Friday, August 8, 2008

When is an Independent Contractor Really an Employee?

This question is answered by the Court in a decision earlier this year in the case of East Bay Taxi Driver’s Association v. Friendly Cab, Inc.

It appears that the taxi drivers in this case leased their cabs. They formed a union under the premise that they are “employees”, that, according to the National Labor Relations Act, is required to be recognized by their employer and to bargain.

Naturally, the company doesn’t think so – considering that the drivers leased their vehicles and keep whatever they make in a day for themselves.

But, the NLRB said that these taxi drivers are employees of the company.

The Court concurred. In determining whether the taxi drivers are independent contractor or employees of the company, the court used the control test.

The presence of control by the company over the taxi drivers negates the theory that they are independent contractor and not employees. For one, the drivers respond only to company’s radio dispatches and no one else, even their own.

Two, they are not allowed to pick up fares on their own.

Three, they are not allowed to advertise their services except the company.

All of these prevent the drivers from obtaining actual “entrepreneurial profit” for themselves, by themselves.

So where do we draw the line? Who is an employee? Who is an independent contractor?

The Court explained in this wise: “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 goods, materials and labor and what they receive for the end result, that is, upon profits.