Here’s a significant decision from the D.C. Circuit declaring an “entrepreneurial” standard for the “independent contractor” test under the NLRA, in place of the multi-factor common-law test. Also, the Second Circuit affirms sanctions against national law-firm partner for breaching a protective order. And for a change of pace, a Fourth Amendment decision from the Supreme Court.
FedEx Home Delivery v. NLRB, No. 07-1391 (D.C. Cir. Apr. 21, 2009): It has been heavily litigated in wage-and-hour cases whether delivery drivers are independent contractors or employees, and FedEx is the biggest target of all. The NLRB considered this same issue in an administrative proceeding, through the lens of whether it had jurisdiction to enter an order against the employer for an unfair labor practice (refusing to bargain with the Teamsters), finding that the single-route drivers are employees. The D.C. Circuit splits 2-1, finding as a matter of law that the drivers are independent contractors under the common-law test adopted under the NLRA, and vacates the NLRB order.
The majority opinion (authored by Judge Brown, joined by Senior Judge Williams) opens by observing the instability in its long chain of authority construing the multi-faceted test meant to separate employees from contractors. While the circuit in recent years had settled on a touchstone of company “control” over the individuals’ work, the majority concludes that even that standard leads to odd results (using the Restatement of Agency example of a cook who is a servant, despite that the employer does not “control” the cooking). It thus adopts (from a 2002 case, Corporate Express) the single standard of “whether the position presents the opportunities and risks inherent in entrepreneurialism.”
By the entrepreneur touchstone, the majority holds that the drivers are independent contractors. Under the Standard Contractor Operating Agreement, FedEx disassociates itself from any control over the drivers’ hours of work, routes or even the use of the FedEx truck (provided that the logo is covered when it is not used for FedEx deliveries). Drivers can hire and pay their own staffs. the majority also found significant that “Contractors can assign at law their contractual rights to their routes, without FedEx’s permission. The logical result is they can sell, trade, give, or even bequeath their routes, an unusual feature for an employer-employee relationship.” the majority finds less compelling the Board’s findings that the opportunity for profit is minuscule and that the company dictates the routes.
In a 30-page partial dissent, Judge Garland agrees with the majority that FedEx was denied a fair opportunity to present its independent-contractor argument, but skewers the majority’s analysis. The dissent in particular criticizes the collapsing of the common-law test into a single standard:
“My colleagues cite only one case from this (or any) Circuit, our 2002 opinion in Corporate Express, for the proposition that entrepreneurial opportunity has ‘explicit[ly]’ become the emphasis of the independent contractor test. Slip Op. at 7. I do not dispute that theirs is one fair reading of that opinion, which contains considerable language regarding entrepreneurial opportunity and the benefits of using such a test. But Corporate Express did not purport to overrule Supreme Court, Circuit, and Board precedent. Indeed, in affirming as reasonable the Board’s determination that the owner-operator drivers in that case were not independent contractors, the court not only agreed that they lacked entrepreneurial opportunity, but also acknowledged that the Board may have correctly determined that the employer controlled the way in which they performed their jobs.”
I would have to guess that the NLRB will seek to en banc this.
Wolters Kluwer Financial Services, Inc. v. Scivantage, No. 07-2491(2d Cir. Apr. 21, 2009): The panel reviews a 130-page sanctions order by Judge Baer (S.D.N.Y.) against the Dorsey & Whitney firm and two of its partners for their representation of the Wolters Kluwer firm. While it affirms the order as to the junior partner (named Peters), it reverses sanctions entered against the firm itself and the senior partner (Reiner). The case is worth a read, if only because the panel found that tactics by the junior partner that might otherwise be shrugged off as SOP by lawyers in the trenches were found sanctionable in the cold light of the courtroom.
The panel tossed sanctions entered for procedural maneuvers that — though, at first blush, looked like sharp practices — it holds legitimate under the prevailing federal and local rules. These include the filing of a voluntary dismissal under FRCP41 to avoid dismissal for lack of personal jurisdiction (which the district court thought was a pretext for judge-shopping) and the failure to serve the dismissal by email (which had the effect of throwing the defendant off-guard, but turns out not to be required by the rules, see Fed. R. Civ. P. 5(b)(2)(E) and Southern and Eastern Districts of New York Local Rule 5.2).
As for the junior partner holding the bag, the panel upholds 24 individual findings of bad faith. The panel first concludes that the judge committed no procedural violations in imposing the reprimands, holding that there was no requirement for enhanced, quasi-criminal procedures. It then upholds sanctions for the following activities: (1) “Joseph Honor, a Wolters employee, testified that Peters disclosed to him answers given by an opposing party in the course of a deposition that had been designated ‘Attorney’s Eyes Only’,” in violation of a protective order; (2) failure to appear at a noticed deposition in violation of FRCP37; and (3) ordering duplicate transcripts “for the improper purpose of circumventing the district court’s order” to return all discovery materials.
Arizona v. Gant, No. 07-542 (U.S. S. Ct. Apr. 21, 2009): This 5-4 Fourth Amendment decision, issued today, holds that police may only search the passenger compartment of a vehicle upon the arrest of a driver/passenger if it is reasonable under the circumstances of the arrest to believe that the arrestee might access the vehicle during the search, or that the vehicle contains evidence of the offense of arrest. The majority thereby refuses to extend New York v. Belton, 453 U. S. 454 (1981), which had been widely interpreted by lower courts to allow routine searches of vehicles after an arrest under a “safety” justification first declared in Chimel v. California, 395 U. S. 752 (1969) (i.e., a search for guns or other hazards), even when the arrestee lacked access to the vehicle.
Readers will note that the configuration of justices’ votes in this case exactly corresponds with those in Appendix v. New Jersey, 530 U.S. 466 (2000) (criminal defendant has Sixth Amendment jury right to determination of statutory sentence enhancements): Justices Stevens (author of this opinion), Souter and Ginsburg, joined by Justices Thomas and Scalia supporting the defendant; Justices Breyer and Kennedy, joined by Chief Justice Roberts and Justice Alito (replacing the late Chief Justice Rehnquist and retired Justice O’Connor) supporting the state. (Justice Scalia, concurring, would go further even than Justice Stevens’ opinion and overrule Belton outright.) Which goes to show that civil rights plaintiffs’ attorneys, who share some kinship with the criminal defense bar (we’re both used to losing), should remain always open to surprise.