Deaton, Inc.

National Labor Relations Board - Board Decisions

Jan 11, 1971

187 N.L.R.B. 780 (N.L.R.B. 1971)

780 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
Deaton , Inc., and Service Employees International
Union, Local #623, AFL-CIO, Petitioner. Case
10-RC-8225
January 11, 1971
DECISION AND DIRECTION OF
ELECTION
BY CHAIRMAN MILLER AND MEMBERS
FANNING, BROWN, AND JENKINS
Upon a petition duly filed under Section 9(c) of the
National Labor Relations Act, as amended, a hearing
was held before Hearing Officer Alan L. Rolnick of
the National Labor Relations Board. Following the
hearing, and pursuant to Section 102.67 of the
National Labor Relations Board Rules and Regula-
tions and Statements of Procedure, Series 8, as
amended, this case was transferred to the National
Labor Relations Board for decision. Thereafter, the
Employer and the Petitioner filed briefs, which have
been duly considered.
The Board has reviewed the Hearing Officer's
rulings made at the hearing and finds that they are
free from prejudicial error. The rulings are hereby
affirmed.
Upon the entire record in this case, the Board finds:
1. The Employer is engaged in commerce within
the meaning of the Act, and it will effectuate the
purposes of the Act to assert jurisdiction herein.
2. The Petitioner is a labor organization claiming
to represent certain employees of the Employer.
3. A question affecting commerce exists concern-
ing the representation of certain employees of the
Employer within the meaning of Sections 9(c)(1) and
2(6) and (7) of the Act.
The Petitioner seeks to represent a unit of all over-
the-road truckdrivers, city pickup and delivery driv-
ers, hostelers, and maintenance employees at the
Employer's Birmingham, Alabama, facility. The
Employer contends that the petition should be
dismissed, primarily on the basis that the unit includes
certain over-the-road truckdrivers who, it urges, are
independent contractors, and others who, it claims,
are employees only of these independent contractors.
The Employer is a Delaware corporation with its
principal office and place of business located at
Birmingham, Alabama, where it is engaged in the
transportation of goods in interstate commerce as a
common carrier under license from the Interstate
Commerce Commission. The Employer utilizes about
400 truckdrivers: about 35 individuals drive Deaton-
owned trucks, 16 are local drivers and hostelers
(yardmen), and about 355 individuals own and/or
drive trucks leased by Deaton.
The following are the various categories of owners
and drivers of trucks leased by Deaton:
a. Single Owner-Drivers: These drivers own and
operate a single truck, which they drive and lease to
Deaton.
b. Multiple Owner-Drivers: These individuals own
more than one truck leased to Deaton. A multiple
owner-driver normally drives one of his leased
vehicles.
c. Nonowner-Drivers: These drivers drive the
trucks leased by Deaton.
The Employer is authorized to operate as an
interstate motor vehicle common carrier under a
Certificate of Public Convenience and Necessity
granted by the Interstate Commerce Commission. In
its operations, the Employer is subject to the Inter-
state Commerce Act and to the regulations promul-
gated by the ICC, and is further subject to pertinent
regulations of the Department of Transportation.
Under the Interstate Commerce Act, a carrier is
permitted to augment its equipment by means of
leases, but the carrier is not thereby relieved from
certain duties and responsibilities imposed by the
Interstate Commerce Act.
The relationship between the Employer and the
truck owners and nonowner-drivers is based on the
terms of a lease entitled "Lease Agreement between
Deaton, Inc., and Independent Contractor." The term
of the lease is 1 year, and from year to year thereafter,
unless terminated by either party upon written notice
after having been in effect for 30 days. The lease
provides that the "contractor agrees to furnish, upon
request of `carrier' the equipment . . . and all labor to
operate the same, and to perform all services
necessary in the transportation of such commodities
as `carrier' may provide." The lease further provides
that the "Contractor warrants that the motor vehicle
be in safe mechanical and operating condition"; that
such vehicle will be maintained by the "contractor";
that said equipment is properly licensed; and that the
equipment meets the rules and regulations of the ICC
and all other regulating authorities and local, state,
and other appropriate agencies.
It is further provided that the "Contractor" agrees
to pay the entire cost of operating the vehicle,
including wages, payroll taxes, workmen's compensa-
tion, fuel tax payments, road tax, equipment use fees,
equipment license fees, driver's license fees, fuel, oil,
gasoline, tires, parts, repairs, driver's salary, fines,
tolls, state license tags, and pay collision, fire, and
theft insurance premiums. However, Deaton, by
virtue of the lease, is authorized to withhold sums
from an owner in default on any monetary obligation
imposed on him by the lease.
It is further provided that the contractor shall
"provide all labor and service herein provided for, or
187 NLRB No. 102
DEATON, INC
employ all necessary drivers, helpers, mechanics or
others competent and qualified to perform the work
required hereunder, and meeting the requirements of
the rules and regulations of Federal, State, and local
regulatory authorities," and shall "Direct and control
his employees, including selecting, hiring, supervising,
firing, training, setting wages, hours and working
conditions and paying and adjusting the grievances of
his employees." The lease agreement provides that the
"carrier" shall pay the "contractor" certain set
percentages of the gross revenue, which, in practice,
the record indicates, amounts uniformly to 70 percent
for the lease of a tractor and trailer, and 60 percent for
the lease of a tractor alone.
Under the lease arrangement, certain duties and
responsibilities are imposed upon the "Contractor"
vis-a-vis the "Carrier." Thus, the "Contractor" agrees,
at his expense, to furnish "Carrier" with the driver's
current medical certificate, copy of all daily drivers'
logs, driver's trip report and manifest, and such other
reports or forms as may be required by the Interstate
Commerce Commission and United States Depart-
ment of Transportation, and in such detail as may be
required by such rules and regulations; the
"Contractor" agrees on delivery of any property
transported by him to secure signed delivery receipt
therefor and on completion of trip, furnish same to
"carrier"; and "Contractor" further agrees to collect
all moneys due "carrier" for transportation service
rendered pursuant hereto. The record also reflects
that the owner of a vehicle leased to Deaton may not
drive that vehicle for another Company.
The drivers report to the Employer's dispatcher for
the various hauls. They "sign in" when they desire to
make a haul. The lease owners hire their own drivers,
but the drivers are, nevertheless, "checked out" by the
Employer's personnel office. In the event a driver
does not perform to Deaton's expectations, such as
being consistently late, being insulting to the custom-
ers, drinking on the job, Deaton asks the lease
operator not to utilize the driver on the Employer's
runs.
The owners of the leased vehicles invest about
$20,000 in each truck. The multiple owner-drivers
may, apparently, lease to the Employer as many
trucks as they may wish, consistent with the Employ-
er's requirements. Thus, for example, one multiple
owner-driver leases about 43 trucks to the Employer,
and the record indicates that while some multiple
i Oui dissenting colleague does not appear to question our reliance on
the common law right -of-control test as the proper means of resolving the
independent contractor issue before us Yet , our colleague's own
conclusions are based upon an application of the more restrictive standards
set forth in U S v Silk (Harrison , Collector of Internal Revenue v Greyvan
Lines, Inc ), 33l U S 704 The relevancy of this test to issues arising under
the National Labor Relations Act has been previously considered by the
Board in its earlier decision involving the same employer and the identical
781
owner-drivers are successful operators, others have
gone into bankruptcy. The leased trucks normally
bear decals stating "leased to Deaton."
All pay and conditions of employment of drivers are
a matter of agreement between the truck owner and
the driver he employs. Thus, the employment terms of
company drivers and drivers of leased equipment are
not necessarily uniform. The Company does not
withhold any state or Federal income tax or social
security tax from the sums paid owners or their
drivers, nor does it cover their workmen's compensa-
tion or unemployment compensation. Owners and
their drivers receive no vacation or holiday pay from
the Company and do not participate in welfare plans
or other company benefits enjoyed by the Company's
employees.
In making determinations as to whether an individ-
ual is an independent contractor or employee, the
Board has frequently stated that it will apply the
common law right-of-control test.' Under this test,
the employer-employee relationship exists when the
employer reserves the right to control not only the
ends to be achieved, but also the means to be used in
reaching such ends. The Board has made it clear that
the application of the test is not a "perfunctory
exercise" but demands a balancing of all the evidence
relevant to the relationship.2
In Deaton Truck Lines, Inc., supra, the Board
considered this very issue , and concluded, with court
approval,3 that the lease owners and their drivers were
not independent contractors but employees of Dea-
ton. The Employer now claims that changes in
operations occurring after that decision have materi-
ally altered the nature of its relationship with the lease
owners and that they now have the status of
independent contractors. In this connection the
Employer relies upon the facts that (1) wages and
benefits of lease drivers are determined by the lease
owner and hence are not necessarily the same as those
enjoyed by company drivers; (2) unlike company
drivers, lease drivers purchase gas where they please,
may vary routes, and may take their trucks home; and
(3) the Employer no longer maintains a pool of
drivers, nor a road patrol.
In our opinion, the foregoing are insufficient to
negate the considerable control exercised and re-
served in the Employer over the manner and means
by which the lessors perform their services on the
Employer's behalf. The Employer remains obligated
issue now before us See Deaton Truck Lines, Inc, 143 NLRB 1372 For the
reasons set forth in that decision , we shall continue to adhere to the
common law right-of-control test as the standard for determining
independent contractor status.
2 National Freight, Inc, Federal Freight, Inc, and Sun Transportation,
Inc, 153 NLRB 1536, 1538-39
3 Deaton Truck Line, Inc v NLRB, 337 F 2d 697 (C A 5)
782 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
to comply with ICC and Department of Transporta-
tion regulations relative to the operation of all
vehicles used in its operations on the Nation's
highways and concededly, exercises the control over
operation of leased equipment necessary to assure
compliance with said requirements. Furthermore, the
Employer, being answerable to its customers for any
unsatisfactory performance by a lease operator or his
driver, will, in turn, take corrective steps with the lease
owner to avoid any repetition of such incidents.
More specifically, the Employer's control over the
means by which the lease owners perform their tasks
is evidenced by its initial determination of qualifica-
tion of any driver hired by a lease owner, by its
disqualification of any driver who fails to perform
satisfactorily, by its requiring leased equipment to be
inspected every 20 days, by its exclusive use of all
leased equipment for the term of the lease, and by its
performance of all dispatching services for both
company and lease drivers alike. Also, the lease
drivers are required to submit a daily driver's log and
trip report and manifest to the Company; each truck
is required to exhibit the Employer's name and
identification number; and Deaton maintains a
personnel file on all drivers with respect to accidents
and qualifications. Furthermore, the Employer,
through its authority to terminate the lease at will 30
days after the commencement thereof, retains poten-
tial authority to control virtually every aspect of the
means by which the lease owners conduct their
operations in its behalf.
It is true , as the Employer points out, that the truck
owners have an opportunity to increase their profits.
Thus, for example, the owners may save money on the
purchase of their trucks and minimize maintenance
costs; they may purchase as many trucks for leasing
purposes as they can afford; and they may engage in
other business activity on their own behalf. But, as we
have seen, by virtue of the uniform system of
remuneration provided in all the leases between the
Employer and the lessors, the Employer in practical
effect sets the amounts the truck owners receive from
the Employer for hauling the Employer's freight.
Moreover, the fact that the truck owners may earn
extra money through purchase of additional trucks, or
through other business activity, although a factor to
be considered, does not preclude an employee
relationship with the Employer.4
In view of the foregoing, and on the basis of the
4 See Indiana Refrigerator Lines, Inc, 157 NLRB 539
S Indiana Refrigerator Lines, supra
6 In order to assure that all eligible voters may have the opportunity to
be informed of the issues in the exercise of their statutory right to vote, all
parties to the election should have access to a list of voters and their
addresses which may be used to communicate with them Excelsior
Underwear Inc, 156 NLRB 1236, N L R B v Wyman-Gordon Co, 394 U S
759. Accordingly, it is hereby directed that an election eligibility list,
entire record, we find that the single owner-drivers
and the nonowner-drivers, including those driving for
the multiple owners, are employees of the Employer.5
4. Although we find that the multiple owner-
drivers are not independent contractors, we conclude
that they are supervisors within the meaning of the
Act. The record shows that the multiple owner-
drivers, as in the prior Deacon case, supra, have the
power to hire and fire the drivers of their trucks, and
otherwise responsibly to direct their work and work
assignments . We shall therefore exclude them from
the unit.
Accordingly, and since no other issues have been
presented concerning the scope of the unit, we find
that the following employees constitute an appropri-
ate unit for the purposes of collective bargaining
within the meaning of Section 9(b) of the Act:
All over-the-road truckdrivers, city pickup and
delivery drivers, hostelers, and maintenance em-
ployees at the Employer's Birmingham, Alabama,
plant, excluding all office clerical employees,
salesmen , guards, and supervisors as defined in the
Act.
[Direction of Elections omitted from publication.]
CHAIRMAN MILLER, dissenting:
Contrary to the majority, I would find that the
owners of equipment leased to the Employer are
independent contractors and hence would dismiss the
petition seeking an election in a unit which includes
them.
The majority, in finding that the owner-operators
are employees, applies the right-of-control test and
concludes that Deaton has retained sufficient control
over the manner and means by which the owner-
operators perform their duties to establish an employ-
ment relationship. In so finding, the majority relies in
essence upon the following: the overall effect of ICC
regulations, which require a degree of company
control over the equipment and certain safety factors
applicable under the law administered by that
agency; the lease agreement providing for the
Company's exclusive use of the leased equipment
(also required by ICC regulations); the fact that either
party may terminate the lease on 30 days' notice;
drivers are required to submit a daily driver's log and
a trip report manifest to the Company (again an ICC
requirement); each truck is required to exhibit the
Company's name and identification number; the
Company may effectively remove a driver from
containing the names and addresses of all the eligible voters, must be filed
by the Employer with the Regional Director for Region 10 within 7 days of
the date of this Decision and Direction of Election The Regional Director
shall make the list available to all parties to the election No extension of
time to file this list shall be granted by the Regional Director except in
extraordinary circumstances Failure to comply with this requirement shall
be grounds for setting aside the election whenever proper objections are
filed
DEATON, INC. 783
company work (but only when required because of
noncompliance with ICC regulations); and, finally,
the fact that the Company maintains a personnel file
on the drivers with respect to accidents, etc.
I have no quarrel with the relevance of the common
law "right-of-control" test to the issues at hand. My
disagreement centers upon the majority's application
of this test to the facts of this case, coupled with its
failure also to consider and give weight to factors
establishing the entrepreneurial status of those they
find to be employees.
Soon after passage of the Wagner Act, the Board
with Court approval,7 adopted liberal standards,
designed to afford as many individuals the protection
of the Act as would be consistent with industrial
realities. "The standard was one of economic and
policy considerations within the labor field. Congres-
sional reaction to this construction of the Act was
adverse and Congress [in 1947 ] passed an amendment
specifically excluding `any individual having the
status of an independent contractor' from the defini-
tion of `employee' contained in Section 2(3) of the
Act. The obvious purpose of this amendment was to
have the Board and courts apply general agency
principles in distinguishing between employees and
independent contractors under the Act." N.L.R.B. v.
United Insurance Co. ofAmerica, 390 U.S. 254 at 256.
Also in 1947, but before the effective date of the
1947 amendments, the Supreme Court in U.S. v. Silk
(Harrison, Collector of Internal Revenue v. Greyvan
Lines, Inc.), supra,8 considered this issue, and on facts
strikingly similar to those presented here, concluded
that owner-operators under contract with a common
carrier subject to regulation by the Interstate Com-
merce Commission were independent contractors and
not employees.
The facts in Greyvan were: Respondent operated a
trucking business pursuant to ICC regulations. The
driver-owners were required to haul exclusively for
the respondent, to furnish their own trucks and all
equipment and labor necessary for pickup, to handle
and deliver shipments, to pay all expenses of
operations, to furnish such insurance as the respon-
dent might specify, to pay for all loss or damage to
shipments and to indemnify the company for any loss
caused by the acts of the truckmen, their servants, and
employees, to paint the respondent's name on their
trucks, to collect money, to post bonds, to drive their
trucks personally or to be present on their trucks
except in emergencies, when a substitute might be
employed with approval by the company, and to
follow the rules and regulations of the company. They
were paid on a percentage of revenue basis. The
contract between the company and the owner-drivers
was terminable at will. The company maintained
dispatchers but did not specify the routes to be used.
Permits, certificates, and franchises required by law
were obtained at the company's expense.
On these facts the Court concluded: "where the
arrangements leave the driver-owners so much re-
sponsibility for investment and management .. .,
they must be held to be independent contractors.
These driver-owners are small businessmen. They
own their own trucks. They hire their own helpers. In
one instance they haul for a single business, in the
other for any customer. The distinction, though
important, is not controlling. It is the total situation,
including the risk undertaken, the control exercised,
the opportunity for profit from sound management,
that marks these driver-owners as independent
contractors." 331 U.S. at 719.
The majority here, in finding a degree of control
fatal to the independence of the contractors, errs first
in failing to note that virtually the only controls
retained were those required by the ICC. For
example, it notes that the Company may "effectively
remove a driver from company work." An examina-
tion of the facts reveals, however, that such a removal
can be effectuated only when required by the law, and
that in all other cases, as provided in the lease,
"Contractors shall . . . direct and control his employ-
ees, including selecting, hiring, supervising, firing,
training, setting wages, hours and working conditions
and paying and adjusting the grievances of his
employees."
As further specifically delineated by the lease:
Parties hereto agree that "carrier" has no
authority to or right to control the details of the
operation of the leased equipment, and any agent
or servant of "carrier" is without authority to
control said operation, except to the extent
required by law and to accomplish the end result
for which this lease is executed.
The majority thus fails to observe the teaching of
Greyvan that the retention of only so much control aS
is required by operation of law (when a carrier is
subject to ICC regulations) clearly does not establish
an employer-employee relationship. In any given
case, therefore, it becomes necessary to examine
beyond this point, and to explore and analyze what
degree of control is retained and exercised beyond
that required by the law of transportation. This the
7 N L R B v Hearst Publications, 322 U S I I I standard set forth in the earlier Hearst case , subsequently modified by
A Though the Silk and Greyvan cases arose under the Social Security Congress, the ruling , that those who perform services on behalf of another
Act, the Court, at page 713, specifically stated that it would follow the and bear all the earmarks of independent businessmen , do so as
principles applied in making similar determinations under the National independent contractors , remains valid law
Labor Relations Act Although the Court relied upon the more liberal
784 DECISIONS OF NATIONAL LABOR RELATIONS BOARD
majority fails to do, and this would be reason enough
for me to dissent.
But the majority, in its haste to find employee
status, also ignores the other test set forth in Greyvan,
which is given emphasis under our law by the
legislative history of the 1947 amendments to our Act.
Consistent with Greyvan, that legislative history
clearly implies that the distinction between employer
and independent contractors cannot, in any event, be
based solely upon the element of control. Thus, as
stated in House Report No. 245:
In the law, there always has been a difference and
a big difference, between "employees" and
"independent contractors." "Employees" work for
wages or salaries under direct supervision.
"Independent contractors" undertake to do a job
for a price, decide how the work will be done,
usually hire others to do the work, and depend for
their income not upon wages, but upon the
difference between what they pay for the goods,
materials, and labor and what they receive for the
end result, that is, upon profits.9
Upon examination of the instant facts in the light of
the foregoing, the conclusion that the lease owners are
independent contractors appears inescapable. The
lease owners invest substantially-about $20,000 per
truck. Some are profitable, others have gone bank-
9 See I Leg. Hist 309 ( 1947) See also H R Conf Rep No 510, 80th
Cong 1st Sess 33, 1 Leg Hist 536-537 (1947)
tU It is true that the Board in an earlier case involving this Employer
found the driver-owners to be employees See Deacon Truck Line, Inc,
supra That decision was enforced by the Fifth Circuit at 337 F 2d 697
However , in the interim, significant changes have been made through
which the Employer relinquished considerable control over the wages and
benefits of lessee drivers , over route designations, and over the source
rupt. The opportunity for profit or loss clearly
depends on the initiative and the ability of the owners
to operate their trucks efficiently and economically;
the expenses are largely borne by them, not Deaton
(fuel, oil, tires, repairs, wages of other drivers and
helpers, taxes, etc.). The business-like nature of the
opportunity for the owner-drivers is shown by the fact
the more successful ones become multiple owners and
may own, as does one contractor here, as many as 43
trucks (the investment for such an owner would be
over three-quarters of a million dollars). The fleet
owners have complete autonomy in establishing the
wages and working conditions under which their
drivers perform. None of the typical indicia of an
employment relationship are present. The lease
owners and their employees are not subject to the
wage or fringe benefit policies applicable to Deaton's
own employees. They are engaged in an independent
enterprise performing services under contract with
Deaton.
When the instant record is measured against the
standards set forth in Greyvan and the legislative
history to the 1947 amendments , the lease owners
must be found to be independent contractors.
Accordingly, I would dismiss the petition seeking to
include them in the unit.I0
through which owner-drivers obtain their employees, and appears to have
retained only such control as is required by the ICC. Furthermore, the
court's decision in that case was made pursuant to limited standards of
review which bound the court to accept the Board 's determination ".
even though the Court would justifiably have made a different choice had
the matter been before it de novo."See N LR B v United Insurance Co of
America, supra.