Gold Medal Baking Co., Inc.

GOLD MEDAL BAKING CO., INC. Gold Medal Baking Co., Inc. and Bread Salesmen's Union Local No. 10, affiliated with the United He- brew Trades of Philadelphia, Petitioner. Case 4- RC-9600 October 20, 1972 DECISION ON REVIEW BY CHAIRMAN MILLER AND MEMBERS KENNEDY AND PENELLO On May 9, 1972, the Regional Director for Re- gion 4 issued a Decision and Order in the instant proceeding in which he dismissed the petition for an election among distributors of the Employer's bakery products on the ground that they are independent contractors. Thereafter, in accordance with Section 102.67 of the National Labor Relations Board Rules and Regulations, Series 8, as amended, the Petitioner filed a request for review of the Regional Director's Decision and Order on grounds that he made findings of fact which are clearly erroneous and that he depart- ed from officially reported precedent. On June 29, 1972, by telegraphic order, the re- quest for review was granted. The Petitioner and the Employer each filed a brief and supplementary brief on review. 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 au- thority in this proceeding to a three-member panel. Upon the entire record in this case, including the briefs on review, the Board hereby affirms the Re- gional Director's Decision and Order, with the follow- ing additions: The Employer, a Pennsylvania corporation with its principal office located in Philadelphia, is engaged in the manufacture and sale of bread, rolls, bagels, and cakes. For more than 50 years, the Employer distributed its bakery products to independent and chain store retailers by means of employees it classi- fied as driver-salesmen. During this time, the Petition- er acted - as bargaining representative for the driver-salesmen and negotiated successive collective- bargaining agreements with the Employer, the last of which expired on December 31, 1970. In the course of negotiations for a new agree- ment, the parties in February 1971 for the first time discussed the feasibility of creating distributorships for the driver-salesmen. Discussion proved fruitful and the Employer's attorney was instructed to draft a distributorship agreement. Between March 6 and April 21, 1971, the Employer asked each of the 11 driver-salesmen to execute the distributorship agree- ment which had been drafted; all of them did so and 895 immediately commenced operating under their agree- ments. By letter dated April 9, the Employer's attorney advised the Petitioner that the Employer would "con- tinue to recognize [it] as the exclusive bargaining agent for all driver employees of the company, includ- ing distributors." Thereafter, the parties engaged in negotiations until November when the Employer broke off the negotiations on the ground that the dis- tributors were independent contractors. On Decem- ber 7, 1971, the Petitioner filed with the Board unfair labor practice charges alleging refusal to bargain by the Employer, but withdrew the charges on January 31, 1972, the same day that it filed the instant petition. Under the terms of the distributorship agree- ments, the distributor is given the exclusive right to sell the Employer's products to customers of the Em- ployer whose names are listed on an appendix to the agreement;' distributor agrees to buy all of his needs of bakery goods from the Employer; distributor agrees to pay the prices established by the Employer and will be allowed a 5-percent credit for stale returns from certain named chain stores; distributor is re- quired to pay for his purchases of the Employer's products within 3 days of receiving the statement for the previous week's purchases; distributor may pur- chase from other bakeries only such items as the Em- ployer agrees to, except for cakes and pastries which distributor can purchase without the Employer's prior approval; distributor agrees to keep accurate records of all purchases and sales and make them available for inspection by the Employer at reasonable times; dis- tributor agrees to not engage in any other business which would interfere with the sale or distribution of the Employer's products to its customers: the Em- ployer has the right to assign additional customers to a distributor as long as such additional assignments are located within a reasonable distance of the distributor's present primary area of distribution; dis- tributor is required to furnish his own truck and main- tain it in good condition and repair and with a clean appearance at all times; distributor agrees to insure the truck to the minimum amounts specified and the Employer shall be named as one of the parties in- sured; distributor agrees to deposit the equivalent of 1 week's gross sales as a security deposit; distributor agrees to a specified amount as liquidated damages in the event that he should purchase products from other than the Employer without the Employer's written consent; the parties agree that the distributor is a self-employed independent contractor; distributor agrees, upon termination of the agreement, not to work for a competitor of the Employer selling or serv- ' The record shows that each distributor was assigned the same customers he had serviced as a driver-salesman 199 NLRB No. 132 896 - DECISIONS OF NATIONAL LABOR RELATIONS BOARD icing the same customers for a period of 2 years; distributor agrees to make arrangements for a substi- tute during illnesses or emergencies and if he fails to do so, the Employer is authorized to provide such service and charge it to the distributor; the Employer has the absolute right to terminate the agreement upon 1 week's notice for breach or default, and it is considered a breach for the distributor, inter alia, to fail to sell or service all of the customers assigned to him in a diligent manner or cause the loss of any such customer; distributor shall not exchange customers with other distributors except upon the prior approval of the Employer and then there shall be no payment made for the exchange; the Employer shall not be held liable to the distributor for the loss of any cus- tomers; during the term of the agreement distributor may assign or sell the exclusive rights he has, subject to the prior written approval Employer has the abso- lute right to terminate its business upon 2 weeks' no- tice to the distributor; the parties agree to binding arbitration in the event of any dispute concerning interpretation or application of the agreement; and the distributor is to be paid a commission of 25 per- cent. The practice under the distributorship agree- ments has been for the distributors to purchase the Employer's products daily at 25 percent less than the Employer's suggested resale price, with a further 5- percent discount for sales made to chain stores as an allowance for stale returns. The distributors are not required to adhere to the suggested resale price, and some distributors have given discounts to certain cus- tomers or have charged customers more than the sug- gested resale price. Except for sales to chain stores, which account for approximately 10 percent of the distributor's business, the distributors make their own collections, give credit, and bear the loss if a customer fails to pay. The distributors can add customers to their routes if they so desire, and the record shows that some of the distributors have done so. The distributor's gross income is determined by the differ- ence between what he pays the Employer for the products he purchases and that which he collects from his customers. The distributors own, maintain, insure, and ga- rage their own trucks, are not supervised in the serv- icing of their routes, determine their own hours, do their own bookkeeping, file their own income tax as self-employed individuals, are responsible for their own replacement in, the event of illness or vacation, and are entitled to none of the fringe benefits they formerly received as driver-salesmen. The distributors are not required to participate in promotional pro- grams instituted by the Employer, to attend meetings, to wear special clothing, or to keep the Employer's name painted on their trucks.' Pursuant to the terms of the distributorship agreement, one distributor sold his right under the distributorship to a third party, with the approval of the Employer, for the sum of $7,000.3 It is well established that the appropriate test to apply in determining whether certain individuals are independent contractors or employees is the common law of agency right-of-control test .4 Under this test, an employer-employee relationship exists when the em- ployer reserves the right to control not only the ends to be achieved, but also the means to be used in achieving such ends. On the other hand, where con- trol is reserved only as to the result sought, an inde- pendent contractor relationship exists. Moreover, the Board has made it clear that application of the test is not a "perfunctory exercise," but demands a bal- ancing of all the evidence relevant to the relationship.' In the instant case, we find, in agreement with the Regional Director, that the distributors involved are independent contractors. Contrary to the Petitioner, we do not believe that the provisions of the distrib- utorship agreements, detailed above, impose the types of restrictions on the distributors which, without more, would require a finding that the Employer has reserved to itself control over the means by which the distributors sell and deliver its bakery products. Fur- ther, as emphasized by the Regional Director, despite the earlier history of representation by the Petitioner, the Employer and the distributors in the distributor- ship agreements expressly stated their intention to create an independent contractor relationship. Moreover, other facts set forth above support the Regional Director's conclusion that such a relation- ship has been created. Thus, the fact that the distrib- utors own and maintain their own trucks at their own expense gives rise to an inference of control over the means by which the Employer's products are distrib- uted. Although the Employer suggests prices at which the products it produces may be resold to retailers, it does not require the distributors to adhere to such prices, and on occasion the distributors have varied from such suggested resale prices as they have seen fit. Notwithstanding the fact that the Employer retains control over the customer lists, the distributors are given a proprietary interest of substantial value in their distributorships which they can sell to a third party. Moreover, the record shows that the distrib- utors carry out their responsibilities under the agree- 2 The record shows that, although all but one of the distributors have the Employer's name painted on their trucks, the employer does not require it. 3 He also sold his truck to the individual for $5,000. N L R B v United Insurance Co, 390 U.S. 255 5 National Freight, Inc, Federal Freight, Inc., and Sun Transportation, Inc, 153 NLRB 1536, 1538-39. GOLD MEDAL BAKING CO., INC. 897 ment without supervision by the Employer. As indica- ted above, the distributors can add customers to their routes if they so desire, and some have done so. Al- though the agreement specifies that the distributors shall keep accurate records of all purchases and sales and make them available to the Employer for inspec- tion, all recordkeeping is in fact done by the distrib- utors themselves. They make their own collections (except for chain stores) and if they extend credit, assume the risk of loss for nonpayment. Finally the distributors no longer receive fringe benefits from the Employer. 6 Pure Seal Dairy Company, 135 NLRB 76. Cf. The Herald Co., 181 NLRB 421, enfd 444 F 2d 430 (C A 2) (where the employer maintained control over the distributors' earnings through extracontractual compensation , required its distributors to participate in a myriad of company activities, including extensive promotional campaigns, and supervised the resolution of many of its distributors' delivery problems), Meyer Dairy, Inc, a subidiary of Milgram Food Stores, Inc, 178 NLRB 454, enforcement denied 429 F.2d 697 (C.A. 10) (where the distributors were required to maintain certain health and cleanli- ness standards to the satisfaction of the employer and promote the employer's products); Frito Lay, Inc, 178 NLRB 611 , and 167 NLRB 73 (where the employer actively engaged the distributors in soliciting new out- lets, assisted the distributors in servicing their routes during emergencies, helped them with such things as racking and the resolution of route prob- lems; and the distributor retained no proprietary rights in the route which Although the earlier bargaining history covering the period when the Employer distributed its products through its own employees, as well as the restrictions contained in the distributorship agreements, are fac- tors which militate in favor of a finding that the dis- tributors are employees, we believe for the reasons stated that the record on balance supports the conclu- sion that the Employer has not retained significant control of the means used by the distributors in selling the Employer's products, and that an independent contractor relationship has in fact been created .6 he could sell to a third party); Carnation Company, 172 NLRB No 215, enforcement denied 429 F 2d 1130 (C.A. 9) (where the distributors were required to install and maintain at their own expense promotional material provided by the employer , and the employer required the distributors to paint and maintain their vehicles to its satisfaction ), News Syndicate Co, Inc, 164 NLRB 422 (where the distributors' income was largely controlled by the employer and the distributor retained no proprietary interest in his territory), Pepsi-Cola Bottling Company of Michigan, Grand Rapids Division, 156 NLRB 80 (where the employer controlled the size of the distributor's territory and could transfer customers to other distributors without compensation ; and the distributors retained no proprietary interest in their routes which they could assign to third parties); Squirt-Nesbitt Bottling Corp , 130 NLRB 24 (where the employer required the distributors to actively engage in promotional activities, to paint and maintain their trucks in a specified manner, to wear uniforms, and attend periodic meetings called by the employer ; and the employer retained the right to solicit orders in the distributors ' territories)