it for.
While Respondent suggests selling prices for its
products, the agreements do not require the dis-
tributors to adhere to such suggested prices.
The agreements define the relationship as one of
independent contractor.
Respondent argues in its brief, "In addition to
controlling their selling prices, the distributors have
opportunity to increase their profits by soliciting
new sales and customers and by using personal ini-
tiative and judgement, in the case of wholesale dis-
tributors, to obtain more space and favorable loca-
tions in the dairy [exhibit] cases. As employees, the
drivers were hourly paid and the amount of time
they could spend at each stop was strictly limited
by Respondent. Now, as independent distributors,
the drivers make additional calls to check on the
displays of their products, and spend as much time
as they like selling themselves and creating favor-
able relations with the store employees who order
products and stock the display cases. The distribu-
tors control their expenses of doing business by
determining the sequence of their routes and the
number of miles they drive. They are free to
purchase their gas, oil, repairs, insurance and sup-
plies where they please and they have exclusive
control over their employment of helpers and relief
men."
E. Concluding Findings
As remarked in the brief of the Charging Party,
sorting out servants or employees from independent
contractors has posed difficult problems of adjudi-
cation for about as long as the common law of torts
and agency and contract has existed. 35 Am. Jur.,
Master and Servants, #5, states a common ap-
proach to the problem:
... whether a person is an independent con-
tractor or merely an employee or servant, de-
pends upon the power of control which the
employer is entitled to exercise over the person
in question. The relation is that of independent
contractor where it appears that a person em-
ployed to do work is not, in the execution and
performance of such work, subject to the con-
trol of the employer, but is free to execute the
work without being subject to the orders of
the employer, with respect to the details
thereof. If, however, one engages another to
perform certain work, retaining control of the
conduct of the person thus engaged with
respect to the work to be done or the order,
method, and plan of the work, the relation is
that of master and servant ...
Section #220, Restatement of the Law of Agency,
in similar vein:
A servant is a person employed to perform ser-
vice for another in his affairs and who, with
respect to his physical conduct in the per-
formance of the service, is subject to the
other's control or right to control.
Drawing from such basic principles, the decisions
of the Board have placed emphasis on the right of
control, with a distinction being drawn between
control over the manner and means by which a
result is to be accomplished and control limited to
the result sought. Control over the manner and
means is indicative of an employee relationship;
control restricted to the object or result sought is
indicative of independent contractor relationship.
Pepsi-Cola Bottling Co., 156 NLRB 80. In similar
vein, called the "Standard statement" in Respon-
dent's brief, the Board found in Squirt-Nesbitt Bot-
tling Corp., 130 NLRB 24 (1961):
It is now well established that in determining
the status of persons alleged to be independent
contractors, the Act requires the application of
the "right of control" test. Where the person
for whom the services are performed retains
the right to control the manner and means by
which the result is to be accomplished, the
relationship is one of employment; on the
other hand, where control is reserved only as
to the result sought the relationship is that of
independent contractor.'
Respondent's able attorney reasons on the basis
of such well established general principles that the
' I do not understand that the Board's recent decision in A Paladin,, Inc.,
168 NLRB 952, marks a departure from the " right of control" tests, though
it may indicate a shifting of emphasis in applying such tests This decision
indicates the substitution of a more "realistic" approach for what the
Board appears to have regarded as a "mechanistic " approach followed in
earlier decisions I confess to some uncertainty as to what is meant by
"mechanistic" in this context In view of the great difficulty I have encoun-
tered in sorting out and applying precedents to the facts at hand I might
well have welcomed a mechanistic solution had I known one existed and
been able to identify it, and if I depart from what the Board regards as
precedents now controlling it likely will be because of misapplied emphasis
to the word "realistic "
1888 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
result sought by Respondent in this case "was the
distribution of its products in a more efficient
manner than was possible by use of its own em-
ployees .... As a result Respondent sought to go
out of business insofar as distribution was con-
cerned . The expense and responsibility of distribu-
tion was to be passed on to independent contrac-
tors whose earnings would depend not upon wages
or salary, but upon the use of their own initiative
and judgment in solving the problems arising in
each case and to develop a successful merchandis-
ing program . It would have been no answer at all to
Respondent 's problem for it to retain control over
the performance of this distribution."
The difficulty with the "right of control" formula
is not so much in grasping it in the abstract as in ap-
plying it to the facts at hand . It is not always easy to
draw the line between control of the object sought
and control of the means for accomplishing that ob-
ject. If it were , it is unlikely that a case where con-
trol of the object was exclusive of the means would
come to our attention . Obviously, as stated by its
attorney, the object sought by the Respondent in its
distributorship agreements was to obtain the dis-
tribution of its products in a more satisfactory
manner, but just how it could insure its success in
accomplishing such an object without exercising
some control over the distribution is hardly clear.
That it reserved to itself a measure of control over
the method and manner of distribution is indisput-
able, and this brings us to what is in effect a balanc-
ing act , weighing the indicia of independence on
the one hand against the indicia of dependence on
the other. It is the total situation that determines
whether individuals are independent contractors.
Cf. United States v. Silk, 331 U.S. 704, 716. And
while the right-of-control standard for distinguish-
ing between employees and independent contrac-
tors evolved as a method for deciding whether or
not a principal should be liable for the torts com-
mitted by another in the course of work being per-
formed by the agent for the principal, there has
been an " infusion of flexibility" into the relevant
standards the Board has applied in determining em-
ployment status where the purpose of the inquiry is
not to decide the applicability of respondeat superi-
or liability, but to determine the coverage of the
National Labor Relations Act.'
I am convinced on the facts of this case , realisti-
cally viewed, that the distributor agreements en-
tered into by the Respondent and its employees did
not give the latter the status of independent con-
tractors . This is not to say that the facts here en-
countered yield no indicia of independent contrac-
tor status . That clearly is not the case . To sum-
marize, unlike employees the distributors are not
required to wear uniforms or to attend company
meetings ; are not supervised in the daily per-
formance of their duties under the agreement; set
their own hours , hire their own helpers and sub-
stitute and depend on profits, not wages , for their
livelihood. They may handle noncompetitive
products of others than the Respondent. While
Respondent furnishes a suggested sales price list on
Respondent 's products handled by the distributor,
the distributors are not bound by the agreement to
adhere to such a list . However, it must be noted
that even some-of these factors most indicative of
independent status are, if we are to view the matter
realistically, qualified.
In describing the geographical areas in which the
respective distributors operate, routes were en-
larged by consolidation or otherwise to a degree
that individual control over the hours worked is not
absolute if the distributor is to service his area in a
satisfactory manner and thereby statisfy the terms
of the agreement ; by the same token the handling
of noncompetitive products is limited by the ex-
igencies of time and the territory required to be ser-
viced , and in the same sense there is a ceiling on
profits that are likely to accrue to the distributor;
and while technically the distributor sets his own
selling price , this price is not likely to vary substan-
tially from Respondent 's suggested selling price. If
it did, resulting in a wide variance in selling prices
among the distributors , Respondent would doubt-
lessly intervene, as admittedly it would if a distribu-
tor reduced his selling prices to a degree that would
' Brief for the Board before C C A 9 in Brush -Moore Newspapers. Inc
d/b/a The Portsmouth Times, 161 NLRB 1620 Cf The strict application of
respondeat superior in the Berne! Foam situation (Berne! Foam Products
Co, Inc, 146 NLRB 1277) where an employer was found to have
completely rejected the bargaining principle because of the unauthorized,
unratified antiunion statements of a single nonpolicy-making supervisor
who had been invited to a union meeting and advised that he would be in-
cluded in the bargaining unit if the union were successful Webb Tractor
and Equipment Company, 167 NLRB 383
CARNATION COMPANY
threaten or cause a price war.3 The independence
in hiring helpers or substitutes is not accompanied
by like freedom of action when the distributor dies
or becomes incapacitated because of illness or inju-
ry, for in such event Respondent has the right to
begin serving the distributor's accounts; nor is the
distributor permitted to assign his contract without
Respondent's prior written consent nor transfer any
rights thereunder to any other party. The substitu-
tion of profits for wages also has its qualifications,
for it requires the joint signatures of the distributor
and Respondent for the distributor to draw funds
required to be deposited under the trust agreement,
a part of each contract.
A clear example of control over the "means"
rather than the "object" is Respondent's substantial
control of the distributor's advertising, and the
requirement that the distributor paint, and repaint
vehicles used in performance under the agreement,
according to Respondent's direction. But these
latter are relatively minor matters , as is the distribu-
tor's freedom to purchase supplies and to garage his
trucks wherever he pleases. The fact that he obtain
a substantial price advantage by purchasing his
truck supplies from the Respondent while not ex-
actly a limitation on his freedom certainly con-
stitutes as inducement to please the Respondent by
his methods of distribution. However, perhaps the
factor most indicative of Respondent's right of con-
trol over the means as well as the object, is Respon-
dent's unilateral right, under the Agreement, to ter-
minate it on one day's notice.' Adding to this the
provision that if the Respondent should exercise its
option to buy back the accounts receivable within
the area serviced by the distributor, the latter, if
wholesale, is restrained from competing in an area
3 On direct examination Charles L Graham, Respondent 's assistant
general manager , testified in effect that the Distributor could "discount"
his milk prices , or raise them , as he saw fit, and Respondent would not in-
tervene, although Graham observed that the distributor "has got to live
within his gross that he has to work with " On cross-examination , however,
Graham gave this testimony
Q when the distributor bought the route , as you claim, you
turned over these accounts to the distributor, did you not?
A Right
Q And, the distributor has to serve those accounts at those prices,
does he not?
A Yes
1889
within 50 miles of Phoenix, and, if retail, is
restrained from competing within an area of 150
miles of Phoenix, would the distributor dare go
against or defy Respondent's directions concerning
the means as well as the object of the distribution,
more than any rank-and-file employee who may be
discharged if he does not follow the directions of
his supervisors?
Obviously, in the distributor agreements Respon-
dent hoped and expected to increase its margin of
profit on the products it sold, and to be relieved of
some of the petty details of supervision; just as ob-
vLOu1i its employees in accepting the agreements,
hoped and expected to increase their pay and to be
relieved of the onerous of supervision in their day-
to-day operations. That the Respondent did not
thereby denude itself of the power to overlook and
to an appreciable degree direct the distribution of
its product, and the signatory employees did not
become truly independent of general direction by
the Respondent is, I think, established by the fac-
tors enumerated above. That the agreements define
the relationship as one of independent contractor is
of little if any weight in determining the degree of
control actually exercised by the Respondent.
Frito-Lay, Inc., 167 NLRB 73.
In reaching these conclusions, I have relied on
the terms of the agreements and have placed little
reliance on the testimony of employees which show
some slight variances in practice from those terms.
Respondent can hardly be held to have waived any
rights it has under the agreement by some slight
variances it has allowed during this brief period,
with charges of unfair labor practices pending
against it. The fact is that the common law "right of
control" test governs, and not the manner in which
Q Don't you require him to service those markets ? That is,
those markets and chains at the price you have agreed to serve under
the contract?
A Yes, we do
Q So, he is bound by the terms of the contract , is he not?
A He could turn it down We might cancel his contract
Q Oh, you might cancel his contract if he turned it down
A Yes
Q And you are interested in avoiding price wars, are you not?
A Right
Q I want to know what a limited service price list is Is this a set
price that you set for limited service sir?
A We publish a limited service price
Q And, you require the distributor to sell at that limited service
price when he is offering limited service, is that right?
A Yes
Q Can your wholesale distributor, can he turn customers down
where you have signed up contracts with various markets and chains?
A He could
Q is it your statement now that if a wholesale distributor
created a condition which could result in a price war, you would not
intervene?
A Well we would try to eliminate a price war any time we
could
Q. Please sir , answer my question directly
A. 1 am sure we would talk to him
4 "The most important point in determining the main question [ contrac-
tor or employee ] is the right of either to terminate the relation without lia-
bility " L B. Price Mercantile Co v Industrial Commission, 30 F 2d 491,
Supreme Court of Arizona ( quoted in the brief of the Charging Party)
1890 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
that right may have been exercised in some situa-
tions . International Union of Operating Engineers,
Local Union No. 12, AFL-CIO, et al., supra. Nor do
I find any merit in Respondent 's contention that the
agreements were the end results of collective bar-
gaining between itself and the employees who ex-
ecuted them . Except for some minor concessions
with respect to vehicles being purchased from
Respondent by the prospective distributors, the
agreements were presented to the individual em-
ployees interviewed on a take -it-or-leave -it basis, as
is shown by their overall uniformity . The employees
were not represented by counsel , there was no real
give and take , and clearly many of those signing the
agreements had little understanding of their more
technical requirements and provisions.5
Upon the basis of the foregoing findings of fact
and upon the entire record in the case, I make the
following:
Conclusions of Law
1. The Respondent is an employer within the
meaning of Section 2(2) of the Act, engaged in
commerce and a business affecting commerce
within the meaning of Section 2(6) and (7) of the
Act.
2. The Union is a labor organization within the
meaning of Section 2(5) of the Act.
' As to precedents , the indicia of control is not, in my opinion , as strong
here as in the case cited in the text immediately above , or in A Paladin,,
Inc., supra , or in Brush -Moore Newspapers , Inc d/bla The Portsmouth
Times, cited supra I would find it difficult to distinguish this case, in the
more substantial particulars , from Shamrock Dairy, Inc, 124 NLRB 494,
affil 280 F 2d 665 (C.A D C ), cert denied 364 U S 892. although both
the General Counsel and the Respondent would distinguish , each to sup-
port his position The cases are, in my opinion , close, but while, to my
knowledge , the Board has never specifically overruled its split decision in
Shamrock Dairy, it appears not to have bound itself to it as a precedent
in more recent cases, such as Squirt-Nesbitt Bottling Corp , supra,
Servette, Inc , 133 NLRB 132, 138, 139, Frito-Lay, Inc , supra, Pepsi-
Cola Bottling Works Co, 156 NLRB 80, Allen Milk Co, 158 NLRB
285, Minnesota Milk Co. 133 NLRB 1314 1 have taken note that
3. At all times material the Union has been the
exclusive representative for purposes of collective
bargaining in an appropriate unit composed of all
Respondent's plant and warehouse employees and
drivers , excluding supervisors and guards.
4. Commencing about June 14, 1966, and at all
material times thereafter , the Respondent , in viola-
tion of Section 8(a)(5) of the Act, has refused to
bargain collectively with the Union, by inviting, so-
liciting, and inducing its driver employees to enter
into individual contracts of employment with the
Respondent in derogation of their bargaining
representative; and by entering into individual con-
tracts with its driver employees, thereby modifying
the existing collective agreement without comply-
ing with the requirements of Section 8(d)(1), (2),
(3), and (4) of the Act.
5. Because of the aforesaid conduct the Respon-
dent has interfered with , restrained , and coerced its
employees in the exercise of rights guaranteed by
Section 7 of the Act, in violation of Section 8(a)(1)
of the Act.
6. The aforesaid labor practices are unfair labor
practices affecting commerce within the meaning of
Section 2(6) and (7) of the Act.
[Recommended Order omitted from publication.]
Shamrock is Respondent's chief competitor in the Phoenix area, and
of Respondent's argument that it would not be equitable to hold it to
more stringent rules than were applied by the Board in Shamrock This
argument, I think, is best addressed to the Board (To adhere to Re-
spondent's position would in effect be to reaffirm Shamrock.) I must
confess also that I can find no significant factors distinguishing the
present case from Pure Seal Dairy Co., 135 NLRB 76, and merely take note
that this case was decided in a representation proceeding , and was decided
by a three man panel, two of whom are no longer on the Board Also, it
should be recorded that I have not attempted to reconcile the findings and
conclusions herein with court cases , such as N L R B. v Servette, Inc , 313
F 2d 66 (C A 9), inasmuch as the Trial Examiner is bound to follow Board
precedent unless the Board has reversed itself or been reversed by the
Supreme Court