Gold Medal Baking Co., Inc.

National Labor Relations Board - Board Decisions

Oct 20, 1972

199 N.L.R.B. 895 (N.L.R.B. 1972)

GOLD MEDAL BAKING CO., INC.
Gold Medal Baking Co., Inc . and Bread Salesmen's
Union Local No. 10 , affiliated with the United He-
brew Trades of Philadelphia , Petitioner . Case 4-
RC-9600
October 20, 1972
DECISION ON REVIEW
BY CHAIRMAN MILLER AND MEMBERS KENNEDY AND
PENELLO
On May 9, 1972, the Regional Director for Re-
gion 4 issued a Decision and Order in the instant
proceeding in which he dismissed the petition for an
election among distributors of the Employer's bakery
products on the ground that they are independent
contractors. Thereafter, in accordance with Section
102.67 of the National Labor Relations Board Rules
and Regulations , Series 8 , as amended, the Petitioner
filed a request for review of the Regional Director's
Decision and Order on grounds that he made findings
of fact which are clearly erroneous and that he depart-
ed from officially reported precedent.
On June 29, 1972, by telegraphic order, the re-
quest for review was granted. The Petitioner and the
Employer each filed a brief and supplementary brief
on review.
Pursuant to the provisions of Section 3(b) of the
National Labor Relations Act, as amended, the Na-
tional Labor Relations Board has delegated its au-
thority in this proceeding to a three-member panel.
Upon the entire record in this case, including the
briefs on review, the Board hereby affirms the Re-
gional Director's Decision and Order, with the follow-
ing additions:
The Employer, a Pennsylvania corporation with
its principal office located in Philadelphia, is engaged
in the manufacture and sale of bread, rolls, bagels,
and cakes. For more than 50 years, the Employer
distributed its bakery products to independent and
chain store retailers by means of employees it classi-
fied as driver-salesmen. During this time, the Petition-
er acted - as bargaining representative for the
driver-salesmen and negotiated successive collective-
bargaining agreements with the Employer, the last of
which expired on December 31, 1970.
In the course of negotiations for a new agree-
ment, the parties in February 1971 for the first time
discussed the feasibility of creating distributorships
for the driver-salesmen . Discussion proved fruitful
and the Employer's attorney was instructed to draft a
distributorship agreement. Between March 6 and
April 21, 1971, the Employer asked each of the 11
driver-salesmen to execute the distributorship agree-
ment which had been drafted; all of them did so and
895
immediately commenced operating under their agree-
ments.
By letter dated April 9, the Employer's attorney
advised the Petitioner that the Employer would "con-
tinue to recognize [it] as the exclusive bargaining
agent for all driver employees of the company, includ-
ing distributors." Thereafter, the parties engaged in
negotiations until November when the Employer
broke off the negotiations on the ground that the dis-
tributors were independent contractors. On Decem-
ber 7, 1971, the Petitioner filed with the Board unfair
labor practice charges alleging refusal to bargain by
the Employer, but withdrew the charges on January
31, 1972, the same day that it filed the instant petition.
Under the terms of the distributorship agree-
ments, the distributor is given the exclusive right to
sell the Employer's products to customers of the Em-
ployer whose names are listed on an appendix to the
agreement;' distributor agrees to buy all of his needs
of bakery goods from the Employer; distributor
agrees to pay the prices established by the Employer
and will be allowed a 5-percent credit for stale returns
from certain named chain stores; distributor is re-
quired to pay for his purchases of the Employer's
products within 3 days of receiving the statement for
the previous week's purchases; distributor may pur-
chase from other bakeries only such items as the Em-
ployer agrees to, except for cakes and pastries which
distributor can purchase without the Employer's prior
approval; distributor agrees to keep accurate records
of all purchases and sales and make them available for
inspection by the Employer at reasonable times; dis-
tributor agrees to not engage in any other business
which would interfere with the sale or distribution of
the Employer's products to its customers: the Em-
ployer has the right to assign additional customers to
a distributor as long as such additional assignments
are located within a reasonable distance of the
distributor's present primary area of distribution; dis-
tributor is required to furnish his own truck and main-
tain it in good condition and repair and with a clean
appearance at all times; distributor agrees to insure
the truck to the minimum amounts specified and the
Employer shall be named as one of the parties in-
sured; distributor agrees to deposit the equivalent of
1 week's gross sales as a security deposit; distributor
agrees to a specified amount as liquidated damages in
the event that he should purchase products from other
than the Employer without the Employer's written
consent; the parties agree that the distributor is a
self-employed independent contractor; distributor
agrees, upon termination of the agreement, not to
work for a competitor of the Employer selling or serv-
' The record shows that each distributor was assigned the same customers
he had serviced as a driver-salesman
199 NLRB No. 132
896 - DECISIONS OF NATIONAL LABOR RELATIONS BOARD
icing the same customers for a period of 2 years;
distributor agrees to make arrangements for a substi-
tute during illnesses or emergencies and if he fails to
do so, the Employer is authorized to provide such
service and charge it to the distributor; the Employer
has the absolute right to terminate the agreement
upon 1 week's notice for breach or default, and it is
considered a breach for the distributor, inter alia, to
fail to sell or service all of the customers assigned to
him in a diligent manner or cause the loss of any such
customer; distributor shall not exchange customers
with other distributors except upon the prior approval
of the Employer and then there shall be no payment
made for the exchange; the Employer shall not be
held liable to the distributor for the loss of any cus-
tomers; during the term of the agreement distributor
may assign or sell the exclusive rights he has, subject
to the prior written approval Employer has the abso-
lute right to terminate its business upon 2 weeks' no-
tice to the distributor; the parties agree to binding
arbitration in the event of any dispute concerning
interpretation or application of the agreement; and
the distributor is to be paid a commission of 25 per-
cent.
The practice under the distributorship agree-
ments has been for the distributors to purchase the
Employer's products daily at 25 percent less than the
Employer's suggested resale price, with a further 5-
percent discount for sales made to chain stores as an
allowance for stale returns. The distributors are not
required to adhere to the suggested resale price, and
some distributors have given discounts to certain cus-
tomers or have charged customers more than the sug-
gested resale price. Except for sales to chain stores,
which account for approximately 10 percent of the
distributor's business, the distributors make their own
collections, give credit, and bear the loss if a customer
fails to pay. The distributors can add customers to
their routes if they so desire, and the record shows that
some of the distributors have done so. The
distributor's gross income is determined by the differ-
ence between what he pays the Employer for the
products he purchases and that which he collects from
his customers.
The distributors own, maintain, insure, and ga-
rage their own trucks, are not supervised in the serv-
icing of their routes, determine their own hours, do
their own bookkeeping, file their own income tax as
self-employed individuals, are responsible for their
own replacement in, the event of illness or vacation,
and are entitled to none of the fringe benefits they
formerly received as driver-salesmen. The distributors
are not required to participate in promotional pro-
grams instituted by the Employer, to attend meetings,
to wear special clothing, or to keep the Employer's
name painted on their trucks.' Pursuant to the terms
of the distributorship agreement, one distributor sold
his right under the distributorship to a third party,
with the approval of the Employer, for the sum of
$7,000.3
It is well established that the appropriate test to
apply in determining whether certain individuals are
independent contractors or employees is the common
law of agency right-of-control test .4 Under this test, an
employer-employee relationship exists when the em-
ployer 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 con-
trol is reserved only as to the result sought, an inde-
pendent contractor relationship exists. Moreover, the
Board has made it clear that application of the test is
not a "perfunctory exercise," but demands a bal-
ancing of all the evidence relevant to the relationship.'
In the instant case, we find, in agreement with the
Regional Director, that the distributors involved are
independent contractors. Contrary to the Petitioner,
we do not believe that the provisions of the distrib-
utorship agreements, detailed above, impose the types
of restrictions on the distributors which, without
more, would require a finding that the Employer has
reserved to itself control over the means by which the
distributors sell and deliver its bakery products. Fur-
ther, as emphasized by the Regional Director, despite
the earlier history of representation by the Petitioner,
the Employer and the distributors in the distributor-
ship agreements expressly stated their intention to
create an independent contractor relationship.
Moreover, other facts set forth above support the
Regional Director's conclusion that such a relation-
ship has been created. Thus, the fact that the distrib-
utors own and maintain their own trucks at their own
expense gives rise to an inference of control over the
means by which the Employer's products are distrib-
uted. Although the Employer suggests prices at which
the products it produces may be resold to retailers, it
does not require the distributors to adhere to such
prices, and on occasion the distributors have varied
from such suggested resale prices as they have seen fit.
Notwithstanding the fact that the Employer retains
control over the customer lists , the distributors are
given a proprietary interest of substantial value in
their distributorships which they can sell to a third
party. Moreover, the record shows that the distrib-
utors carry out their responsibilities under the agree-
2 The record shows that, although all but one of the distributors have the
Employer's name painted on their trucks, the employer does not require it.
3 He also sold his truck to the individual for $5,000.
N L R B v United Insurance Co, 390 U.S. 255
5 National Freight, Inc, Federal Freight, Inc., and Sun Transportation, Inc,
153 NLRB 1536, 1538-39.
GOLD MEDAL BAKING CO., INC. 897
ment without supervision by the Employer. As indica-
ted above, the distributors can add customers to their
routes if they so desire, and some have done so. Al-
though the agreement specifies that the distributors
shall keep accurate records of all purchases and sales
and make them available to the Employer for inspec-
tion, all recordkeeping is in fact done by the distrib-
utors themselves. They make their own collections
(except for chain stores) and if they extend credit,
assume the risk of loss for nonpayment. Finally the
distributors no longer receive fringe benefits from the
Employer.
6 Pure Seal Dairy Company, 135 NLRB 76. Cf. The Herald Co., 181 NLRB
421, enfd 444 F 2d 430 (C A 2) (where the employer maintained control over
the distributors' earnings through extracontractual compensation , required
its distributors to participate in a myriad of company activities, including
extensive promotional campaigns , and supervised the resolution of many of
its distributors' delivery problems), Meyer Dairy, Inc, a subidiary of Milgram
Food Stores, Inc, 178 NLRB 454, enforcement denied 429 F.2d 697 (C.A. 10)
(where the distributors were required to maintain certain health and cleanli-
ness standards to the satisfaction of the employer and promote the
employer's products); Frito Lay, Inc, 178 NLRB 611 , and 167 NLRB 73
(where the employer actively engaged the distributors in soliciting new out-
lets, assisted the distributors in servicing their routes during emergencies,
helped them with such things as racking and the resolution of route prob-
lems; and the distributor retained no proprietary rights in the route which
Although the earlier bargaining history covering
the period when the Employer distributed its products
through its own employees, as well as the restrictions
contained in the distributorship agreements, are fac-
tors which militate in favor of a finding that the dis-
tributors are employees, we believe for the reasons
stated that the record on balance supports the conclu-
sion that the Employer has not retained significant
control of the means used by the distributors in selling
the Employer's products, and that an independent
contractor relationship has in fact been created .6
he could sell to a third party); Carnation Company, 172 NLRB No 215,
enforcement denied 429 F 2d 1130 (C.A. 9) (where the distributors were
required to install and maintain at their own expense promotional material
provided by the employer , and the employer required the distributors to paint
and maintain their vehicles to its satisfaction ), News Syndicate Co, Inc, 164
NLRB 422 (where the distributors ' income was largely controlled by the
employer and the distributor retained no proprietary interest in his territory),
Pepsi-Cola Bottling Company of Michigan , Grand Rapids Division, 156 NLRB
80 (where the employer controlled the size of the distributor 's territory and
could transfer customers to other distributors without compensation ; and the
distributors retained no proprietary interest in their routes which they could
assign to third parties); Squirt-Nesbitt Bottling Corp , 130 NLRB 24 (where
the employer required the distributors to actively engage in promotional
activities , to paint and maintain their trucks in a specified manner, to wear
uniforms, and attend periodic meetings called by the employer ; and the
employer retained the right to solicit orders in the distributors ' territories)