603 F.2d 862 (D.C. Cir. 1978), 77-1512, Local 777, Democratic Union Organizing Committee, Seafarers Intern. Union of North America, AFL-CIO v. N.L.R.B.

Docket Nº:77-1512, 77-1673.
Citation:603 F.2d 862
Case Date:October 20, 1978
Court:United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit

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603 F.2d 862 (D.C. Cir. 1978)





YELLOW CAB COMPANY and Checker Taxi Company, Inc., Petitioners,



Local 777, Democratic Union, etc., Intervenor.

Nos. 77-1512, 77-1673.

United States Court of Appeals, District of Columbia Circuit

October 20, 1978

Argued June 13, 1978.

Rehearing Denied June 20, 1979.

As Amended July 5 and 27, 1979.

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Joel H. Kaplan, Chicago, Ill., for petitioners in No. 77-1673.

Robert E. Haythorne and D. Lawrence Gunnels, Chicago, Ill., were on the brief, for petitioners in No. 77-1673.

Irving M. Friedman, Chicago, Ill., with whom David Jaffe was on the brief, for petitioner in No. 77-1512 and intervenor in No. 77-1673.

Candace M. Carroll, Atty., N. L. R. B., Washington, D.C., with whom John S. Irving, Gen. Counsel, Carl L. Taylor, Associate Gen. Counsel, Elliott Moore, Deputy Associate Gen. Counsel, and John D. Burgoyne, Asst. Gen. Counsel, Washington, D.C., were on the brief, for respondent.

George D. Webster and Arthur L. Herold, Washington, D.C., were on the brief, Amicus Curiae, urging denial of enforcement of the Board's order.

Also Ronald Rosenberg, Washington, D.C., entered an appearance for petitioners in No. 77-1512 and intervenor in No. 77-1673.

Before TAMM and MacKINNON, Circuit Judges, and MARKEY, [*] Chief Judge, United States Court of Customs and Patent Appeals.

Opinion for the court filed by MacKINNON, Circuit Judge.

MacKINNON, Circuit Judge:

The Yellow Cab Company and the Checker Taxi Company (hereinafter "Yellow" and "Checker" and "the Companies") 1 in Chicago, petition pursuant to Section 10(f) of the National Labor Relations Act (the "Act"), as amended (61 Stat. 136, 73 Stat. 519, 88 Stat. 395, 29 U.S.C. § 151 Et seq.) for review of a decision and order of the National Labor Relations Board (the "Board") 2 requiring the Companies to recognize Local 777, Democratic Union Organizing Committee, Seafarers International Union of North America, AFL-CIO (the "Union") as the representative of their lessee cab drivers. 3 The Board, pursuant to section 10(e) of the Act, has filed a cross-application for enforcement and the Union has itself filed a petition for review insofar as the Board's order failed to grant certain remedies. 4


A.) Background of the Leasing Decision

The dispute which precipitated this litigation arose as a result of the decision by Checker and Yellow to inaugurate a cab-leasing program as an alternative to the commission arrangement they had used exclusively until 1975. 5 Under the leasing system all the cab companies receive is a flat rate for the use of a cab and a "medallion." Under the commission system the sole compensation to the Companies is a certain percentage (approximately 50%) of the total fares paid to the cab drivers.

In 1974, the Companies, suffering a decline in earnings, based in part on the increasing

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scarcity of full-time commission drivers, decided to embark on a leasing program. 6

By December of 1974, the companies had developed detailed plans concerning the use of subsidiaries to begin leasing operations, and they sent the Internal Revenue Service a summary of their proposed operation requesting a ruling that the lessees were independent contractors and not employees for federal tax purposes. A favorable ruling was granted some three months later in March of 1975.

Immediately upon receipt of the favorable IRS ruling, Yellow applied to the Commissioner of Consumer Sales, Weights, and Measures for the transfer of 50 of its 2,166 licenses to its subsidiary, Bell Cabs, in order that leasing operations might begin. Meanwhile, the Union had begun a virulent campaign against the leasing plan, denouncing it as a "union-busting tactic" and threatening a retaliatory cab strike. In late May, the Commissioner announced that he would not approve the transfer of licenses to Bell. At this point, Yellow and Checker abandoned their plans to establish subsidiaries to run their leasing operation and decided instead to lease their cabs directly to the drivers.

Accordingly, they requested a supplemental ruling from the IRS that if they did so the lessee drivers would still not be considered employees for tax purposes. This ruling was eventually rendered in October 1975, sometime after actual leasing operations had begun.

After the companies decided to utilize direct leasing rather than forming subsidiaries, they informed the Union of their intentions and invited discussion before they arrived at a final decision. Two meetings were held between the parties, on June 5 and 17, 1975. At these meetings the Union manifested its categorical opposition to the idea of leasing 7 and its "pattern of conduct prior to and during the June meetings indicates that it was resigned to the belief that negotiations would be futile, and that its opposition to leasing would have to be sustained in the arenas of political and legal combat." 8 The Union also considered the leasing program simply to be a modification of the current collective bargaining agreement and insisted that it be recognized as the representative of the lessee drivers, since it had been certified to represent all drivers employed by the Company. The Union left no doubt that, even were the companies willing to bargain about a modification of the leasing program, it would not do so until it was recognized as the representative of the lessee drivers. 9

After the second meeting had ended in impasse, the Company declined the Union's request to meet further, stating their belief that any future discussion would, given the Union's attitude, be futile. Two weeks after the final meeting with the Union, on July 1, 1975, Checker and Yellow both commenced their leasing operations.

B.) The Leasing Programs

In the course of establishing its leasing operation the Companies transferred no

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driver from a commission to a lease system other than at his own request, and there is no evidence that they even solicited drivers to become lessees. 10 The terms of the lease itself are straightforward. Leases are given on a day, night or twenty-four hour basis and the driver must post a bond to cover any damage that he may do to the car during its operation. 11 The terms of the lease agreement state that the Company is not required to renew or extend any lease and that it can terminate a lease and repossess the car involved for any violation of a government ordinance or regulation. It also provides explicitly that the driver is a lessee and not an employee, is not required to report his location, complete a trip sheet recording his rides and fares, account for his collections, or maintain his cab in any specific place. The lease contains a prohibition on subleasing and imposes a total mileage limit calculated to ensure that subleasing does not take place of 250 miles in any twenty-four hour period.

There is no question that even though the lease agreements by their explicit terms do not directly regulate the lessee-drivers, they do require compliance with the provisions of all applicable laws and regulations and lessees may be terminated for violation thereof. The drivers' conduct is in fact fairly closely controlled by the local ordinances. The municipal regulations are multitudinous. They not only require the cab driver to pass a series of medical, geographical and driving tests, but also to run his meter properly, to present a neat appearance, and to use cab stands and the large ranks at O'Hare Airport in a certain prescribed manner. In sum, "the regulations . . . cover numerous aspects of the drivers' work which, in a different context, might normally be dealt with by the drivers' employer." 12 The fundamental difference between commission and lessee drivers, both of whom are subject to the same municipal regulations, is that the former work for the companies and are accountable to them for all sums collected as fares, from which they receive a stated portion as their earnings, while the latter lease their cabs, pay only a single flat rate and work for themselves.

The Union charged that the Companies were guilty of unfair labor practices by instituting the leasing program without consulting the Union and by refusing to recognize it as the bargaining representative for the lessee drivers. The Administrative Law Judge found that on the basis of recent NLRB decisions the lessees were not employees and that the Union itself had made bargaining impossible by adopting an adamant opposition to leasing and by refusing to negotiate unless it was first recognized as the bargaining representative for the lessee drivers. The Union was not entitled to assume this position unless it was so selected by the drivers in an election. 13

The NLRB reversed the Administrative Law Judge on both these issues. 14 The Board held that the cab companies exercised sufficient control over the lessee drivers that an employer/employee relationship existed 15 and that the Union's refusal to bargain before it was recognized was immaterial in light of the Companies' firm resolution to begin leasing operations regardless of the union's position. 16 We find ourselves

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in agreement with the Administrative Law Judge, and accordingly deny enforcement of the Board's order insofar as it is inconsistent with that examiner's conclusions.


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