580 F.2d 966 (9th Cir. 1978), 77-2337, Merchants Home Delivery Service, Inc. v. N.L.R.B.
|Citation:||580 F.2d 966|
|Party Name:||MERCHANTS HOME DELIVERY SERVICE, INC., Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent.|
|Case Date:||August 21, 1978|
|Court:||United States Courts of Appeals, Court of Appeals for the Ninth Circuit|
Daniel J. Sullivan (argued), of Lewis, Rice, Tucker, Allen & Chubb, St. Louis, Mo., for petitioner.
Howard Perlstein (argued), Washington, D. C., for respondent.
Petition to Review a Decision of the National Labor Relations Board.
Before MERRILL and KENNEDY, Circuit Judges, and BARTELS, [*] District Judge.
BARTELS, Senior District Judge:
This is a petition for review and cross-petition for enforcement of an order of the National Labor Relations Board (NLRB). Merchants Home Delivery Service (Merchants) is a California-based contract carrier with operations in twenty-two states, engaged primarily in the delivery of household appliances and furniture from department and furniture stores to the homes of the stores' customers. We are concerned here with its activities in making deliveries for J. C. Penney Co., Inc. (Penney) in the St. Louis, Missouri area. The NLRB found that Merchants violated §§ 8(a)(1) & (5) of the NLRA 29 U.S.C. §§ 158(a) (1) & (5), in refusing to bargain with the union purporting to represent the truck drivers who handle the Penney deliveries for Merchants. 1 The Board's conclusion was based on three underlying findings: (1) the truck owner-operators engaged by Merchants to perform the Penney deliveries are employees of Merchants, not independent contractors; (2) Merchants is a successor corporation to Compton Service Co. (Compton) and Am-Del-Co, Inc. (ADC), which had previously handled Penney's deliveries; and (3) the union which represented Compton's and ADC's drivers continued to enjoy majority status among Merchants' drivers, most of whom had previously worked for Compton and ADC on the Penney account. In view of our determination that Merchants' truck drivers are independent contractors excluded from coverage under the NLRA by § 2(3) of the Act, 29 U.S.C. § 152(3), we do not reach the issues of successorship and majority status.
For approximately nine years, from the mid-1960's through 1975, Penney had its merchandise delivered by Compton. By 1974, Penney, which also stored its merchandise in a warehouse owned by Compton, was Compton's primary client, accounting for 95% Of its delivery business. In making the deliveries, Compton used its own trucks and the drivers and helpers on the trucks were Compton employees. These drivers were represented by the union during this period and operated under collective bargaining agreements negotiated after Compton recognized the union.
In June of 1975 Merchants, which delivered for Penney in other parts of the country, submitted a proposal to Penney in St. Louis, promising better and cheaper service as well as "(n)o unions." According to Merchants, the key to its competitive edge was its consistent practice of engaging only drivers who owned their own equipment to make the deliveries, as opposed to hiring employees to drive company trucks. Penney thereupon warned Compton that its bid would have to be significantly reduced if it were to retain the delivery contract when it came up for renewal and suggested that ADC, an owner-operator delivery company formed by Compton's principals in 1970, submit a bid. ADC accordingly submitted a bid for payment on a per-stop basis, and was notified on July 22, 1975, that its bid had been accepted. Compton's contract was subsequently cancelled.
On July 28, 1975, Billie Hunt, the president of both Compton and ADC, met with his drivers, helpers and other employees to inform them of Compton's loss of the contract. Three days later he again met with the drivers and helpers to tell them that they would have the first opportunity to become owner-operators for ADC. Of the nine owner-operators signed up by ADC,
five were ex-Compton employees, and three more ex-Compton employees worked as helpers on ADC's Penney delivery trucks. Compton laid off a total of twenty employees as a result of the loss of its Penney contract, but did not go out of business, since it still had a contract with Penney for warehousing services and performed intermittent delivery service with three trucks which had not been sold or leased to ADC's new contingent of owner-operators. 2 ADC's success in winning the Penney contract was short-lived, however. Evidently as a result of unfair labor practice charges filed by the union against Compton and ADC, 3 Penney negotiated a hasty contract with Merchants in January 1976 and cancelled its agreement with ADC.
Understandably concerned about their future, ADC's Penney drivers contacted an attorney by the name of Terry Peebles, who had earlier assisted them in incorporating and making other arrangements to lease or buy the trucks they used when they signed on with ADC. Peebles called Penney, who referred him to Merchants. Merchants, of course, needed to sign up owner-operators to fulfill its contract with Penney, and was particularly interested in taking on persons familiar with Penney operations. Accordingly Walter Carson, Merchants' operations manager, set up a meeting with the drivers at Peebles' office and discussed Merchants' terms of hiring. He also passed out "applications for employment," 4 although he stressed that persons selected were not to consider themselves employees of Merchants. Some days later, Carson called the drivers up again and arranged a meeting on January 12, 1976, in Penney's conference room where, after expressing some dissatisfaction with the rates they would be earning, and after consulting with their attorney Peebles, the drivers signed up with Merchants.
Under the circumstances of this case, it is important to note that only one of the drivers, Lloyd Reid, was doing business as an individual when he signed up with Merchants. Greenwald and Holleran were doing business as G & H Delivery, Inc.; Potts and Glazebrook as G & P Express, Inc.; Flowers and Kleinschmidt as F & K Delivery, Inc.; and Drozd and Hale as H & R Delivery Co., a partnership. Another two-man partnership, Sandau Moving and Storage, was signed up by Merchants one week later to run a shuttle between Penney stores and warehouses. Of these eleven individuals, the first eight or nine, who were doing the actual deliveries, had previously worked for Compton and then for ADC on the Penney account, a fact which made them especially attractive to Merchants. The two partners driving the shuttle had also previously driven for ADC, though not on the Penney account. With this background in mind, we may now focus on the major elements of the relationship between Merchants and its owner-operators which are set forth in the "Independent Truckman's Agreement" and the "Lease with Option to Purchase and Service Agreement" executed by each owner-operator. 5
Independent Truckman's Agreement
The Truckman's Agreement refers to the owner-operator as a "contractor," and provides that the parties intend to create an independent contractor relationship and not one of employer-employee. 6 "When requested"
by Merchants, the owner-operators will deliver and load and unload shipments packaging and padding them as necessary. The owner-operator must provide at his own expense whatever labor is necessary, and such labor is to be under the sole control of the owner-operator, who is responsible for all of his helpers' employment taxes, etc., and is to hold Merchants harmless from liability for any injuries occurring to them. The owner-operator warrants the good condition of his equipment, and is to pay all maintenance, operating and licensing fees. Liability insurance paid for by the owner-operator is arranged through Merchants' fleet plan, and Merchants carries at its own expense cargo insurance in sums required by law. However, the owner-operator is liable for loss of or damage to merchandise in its possession, and Merchants has the exclusive prerogative to settle claims, subject to a reasonable opportunity on the part of the owner-operator to prove lack of fault. He is to collect all C.O.D.'s and remit them to Merchants within twenty-four hours. Under federal regulations, the trucks driven for Merchants must carry the name of the carrier. 49 C.F.R. Part 1058 (1976). The contract requires the owner-operators to remove such identification upon termination of the contract.
Compensation to the owner-operator is fixed by the contract at 60% Of all hauling revenue, 7 expressly understood to be entirely dependent on the volume of deliveries ordered by Penney. Merchants disclaimed any guarantee of such volume, and, in the event of a material drop in deliveries, reserved the right to allocate deliveries among the owner-operators or reassign the owner-operators or terminate any owner-operator. The contract was to remain in effect for one year, and then continue from year to year with an option by either party to terminate on thirty days' notice. The contract could also be terminated if the contractor received three notices of substandard service from Merchants. The contract is personal to the owner-operator, and no rights or duties are assignable or delegable thereunder. The contract also requires the owner-operators to post a performance bond, but Merchants gave them a $500 advance to cover initial cash flow problems. This advance was recovered by Merchants...
To continue readingFREE SIGN UP