George Transfer & Rigging Co., Inc.

494 DECISIONS OF NATIONAL LABOR RELATIONS BOARD George Transfer & Rigging Co., Inc. and Local 377, International Brotherhood of Chauffeurs, Team- sters, Warehousemen and Helpers of America and International Brotherhood of Teamsters, Chauf- feurs, Warehousemen and Helpers of America, Petitioners. Case 8-RC-8645 January 18, 1974 DECISION AND ORDER Upon a petition duly filed under Section 9(c) of the National Labor Relations Act, as amended, a hearing 1 was held on various dates from July 18 to October 30, 1972, before Hearing Officer Michael E. Temsey. Following the hearing and pursuant to Section 102.67 of the National Labor Relations Board Rules and Regulations and Statements of Procedure, Series 8, as amended, and by direction of the Regional Director for Region 8, this case was transferred to the National Labor Relations Board for decision. Thereafter, the Employer and the Petitioners filed briefs and requests for oral argu- ment. The Board has reviewed the Hearing Officer's rulings made at the hearing and finds that no prejudicial error was committed. The rulings are hereby affirmed. Upon the entire record in this case, the Board finds: 2 1. The Employer is engaged in commerce within the meaning of the Act, and it will effectuate the policies of the Act to assert jurisdiction herein. 2. The labor organizations involved claim to represent certain employees of the Employer.3 3. No question affecting commerce exists con- cerning the representation of employees of the Employer within the meaning of Sections 9(c)(1) and 2(6) and (7) of the Act. The Petitioners seek a unit of all single owner- operators and nonowner drivers of leased equipment, and all direct employee drivers driving any equip- ment throughout the entire system of the Employer. The Intervenor is in agreement with the Petitioners' unit description. The Employer, on the other hand, contends that the unit sought is inappropriate on the basis that the single owner-operators who lease tractors and trailers to the Company are independent contractors, that the nonowner drivers are employees I Fraternal Association of Special Haulers, Local Union No 100, was permitted to intervene on the basis of a proper showing of interest 2 The Petitioners' and the Employer's requests for oral argument are hereby denied, since the record, including the briefs, adequately presents the issues and positions of the parties 3 We find no merit in the Employer 's contention that the Intervenor should be disqualified from acting as a labor organization because of its alleged conflict of interest with the Fraternal Association of Steel Haulers (FASH) See The Aetna Freight Lines, Incorporated, 194 NLRB 740 of the independent contractors, and that the Compa- ny does not employ any drivers directly. The Employer, a Maryland corporation, with its principal office and place of business in Parkton, Maryland, is engaged in the interstate transportation of steel and building products as a common carrier under license from the Interstate Commerce Com- mission. It operates through 23 terminals, which are maintained, for the most part, by terminal agents, who are paid on a commission basis. The Employer owns no tractors, but does own about 125 trailers. There are about 300 single owner-operators who lease a tractor, or a tractor and a trailer, to the Employer, and approximately 26 multiple owner operators who lease two to six pieces of equipment to the Employer, and whom the labor organizations involved would exclude. 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 Interstate Commerce Act and to the regulations promulgated by the ICC, and is further subject to pertinent regulations of the Department of Transpor- tation (DOT). 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 that Act. The relationship between the Employer and the single owner- (and multiple owner-) operators is based on the terms of a lease entitled "Motor Vehicle Lease Agreement."`' The term of the lease is for a minimum of 30 days, and may be terminated by either party upon 24 hours' notice, or automatically by either party's breach of its major provisions. The lease provides, inter alga, that the owner guarantees title to the equipment and warrants that such equipment "is in good, safe and efficient operating condition"; the owner is to submit the equipment to the Employer for the latter's inspection at the time the Employer takes possession of the equipment, and periodically thereafter, as required by the ICC and DOT; the Employer is to pay the owner 62-1/2 percent of the total revenue as payment for the use of the equipment; 5 the Employer retains only that control that it is required to retain under the 4 This lease is a tractor lease . There is also a trailer lease . A single owner- operator who leases both a tractor and a trailer must execute both leases. 5 The trailer lease provides for 12- 1/2 percent of the gross revenue as payment for the use of the trailer When equipment is detained at the point of loading or unloading, the Employer bills the shipper for "detention time," which, when paid, is transmitted to the owner of the rig in full (not to any employee-driver of the owner, as the dissent herein implies) The leases also provide for an alternative to the percentage computation-"a fixed sum agreed upon by the parties " This agreed sum is the means of payment when 208 NLRB No. 25 GEORGE TRANSFER & RIGGING CO., INC. applicable laws and regulations and does not control the manner or method by which the owner or the owner's employees perform the work: the owner is to operate the leased equipment himself, and any person hired by the owner is considered to be an employee of the owner, and is under the direction and control of the owner and paid by the owner; and the owner is to provide workmen's compensation insurance for his drivers. The lease further provides that the owner agrees to deliver cargo consigned to his vehicle "with reasona- ble diligence, speed and care," and the owner is responsible for any customer claims resulting from cargo shortage, cargo damage, or delay. Under the lease, the owner must pay all equipment operating costs, including- (a) fuel, oil, tires, and all other necessary accessories; (h) maintenance costs and repairs; (c) all taxes and assessments, etc., arising out of obligations to the owner's employees; (d) all licenses and taxes required for the equipment; ( e) all, fines and penalties arising out of use of the equipment; (f) bobtail and deadhead insurance; (g) comprehensive insurance (fire, theft, and collision); and (h) all other expenses necessary for the operation of the equipment. It is further stated that the Employer may sublease the equipment to authorized motor carriers pursuant to the ICC regulations, but that the owner is to receive his portion of any payments received by the Employer; 6 and that whenever the applicable law and regulations impose joint liability upon the Employer and the owner, the owner agrees to indemnify the Employer for any such liability, and the Employer agrees to provide public liability, property damage, and cargo insur- ance where the law imposes liability on it. All new drivers, whether they be owner-operators or persons hired to drive their equipment, are required to complete a company application, after which they must attend an orientation program for a period of up to a maximum of 5 days at the Employer's terminal at Bedford, Pennsylvania.7 Their equipment is inspected,8 and the Employer checks the driver's employment record, his character, and his credit. All expenses of the orientation program, except food, are paid by the drivers themselves. The record reflects that the pay and conditions of employment of the nonowner drivers are a matter of agreement between them and the owner-operators .9 the owner-lessor requires a sum larger than the specified percentage to be persuaded to take a low-revenue load or a load destined for a point deemed inconvenient or onerous by the owner-lessor. G The record shows that the Employer subleases equipment under this provision only on an occasional basis. 7 Both the application and the orientation program are required by either iCC or DOT regulations. Drivers are also required to pass a physical examination and thereafter submit to such an exam on an annual basis 495 The Employer does not withhold any Federal or state income taxes or social security taxes, nor does it cover their unemployment compensation or work- men's compensation. Owners and their drivers receive no vacation or holiday pay from the Employer, and do not participate in welfare plans or other Employer benefits enjoyed by the Employer's salaried employees. However, owner-operators them- selves can participate in a self-employment insurance and retirement program, and the Employer will, upon authorization, make the necessary deductions from their revenue and forward the deductions to the appropriate insurance company. The record further shows that the Employer does not purchase equip- ment for lessors, or assist the lessors in the acquisi- tion of any equipment, and does not guarantee any of the financing. The Employer does not make personal loans to the lessors, but lessors may secure an advance of up to 50 percent of the gross revenue of any load. However, that advance is deducted from the settlement check following the trip. The owner-operator is free to accept or reject any shipment offered to him. In the event he rejects the cargo, he is immediately offered another shipment, which he may accept or reject, and he is not disciplined for his refusal to accept. The Employer does, however, prohibit "trip leasing," i.e., the practice whereby drivers solicit freight on their own, but this is done, according to the Employer, to avoid possible conflict with ICC regulations which state that leases "shall provide for the exclusive posses- sion, control and use of equipment" by the lessor for the duration of the lease. Moreover, the Employer claims that there is no reason to allow trip leasing because it has more freight than it can move. Thus, there is always a load that a driver can pick up at a nearby terminal of the Employer, if he desires, so that there need be no occasion for a driver to return with an empty trailer unless he chooses to do so. Owner-operators decide how often and how many hours they will work, and some may drive as few as 10 hours a week and others may drive the Federal maximum of 60 hours per week. The owner-opera- tors are free to select the routes they travel and to determine where to park their tractors when not in use. While the tractor carries the decal of the Employer, as required by the lease agreement, the tractors are not required to be painted a particular color, nor do the drivers wear any special uniform. s In order to comply with various DOT regulations requiring systematic equipment inspections, the Employer requires its lessors to have their equipment inspected every 30 days. free of charge. either at a company facility or a subcontracted inspection station. Any repairs needed are taken care of by the lessors at their expense at their choice of repair facilities. 9 The owner also decides whether to employ drivers, how many to employ, and which driver shall drive on any given trip-all without the necessity of any approval by the Employer 496 DECISIONS OF NATIONAL LABOR RELATIONS BOARD And if the driver is delayed at pickup or destination, the Employer bills the customer for the expense, which is described as "detention" time. Subsequent- ly, the lessor is fully reimbursed by the Employer for such time. The Employer is required to adhere to certain safety requirements of the Department of Transpor- tation. To this end, it employs six field safety inspectors, who engage in spot checks of vehicles on the road to insure proper use and operation of the equipment such as that all doors, tailgates, and tarpaulins are secure. It is also required to keep an "accident register" of recordable accidents which it reviews annually. Furthermore, once a year, the Employer sponsors a family style picnic, at which time it awards safety bonuses to those drivers who had no accidents during the preceding year. The bonus amounts to one-half percent of the driver's annual gross revenue. The Employer also pays a productivity bonus to the owner of the equipment, computed on the basis of 1-1/2 percent of the annual gross revenue generated by their particular piece of equipment. Occasional safety meetings are held during the year, but attendance at these meetings is strictly voluntary. The lease will be terminated by the Employer because of a drinking or drug problem of the driver, or if the driver has three major accidents in a period of 2 years. The lease, as noted heretofore, requires the lessor to carry comprehensive insurance (fire, theft, and collision), and "bobtail" (driving a tractor without trailer) and "deadhead" (returning with an empty trailer) insurance. The Employer, under ICC regula- tions, has to carry cargo and equipment liability insurance, but cargo is covered by the Employer's insurance only while the lessor is transporting it, and the equipment is covered by its liability insurance only while it is en route to the shipper, during delivery, and on return trips. The Employer is not required to, and does not, carry collision insurance. In determining whether an individual is an employ- ee or an independent contractor, the Board has consistently applied the common law right-of-control test. Under this test, an employer-employee relation- ship exists when the employer 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 control is reserved only as to the result sought, an independent contractor relationship exists. 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. 10 After balancing the pertinent factors in this case, we find that the owner-operators are independent contractors rather than employees. Although such factors as (1) the overall effect of the degree of control over equipment and personnel required by Federal regulation of motor carriers, including the effect of certain lease provisions which appear to preserve to the Employer a degree of control consistent with the ICC and DOT rules and regulations; (2) the fact that the Employer unilateral- ly sets the rates of compensation for lessors; and (3) the fact that the Employer does not permit the owner-operators to trip lease their equipment to other carriers appear to favor a finding that an employer-employee relationship exists, they do not, in our opinion, establish that the Employer controls the means by which the owner-operators perform their day-to-day transport duties under the lease agreements.I" To the contrary, the following factors convince us that the controls exercised by the Employer relate solely to results to be achieved under the leases, and that an employer-employee relation- ship has not been established: (1) The owner- operators exercise a very substantial degree of freedom in scheduling the use of their equipment, as reflected by the fact that they determine what days and hours to work, what routes to use, where to have repairs made and purchase fuel, and where to park their tractors when not in use; (2) the owner- operators are free to refuse loads without penalty, and free to select their own routes; (3) the owner- operators decide whether to hire or fire a driver, what work rules to impose on their drivers, and what rates of pay and fringe benefits the drivers will receive; (4) the owner-operators pay virtually all the costs of operation and maintenance of the equipment; (5) the owner-operators are subject to only minimal day-to- day supervision or control by the Employer; (6) lessors and their drivers do not participate in Employer benefits and the Employer makes no loans to the lessors other than an advance up to 50 percent of the gross revenue of current shipment, which is deducted from the settlement check for that trip; and (7) the entrepreneurial nature of the owner-operator's modus operandi is reflected by the fact that he is an individual with a substantial capital investment in equipment, which he purchases without any assist- ance from the Employer, and which he then utilizes to produce income for himself. In view of the foregoing, we conclude that the single owner-operators are independent contractors, 10 National Freight, Inc, Federal Freight, Inc, and Sun Transportation, I1 Conley Motor Express, Inc, 197 NLRB 624 Inc, 153 NLRB 1536,1538-39. GEORGE TRANSFER & RIGGING CO., INC. and that the nonowner drivers are employees of the independent contractors rather than of the Employ- er.12 In view thereof, and the fact that there are no employees driving directly for the Employer, we shall dismiss the petition. ORDER It is hereby ordered that the petition herein be, and it hereby is, dismissed. MEMBERS FANNING AND JENKINS, dissenting: The Employer is a multimillion dollar corporation with its main office in Parkton, Maryland. It is engaged in the business of hauling over-the-road steel and other freight in an area of approximately 300,000 square miles, including nine Middle Atlantic States, New England, and the Carolinas. To service this interstate transportation system the Employer maintains 23 terminals, manned by dispatchers, who assign freight to be picked up and delivered to consignees by some 500 drivers. These drivers are the only persons who perform revenue-producing serv- ices for the Employer. The Employer contends, however, that they are not employees of George, but merely independent contractors or employees of independent contractors, who have leased equipment to George. The Employer takes the position that its only employees are executives and support person- nel, such as administrators, inspectors, and clericals. This would suggest that the Interstate Commerce Commission and the Department of Transportation have issued licenses to the Employer as a sort of booking agent, an intermediary between persons seeking to have goods transported in interstate commerce and those persons, drivers, who actually do the transporting. In our opinion, the record does not support the Employer's position. On the contrary, it seems clear from the voluminous testimony and the extensive exhibits in this case that George, and George alone, not the individual driver or the owner of leased equipment, is legally and operationally responsible for the critical means and methods whereby freight entrusted to George is moved from shipper to consignee. This responsibility includes the essential procedures to assure the safety of the drivers, their vehicles, the cargo, and the public. Stringent rules, rigorously enforced by the Employ- er, determine who is to drive vehicles for George, how those vehicles are to be driven and maintained, 12 Conley Motor Lxpress. Inc, supra, and Fleet Transport Company, Inc, 196 NLRB 436 We note that other governmental agencies, such as the IRS, the State of Maryland, and the State of Kentucky, have all ruled that the relationship between the Employer and the lessors is one of independent contractor, not employer-employee We further note that the only driver who testified described how he and others formed a partnership and, eventually, a 497 and specific procedures the driver must follow in the performance of his driving function. Every applicant for a driver's job on one of the Employer's leased vehicles must file an application with the Employer, answering questions with respect to his residence, family status, character, accident and driving record, and references. The answers are all subject to investigation by George or its agents. A driver is not permitted to drive for George until he has attended an "orientation course" at the Employer's Bedford, Pennsylvania. safety terminal. There he is given a written examination in which he is required to answer 30 questions from a list of 100 provided by the Department of Transportation. The formal orientation program lasts about 1-1/2 days. During this period the applicant is indoctrinated into the "George system." George's inspector takes him on a road test with a tractor and loaded trailer to determine if he can, in fact, handle the equipment to the satisfaction of the Employer. He is instructed on the method of installing tarp over his cargo, which is required even if he is carrying junk steel. He is instructed on loading procedures and distribution of weight in conformance with George's rules and government regulations. His vehicle must be inspect- ed every 30 days by one of George's inspectors or at an inspection station authorized and paid by George. He himself must check his vehicle for safety problems before every run and include this informa- tion in his daily log, which he is required to keep. Every day he submits the log for the previous day to George's terminal manager where, after review, it is transmitted to the main office where it is daily reviewed again by George's safety department. Drivers are required to have a medical examination once every 24 months. The Employer will notify the driver that his medical certificate is expiring and if, after several notices, the driver fails to report for his examination, as directed, the dispatcher at the driver's terminal will be told not to load that particular driver. Drivers are on notice that they may be stopped at any time on the highway, at a terminal, or parking lot by one of George's inspectors, who are there to check the condition of the rig and the driver's performance of his job. Inspectors have the authority to and do determine whether the driver or his vehicle consti- tutes a safety problem and may take a driver off his tractor or, if the problem is serious enough, cancel his lease on the spot. Every vehicle leased to George Delaware corporation to carry on their business relationship with the Employer-acts which clearly have the flavor of an independent business relationship, rather than of the traditional employer-employee relationship The totality of the entire record persuades us that, while the matter is by no means wholly free from doubt, the preponderence of the evidence supports our conclusion that the relationship here is one of independent contractor rather than employer-employee 498 DECISIONS OF NATIONAL LABOR RELATIONS BOARD must show the insignia and decal of the George Transfer & Rigging Co., Inc. George, and George alone, has the right to sublease the equipment for a return load. Drivers, whether or not owners of their equipment, are absolutely prohibited from seeking a return load. If a load is not available through George, they must return with an empty trailer. The general rule in the George system is that a driver who has had three major accidents in 2 years will have his lease terminated. Drivers are warned by teletype of dangerous conditions on the road such as a danger- ous hill, steep grades or slippery spots, and severe accidents. By computerizing terminal and driver identification numbers the Employer is informed at all times where a particular driver and his load is or should be. The Employer has a dual incentive system to encourage its drivers to drive safely and to maximize their production. In addition to their regular percent- age, they are granted one-half percent of the gross revenue they have produced in 1 year if they have had no chargeable accident or monetary losses. This bonus is paid at the annual "George family picnic" where they and their families are entertained. Drivers are also granted a production bonus of 1-1/2 percent of their gross yearly revenue. This bonus is paid at the end of March. Drivers are not required to run the risks of some normal business losses. For example, if a driver is unreasonably detained with a load he will be paid an hourly rate known as "detention time." The consignee or consignor is billed by George for this amount, which is then passed to the driver with no deduction by George.13 Drivers are paid an advance of about 50 percent of their anticipated earnings for a particular run. In the event of an emergency, involving a breakdown or necessary repairs on the road, the Employer may provide the driver with a second advance to take care of the emergency. The Employer may also negotiate a premium out of its own percentage to move a stranded load of freight by dispatching a second driver to take a tractor out to the disable vehicle. Thus, it is George, not the driver, who assumes final responsibility for the movement of freight under its name as, indeed, Federal regulations require. In the event a shipper or consignee does not pay George, the driver will still get paid for hauling that particular load, presumably an amount equal to the percentage he would have received had George been paid in the normal course of business. It would seem clear, however, that payment of such an amount is in the nature of a reimbursement for services performed for 13 Obviously, the payment of detention time by George is made to those drivers operating under a percentage agreement who would not otherwise be reimbursed for time lost It should be equally apparent that drivers operating on an hourly or salary basis would not lose pay as a result of George rather than a percentage of the tariff paid by the customer. Impoliteness to customers or altercations with other drivers are investigated by George and, if George is not satisfied with the conduct of the driver, his lease may be terminated or the owner of his equipment notified that the driver's reference had been removed from George's system so that he may no longer drive a tractor leased to George. The Employer has a fleet liability insurance policy covering all vehicles in its service. This policy also covers cargo insurance while the cargo is transported under George's name. The Employer pays "third structure taxes" imposed on George by various States on the basis of miles traveled in the State or on a tonnage or axle-load basis. To take advantage of credits given by these States for taxes paid on gasoline George asks its drivers to purchase gasoline in such States and to submit the receipts to George. From the foregoing evidence it is obvious that George exercises detailed control and supervision over the drivers who haul freight under its name. Applying the common law right-of-control test to this relationship, we must conclude that George has reserved to itself not only the right to control the ends to be achieved but the means whereby the drivers perform their driving duties. It is irrelevant, in our view, that some of the rules enforced by George emanate from the Interstate Commerce Commission, the Department of Transportation, or other govern- ment agencies. For, surely, as this record shows, the drivers controlled by George are not under the aegis of those agencies, but under the complete and operative authority of George, subject to losing their employment at the will of George. We find most unpersuasive the majority's list of factors on which they rely in finding that these drivers are independent contractors. The fact that a driver may elect not to work on a particular day or a particular run is hardly an indication of the Employ- er's lack of control on the days and runs when he does work. Nor does the fact that the owner of the leased vehicle pays for its repair and decides where to park it have any substantial impact upon the Employer's right to control the vehicle and the driver on or off the road. While the route to travel may be the driver's choice , this prerogative loses its signifi- cance since it is obvious that there are very few interstate routes from which to choose and the interests of the driver and the Employer in this respect are precisely the same. Owners of equipment may offer an applicant to the Employer as drivers of being unreasonably detained However, in that case the owner of the rig would normally be the one to lose but for the payment of detention time In both instances George assumes responsibility for the actual cost of the labor of driving in its transportation business GEORGE TRANSFER & RIGGING CO., INC. 499 their tractors, but there can be no doubt on this record that no driver is employed on a vehicle leased to George unless and until he is approved by George and no driver continues in that capacity if George disapproves of his employment. With respect to the method of reimbursing the driver for his services, this is an immaterial factor in assessing the degree and depth of the Employer's actual control over the means of driver performance. Contrary to the majority, the Employer does tell the drivers to purchase gasoline in States offering a credit to the Employer for mileage and axle-load taxes. We must also disagree with the majority, on the basis of the evidence set forth above, that the owner-operators are subject to "only minimal day-to-day supervision or control by the Employer." For these reasons we find that all drivers of tractors leased to George and under its control are employees within the meaning of the Act and we dissent from the majority's contrary conclusion.