Reference no: EM132165851

The employer publishes the South Texas Clarion daily newspaper, employing 726 carriers on 780 routes through the rural Rio Grande river valley. In addition to the Clarion, the carriers deliver seven other newspapers e.g., The Wall Street Journal. The employer operates four distribution centers (warehouses) where carriers pick up the papers to take on their routes. Each distribution center has general manager and several "District Managers" who supervise the work of 30-50 carriers. A few carriers work multiple routes. In order to become a carrier, an individual must submit proof from the state that they are a safe and licensed driver. They also sign a "Contractor's Agreement" and put down a $300 security deposit. Either part can terminate the Agreement with a 21-day notice. District Managers usually show new carriers their routes, although sometimes the previous carrier trains his/her replacement. District Managers leave messages for carriers via dry-erase boards in the warehouse and small read-only computers, which carriers rent for $2 a week. These computers are updated daily at the distribution center with information about new/ending subscriptions, route suggestions, and special requests from subscribers. Because most sections of the paper have been preprinted, they are delivered to the Distribution Centers when the facilities open at 1:00 AM each day. The front two sections, with the most current news, arrive by truck an hour later. Carriers arrive at 2:00 AM and assemble the papers at "route tables' although they are free to assemble them in their vehicles or even at home. The employer provides free plastic bags on Sundays and on morning where rain is imminent. Carriers must purchase bags and/or rubber bands on other days (the carriers are free to choose which to use). After assembling, the carriers deliver the newspapers. By contract, all papers must be delivered to residences by 6:00 AM, and to organizations by 8:00 AM. Many carriers occasionally use helpers (e.g. to assemble papers) or substitute drivers (e.g., if a carrier goes on vacation). These workers are paid by the contractor, not by the newspaper; the newspaper only requires that substitutes have a valid driver's license and vehicle insurance. Carriers are paid weekly by the "Accounts Payable" department. Clarion employees are paid from the "Payroll" Department. Both types of paycheck originate from the same office. Carriers are paid 30 cents per delivery of the Clarion plus 5 cents for each full-sized advertising supplement. For other papers, the rate is 10 cents per delivery. The newspaper does not deduct payroll taxes or workmen's compensation for carriers and at eh end of the year they are issued a Form 1099 rather than a W2. They receive no health insurance or other fringe benefits from the publisher. The question before the Administrative Law Judge (ALJ) is whether the carriers are "employees" of the publisher of the South Texas Clarion newspaper or whether the carriers are "independent contractors." Section 2(3) of the National Labor Relations Act (also called the Labor Management Relations Act or "the Act") indicates that, the term "employee" shall not include "any individual having the status of independent contractor." If carriers are employees they are free to unionize if they wish: if they are independent contractors then they are not. In this case the publisher maintains that the carriers are independent contractors and not employees and that the similar newspaper case, St. Joseph News-Press (2005) supports this position. The publisher argues that the case differs from a superficially similar case -The Roadway Package System, 326 NLRB 842 [159 LRRM 1153] (1998) and is similar to the Dial-A-Mattress Operating System, 326 NLRB 884 [LRRM 1166 (1998) case where workers were found to be independent contractors. The publisher concedes that a few factors raised in St. Joseph News-Press case may suggest "employee" status for the Clarion carriers (e.g., the work is unskilled yet essential to the operation of the business). However, the majority of the factors indicate that the carriers at the Clarion are independent contractors. These factors include the following reasons: 1. Control of work. As independent contractors, carriers maintain great control over the details of how they complete their work. For example, while the District Managers can suggest routes, the carriers are free to deviate from those suggestions. Carriers can also decide whether to use rubber bands of bags and where to assemble newspapers. 2.Supervision: The newspaper does not subject carriers to any sort of "progressive discipline system" for problems with deliveries. It is true that the publisher relays customer complaints to its carriers and may follow a carrier on his or her route if complaints persist. But the publisher does not take any adverse action against a carrier for failure to adequately perform his or her duties, other that terminating the contract. Moreover, although the carriers are subject to "Safety Standard" rules, the publisher disagrees with the unions' characterization of these as "employee work rules." The standards apply to anyone who enters the distribution center, including carriers, employees, and visitors. The rules state that no alcohol or drugs or weapons are allowed on publishers' property; also closed-toed shoes must be worn. The Safety Standards do contain some carrier-specific rules. However, these rules simply ensure the safe operation of the distribution center; they do not dictate how the carrier is to perform his or her duties. 3. Entrepreneurial potential: Carriers have more than a paycheck; they are, in essence, small business owners. They are free to hire full-time substitutes, hold multiple routes, and deliver other papers in addition to those distributed by the employer. They may also work for other carriers. Many also hold other "day" jobs. 4. Provision of tools, supplies, and a place to work: Carriers own, control, and maintain their own vehicles. They buy supplies and are free to work anywhere. 5. Parties Intent: The parties intend to have a contractor-client relationship. The parties' "Contractor's Agreement" clearly states the type of agreement that the carrier and newspaper are forming. Also, the carriers are not subject to employee benefits, but are paid in the same manner as other outside vendors. By contrast the union calls attention to the work relationship of the carriers and the employer. "Based on their economic dependence on the newspaper, together with other relevant factors, we submit the carriers are statutory employees, and no independent contractors. But even considering only the factors management listed in the common-law test, we would reach the conclusion that the carriers are employees." The Union argues that "four of the nine factors mentioned in the St. Joseph Ness-Press case indisputably with in favor of finding "employee status." : 1. The distribution of newspapers is an integral part of the employers business. 2. The carriers are performing unskilled work 3. The carriers are hired for an indefinite period (independent contractors, such as construction contractors, usually have a deadline whereby a project must be completed; these carriers have no such deadline). 4.Other employees perform work that is similar: It is not uncommon for newspaper employees or District Managers to deliver newspapers if a carrier is ill or no carrier has been hired to serve a particular route. 5.Control of Work. The employer exercises more control over the carriers' details of work than did the employer in News-Press. The Clarion requires carriers to deliver to all subscribers on their routes. Unlike News-Press carriers, Clarion carriers more over do not issue bills, extend credit, or collect payments. Instead, the Clarion's circulation department bills subscribers. Clarion carriers have been subject to discipline that went beyond merely threating to terminate the contract, (e.g., two week suspensions). Clarion carriers are subject to a list of work rules specified in their employment agreement and to ad hoc rules developed by District Managers. One District Manager prohibits pets in the carrier vehicles during delivery and even pre-approves carriers' Christmas cards. 6. Supervision: District Managers relay customer complaints to carriers and sometimes terminate contracts if complaints are excessive. But District Mangers will sometimes take the additional step of following carriers on their routes. District Managers will also call carriers if they are late arriving at the distribution center. Two carriers in the present case have testified that carriers will be "officially reprimanded" if they receive too many customer complaints. Thus, a "formal progressive discipline system" for carriers exists. 7.Provision of tools, supplies, and a place to work. It is also clear that the publisher provides supplies and a place to work. The employer furnishes computer, albeit it charges the carriers a nominal rental fee. The employer also maintains distribution centers complete with route tables, cubby holes, and downloading facilities for the computers. The carriers must report to a distribution center to obtain newspapers. 8.Entrepreneurial potential: The newspaper requires the carrier to deliver newspapers at a nonnegotiable piece rate. This inability to negotiate rates limits entrepreneurial potential. Although carriers also can hire substitutes, Clarion managers control substitutes' term and conditions of employment. Some District Managers will not give more routes to carriers whom they believe do not have time for another route. Together these facts suggest Clarion carriers are employees and not entrepreneurs. 9.Parties' intent: Finally, the parties' contract implies an independent contractor-client agreement. But the carriers have no choice in whether they are considered independent contractors or employees; rather, the employer simply labels "contractors" To say that this contract reflects the carriers' intent is therefore dubious. Further in the Rio Grande valley, many carriers speak Spanish, but the contract is written in English. Such a "contract is not negotiated by two independent equals, it simply is the dictation of terms set by one side and is not reflective of mutual interests.

Questions:

1. Which of the company's arguments for "independent contractor" status are most compelling and which of the union's arguments for "employee" status are most compelling?

2. Should the case be decided on the basis of who wins "more" of the nine factors mentioned? Are there other factors not mentioned?

3. If you were the Administrative Law Judge working for the NLRB how would you rule in this case and why?