Standard Oil Co.

National Labor Relations Board - Board Decisions

May 3, 1979

241 N.L.R.B. 1248 (N.L.R.B. 1979)

DECISIONS OF NATIONAL LABOR RELATIONS BOARD
The Standard Oil Co. (of Ohio) and Tank Truck Driv-
ers Independent Union, Inc., Petitioner. Case 9-
RC- 12634
May 3, 1979
DECISION ON REVIEW
BY CHAIRMAN FANNING AND MEMBERS PENELLO
AND TRUESDALE
On November 9, 1978, the Regional Director for
Region 9 issued his Decision and Direction of Elec-
tion in the above-captioned case in which he directed
an election in a unit of all "consumer marketers" (for-
merly denominated "owner-distributors") in the Em-
ployer's Dayton division. Thereafter, pursuant to Na-
tional Labor Relations Board Rules and Regulations,
Series 8, as amended, the Employer filed a timely re-
quest for review of the Regional Director's decision,
contending, inter alia, that he had departed from
precedent and made findings of fact that were clearly
erroneous in concluding that the "consumer market-
ers" herein were employees rather than independent
contractors.
By telegraphic order dated December 5, 1978, the
National Labor Relations Board granted the request
for review insofar as it related to the status of the
"consumer marketers."
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.
The Board has considered the entire record in this
case with respect to the issues under review and
hereby makes the following findings:
The Employer is an Ohio corporation engaged in
the production, refining, transportation, sale, and dis-
tribution of petroleum products. It operates in Ohio
under the name Sohio and markets its products out-
side Ohio through Boron, a wholly owned subsidiary,
under the Boron label. The Employer's marketing de-
partment consists of 5 regions, which are divided into
1 I sales divisions. Nine of the divisions are located in
Ohio while the remaining two are located in adjacent
States.
In a previous case involving the same Employer
and the same Petitioner and concerning the same in-
dividuals (albeit contained in a larger, statewide unit),
the Board determined that the single tank truck
"owner-distributors" were employees rather than in-
dependent contractors.' Since the time of that Deci-
sion (dated July 19, 1977), the Employer has insti-
tuted new agreements with the single tank truck
owner-distributors (now termed "consumer market-
I Standard Oil Conpany, 230 NLRB 967 (1977).
ers") effective November 1, 1978. According to the
Employer, these new agreements contain substantial
changes from the prior owner-distributor agreements,
establishing conclusively that the new consumer mar-
keters are independent contractors and not employ-
ees.
In its prior Decision, the Board found that the for-
mer owner-distributors were an integral part of the
Employer's business and under its substantial control.
In reaching this determination the Board relied on a
number of factors which, on balance, it found indi-
cated that the Company exercised substantial control
over the distribution function.
As in the prior case, the consumer marketers herein
continue to constitute an integral part of the Compa-
ny's business in that they devote almost all of their
working time to the delivery of the Company's prod-
ucts to its customers. Similarly, the consumer market-
ers continue to be the only individuals who distribute
the Company's products to customers with a fuel ca-
pacity of 3,000 gallons or less.
Under the previous agreement, certain commission
drivers also operated the bulk stations from which the
fuel was transferred to the drivers' tank trucks for
delivery to the individual customers, and those who
operated these bulk stations received a monthly al-
lowance from the Company as compensation for their
maintenance. The operation of the bulk stations for
those who chose to do so was governed by a separate
paragraph contained within the owner-distributor
agreement. Effective November 1, 1978, however, the
operation of the bulk stations is governed by a sepa-
rate agreement called an "administrative service con-
tract." According to the Company, this signifies a
marked change in the manner in which the consumer
marketers operate, inasmuch as there is now no "re-
quirement" that the consumer marketers also func-
tion as administrative service contractors, and the
bulk station operation is one totally divorced from
the relationship between the Company and the con-
sumer marketers.
Contrary to the Company (and in agreement with
the Regional Director), we fail to discern the signif-
icance of the change from a separate paragraph in the
old agreement to a separate contract in the new ar-
rangement as it applies to the relationship between
the Company and the consumer marketers. As before,
it is the decision of the individual as to whether or not
he will serve the dual function of distributing fuel and
operating the bulk station plants. The consumer mar-
keters who also operate the bulk plants are respon-
sible for keeping the plants well stocked, maintaining
their inventories, and performing general mainte-
nance duties. As under the previous arrangement, the
amount of allowance given for the operation of the
bulk stations is fixed by the Company and is not ne-
241 NLRB No. 190
1248
THE STANDARD OIL CO.
gotiable. Thus, contrary to the limitations of the
Company, there was never a "requirement" under the
prior agreement that the owner-distributors also oper-
ate the bulk station plants. Those who chose to do so
were presented with distributor agreements that con-
tained a separate paragraph regulating the terms of
the operation of the bulk stations. Under the new ar-
rangement, those consumer marketers who choose to
do so are presented with a separate contract govern-
ing the bulk station operation.
As under the prior agreement, the new administra-
tive service contracts regulate completely the opera-
tion of the bulk station plants, with reports and inven-
tory statements required on a regular basis. As noted
by the Regional Director, 16 of the 17 consumer mar-
keters are also administrative service contractors,
which is approximately the same ratio of dual func-
tion individuals as under the old owner-distributor
agreements.
In sum, we reject the contention of the Company
that the mere separation of the contractual language
respecting the operation of the bulk station into sepa-
rate contracts has affected the fundamental relation-
ship between the Company and the consumer mar-
keters.
Another factor considered significant by the Board
in its prior Decision was the fact that the owner-dis-
tributors were limited in their distribution functions
to an "area of primary responsibility," which had
been historically designated by the Company. Al-
though even under the prior agreements the Com-
pany contended that the owner-distributors were per-
mitted to solicit business outside their areas of
primary responsibility, the Board found that, in prac-
tical effect, the drivers operated in territories fixed by
the Company.
The Company urges here that the new consumer
marketer agreements do not even designate "areas of
primary responsibility," and, at least theoretically,
the consumer marketers are free to solicit business
anywhere in the State of Ohio. We are of the view
that, because of the historical designation of assigned,
fixed territories and the economic realities of the situ-
ation, there is little, if any, change from the prior ar-
rangement. As noted by the Regional Director, the
record reveals that, even under the new agreements,
the consumer marketers continue to respect one an-
other's previously designated territories of operation
and delivery. Although the Company's division man-
ager testified to his belief that certain consumer mar-
keters had hauled petroleum products outside their
respective areas, the division manager did not testify
in detail concerning the circumstances of these deliv-
eries, whether they were temporary arrangements, or
whether they occurred at the convenience and behest
of the Company. The one consumer marketer who
did testify on this point stated that the old territories
(as previously assigned by the Company) were re-
spected because of economic realities and a deference
for the historical "routes" of the other consumer mar-
keters. In any event, the testimony of the division
manager certainly does not support the Company's
assertion that under the new consumer marketer
agreement the drivers actually solicit business outside
their previously designated areas of primary responsi-
bility. As in the prior Board Decision, there is little in
the instant record to suggest that it is feasible, either
logistically or economically, for the consumer market-
ers to solicit or develop new business outside their
historical areas of primary responsibility.
Under the new consumer marketer agreements, as
under the old owner-distributor arrangement, the
Company continues to decide on the products to be
supplied to the consumer marketers, retains title to all
products until they are sold, establishes prices for the
products, and unilaterally sets the commission rates
to be remitted to the consumer marketers. While a
minor change is that the Company may no longer
change the commission rates during the term of the
agreement, it continues to unilaterally set the com-
mission rates in the first instance and further unilater-
ally sets the commission rates with respect to new
products.
In its prior Decision, the Board took note of the
fact that the owner-distributors were required to
make daily sales reports to the Company, to make
daily remittance statements of all sales proceeds, and
to furnish the Company with relevant data regarding
the customers. The Board found that this extensive
reporting procedure (combined with other factors)
evidenced the Company's substantial control and
checks over the day-to-day operation of the consumer
marketers. Although the Company urges that there is
no longer the voluminous paperwork involved for the
consumer marketers (indicating, presumably, a less-
ening of controls by the Company), the record reveals
that the consumer marketers are still required to file
daily reports of their day's activities, including a re-
port of cash sales, collections, and total sales. As be-
fore, it is the Company that decides which customers
may be sold the Company's products on credit, ex-
tends its own credit to those customers, and handles
the billing for approved credit customers through a
computerized billing system.
In a similar vein, the Company asserts that provi-
sions in the new consumer marketer agreements al-
lowing the consumer marketers to extend credit to
customers at their own risk indicate a substantial
change from the old owner-distributor agreements.
As under the prior agreement, any amount of credit
extended to customers not approved by the Company
results in the amount of the credit extended being
1249
DECISIONS OF NATIONAL LABOR RELATIONS BOARD
deducted immediately from the driver's commission
check. We do not, as urged by the Company, view
this kind of practice as indicative of the status of a
small businessman. The critical link between the ex-
tension of nonapproved (i.e., non-company-ap-
proved) credit and the immediate deduction of
nonapproved credit (as opposed to a 30- to 60-day
waiting period under the prior agreement) extension
from a driver's commission check evidences to us that
the Company continues to exercise substantial con-
trol over the extension of credit to its customers.
Another change which the Company contends rep-
resents a substantial departure from the prior dis-
tributorship arrangements is that, under the new
agreements, the consumer marketers have the capac-
ity to increase or decrease the price of heating oil they
deliver to customers. While at first glance the ability
to increase or decrease the price of a product would
seem to be a factor indicating independent contractor
status, a closer examination reveals that the pur-
ported "flexibility" is so limited and in fact punitive
(with respect to a determination to decrease prices) as
to make the ability completely illusory.
Initially, it must be noted that the new pricing
"flexibility" applies only to heating oil, which
amounts to approximately 50 percent of a consumer
marketer's total sales. With regard to the rest of the
products sold by the consumer marketers, the Com-
pany retains absolute control over the prices at which
they may be sold. But, even with respect to the pric-
ing of heating oil, our reading of the record convinces
us that the restrictions imposed by the Company
through administrative controls, as well as the reali-
ties of the marketplace, combine to make the new
flexibility all but meaningless.
Because of the regulation of the petroleum indus-
try, it is clear that anything other than an incremental
increase in prices would have the effect of making a
consumer marketer who increases prices noncompeti-
tive with other distributors. Beyond this, however, is
the fact that even if a consumer marketer should take
the bold step of increasing the price of his heating oil,
under the terms of the new agreement he must relin-
quish 50 percent of that increase to the Company.
The Company explains that the relinquishment of
this 50 percent of any increase is due to the adminis-
trative costs in processing sales at anything other than
the Company's posted price for heating oil. On the
other hand, if the consumer marketer should deter-
mine to decrease the price of his heating oil, he would
realize no gains from increased sales, inasmuch as the
Company requires that he absorb all of the loss in-
curred by such a price decrease.
Thus, rather than the typical businessman's deci-
sions with regard to the pricing of his products, the
situation herein displays the tight controls which the
Company exercises over the consumer marketers and
the pricing of its products. If the consumer marketer
should venture in this highly regulated market to in-
crease the price of the heating oil he distributes, the
Company exacts fully 50 percent of that increase be-
cause it does not conform to its own pricing system.
Even more significantly, if the consumer marketer
should decide to utilize the common entrepreneurial
tool of decreasing prices to increase volume, it would
be essentially meaningless to him because he must
relinquish 100 percent of the decrease in price to the
Company. We do not, as urged by the Company,
view these stringent controls over pricing as demon-
strative of increased entrepreneurial opportunities,
but rather as changes in form, and indicative of the
broad controls which the Company continues to exer-
cise over the operations of the consumer marketers.
The Company argues that another significant fac-
tor relied on by the Board in its prior Decision, the
lack of a substantial proprietary interest of the drivers
in the distribution function, has been altered signifi-
cantly under the new consumer marketer agreements.
The Company points out that under the new agree-
ments, it no longer has the right of first option to
purchase the trucks of the consumer marketers, and
that the consumer marketers may now purchase their
own tanks to be used in the distribution function. The
Company further contends that the new agreements
provide for the payment of a "good will" sum, which
it alleges recognizes the proprietary interest of the
consumer marketers in the development of their re-
spective routes.
The Board found in its prior Decision that the
Company's right of first option to purchase the driv-
ers' trucks indicated an important control over the
right to enter into a competitive business soon after
any time they should sever their relationship with the
Company. While it is true that the new agreements do
not provide the Company with the first option to pur-
chase the drivers' trucks, the Company has added
provisions which have the effect of insuring that con-
sumer marketers will not enter into any type of com-
petitive enterprise except under heavy penalties. In
the first place, the Company has added a liquidated
damage provision which it may invoke should a con-
sumer marketer enter into a competing business after
termination of his relationship with the Company. In
addition, the Company has added a security deposit,
to be paid by the consumer marketer, to insure per-
formance of the agreement. The addition of these
provisions, involving substantial penalties for sever-
ing the relationship between the consumer marketers
and the Company, are not indicative of any increased
proprietary interest for the consumer marketers in the
distribution function. Instead, these changes simply
reflect that the Company has decided to employ dif-
1250
THE STANDARD OIL CO.
ferent means by which it may insure that the con-
sumer marketers do not venture into a competitive
concern. Similarly, while it is correct that the Com-
pany no longer provides the tanks used by the con-
sumer marketers at no charge and the consumer mar-
keters are "free" to purchase tanks of their own, the
record reveals that no consumer marketer has in fact
purchased a tank. There is no evidence that it is eco-
nomically feasible for the consumer marketers to do
so, and all of them now lease tanks from the Com-
pany. As noted by the Regional Director, the lease
for the tanks terminates with the agreement, and thus
it can hardly be said that the leasing of the tanks has
enhanced the drivers' "proprietary interest" in any
way.
Although the Company asserts that a provision in
the new agreements calling for the payment of a
"good will" sum to the consumer marketers repre-
sents a recognition of the driver's development of his
individual business, the payment does not take into
account the development of a driver's route beyond a
limited period of time, and the ultimate amount of
the payment is determined solely by the Company. In
our view, inasmuch as a driver's route may not be
sold, leased, or otherwise assigned, the purported
"good will" provision in the new agreements is really
more in the nature of a combination bonus/severance
payment than any real recognition of the develop-
ment of a proprietary interest in a particular con-
sumer marketer's route.
The Company also urges that the new agreements
are for fixed terms (12 to 18 months) as opposed to
the open-ended nature of the prior agreements, and
this lends additional support to the proposition that
the consumer marketers are not employees. As noted
by the Regional Director, while the new agreements
are for a fixed term, the Company nonetheless retains
the right to terminate the agreement for a failure to
comply "with any material provision thereof." The
term "material provision" is not defined in the agree-
ment, and we concur in the Regional Director's deter-
mination that this "change" represents little in terms
of the relationship between the Company and the
consumer marketers. The Company, in practical ef-
fect, maintains the power to terminate the agreement
at any time. Beyond this, however, there is nothing in
the record which would indicate that the Company
would fail to renew the agreements for anything other
than an unsatisfactory performance record.
The Company further contends that it has signifi-
cantly lessened its controls over the manner and
means of the daily operations of the consumer mar-
keters. In making this assertion the Company notes
that it no longer has the right to inspect the books of
the consumer marketers, and further that it no longer
has mandatory weekly sales meetings of drivers con-
ducted by its consumer salesmen. As noted above, the
Company has simplified the reporting procedures for
consumer marketers to some extent, but consumer
marketers are still required to make daily reports to
the Company showing their sales, products sold, and
inventory. In no small way, this daily reporting pro-
cedure gives the Company a built-in monitor for the
financial activities of the consumer marketers.
If it is true that there are no longer mandatory
meetings between the Company's consumer salesmen
and the consumer marketers and bulk station opera-
tors, it is nonetheless equally true that the consumer
salesmen continue to have significant contacts with
the consumer marketers and bulk station operators
because of their periodic checks at the bulk stations,
which normally involve consultations regarding the
introduction of new product lines, inventory inspec-
tions, as well as general instructions on operations
from the Company.
As the above discussion demonstrates, the pur-
ported changes made by the Company in its new con-
sumer marketer agreements are more changes in form
than in substance. Moreover, there are a number of
other conditions which the Company does not seri-
ously contend have changed since the issuance of the
previous Decision. Thus, as before, the drivers are
compensated solely on a commission basis and hence
have no opportunity to engage in the entrepreneurial
activities normally associated with independent con-
tractors. Decisions with respect to the line of products
to be sold, the type of customer to be serviced, and, in
general, the normal risk-taking ventures which distin-
guish the small businessman/independent contractor
from an employee are, in this case, all made by the
Company.
The Board found in its prior Decision that certain
minor factors within the drivers' control were not sig-
nificant in determining whether an employer/employ-
ee or independent contractor relationship existed be-
tween the Company and the owner-distributors. We
maintain the view that under the new consumer mar-
keter arrangement, such factors as planning the ac-
tual delivery route, scheduling vacations, employing
assistants, and relative freedom with respect to such
decisions as where a truck may be parked do not have
the effect of altering the fundamental relationship be-
tween the consumer marketers and the Company.
As before, the consumer marketers are primarily
engaged for virtually all of their working time in the
distribution of the Company's products. They are
limited to a market of customers with a capacity of
3,000 gallons or less. They continue to account to the
Company for sales and product lines on a daily basis,
a device by which the Company exercises a signifi-
cant amount of control over the method and means of
the distribution function. The terms of the consumer
1251
DECISIONS OF NATIONAL LABOR RELATIONS BOARD
marketer agreement (including the drivers' commis-
sion rates, which are their sole basis for compensa-
tion) are unilaterally set by the Company, and con-
sumer marketers have a choice with respect to these
agreements only insofar as they either accept the
agreement as written or terminate their relationship
with the Company.
Those contractual changes which the Company
claims have altered its relationship have, in practical
effect, not really changed that relationship at all. The
separation of the article in the prior agreements regu-
lating the operation of the bulk stations into a sepa-
rate agreement is simply a separation and nothing
more, with the operation of the bulk stations continu-
ing as under the old agreements. The change to "open
territories" has little practical effect in terms of the
economic and historic realities of the consumer mar-
keters' previously designated geographic routes. The
daily sales reports of the consumer marketers, com-
bined with their regular (albeit now not mandatory)
contracts with consumer salesmen continue to enable
the Company to closely monitor the daily activities of
the consumer marketers. The so-called limited pricing
flexibility is, in fact, so limited (and in the case of a
decision to decrease prices, actually punitive) as to be
meaningless. While the Company no longer main-
tains the first option to purchase the drivers' trucks, it
has added liquidated damage and security deposit
provisions which will effectively guarantee that the
consumer marketers will enter into competition with
the Company only under heavy penalty.
The standard which we applied in the previous case
involving the owner-distributors and that which we
apply herein to determine the status of the consumer
marketers is the common law "right to control" test
as set forth by the Supreme Court in N.LR.B. v.
United Insurance Company, 390 U.S. 254, 259 (1968).
Applying those factors considered significant by the
Supreme Court in United Insurance, supra, to the in-
stant case, we note that (I) the consumer marketers
perform functions that are an essential part of the
Employer's business, inasmuch as they are the only
individuals who make deliveries to customers with a
fuel capacity of 3,000 gallons or less; (2) although the
consumer marketer agreements are for a fixed term,
there is no indication that their arrangement with the
Company would terminate for other than an unsatis-
factory performance record; (3) the consumer mar-
keters do business in the Company's name (they have
no individual listings in the yellow pages, but are
listed under SOHIO) with assistance from the Com-
pany's consumer salesmen and ordinarily sell only
SOHIO products; (4) the consumer marketer agree-
ments which contain the terms and conditions under
which the consumer marketers operate are promul-
gated and changed unilaterally by the Company; (5)
the consumer marketers are required under the terms
of the agreement to make daily reports and account
to the Company for the funds they collect under a
regular reporting procedure prescribed by the Com-
pany; (6) the consumer marketers may not sell or as-
sign their routes and hence have no proprietary inter-
est in the distribution function; and (7) since they are
in practical effect limited to certain geographic areas
of primary responsibility, and limited in terms of the
type and pricing of products, they do not have the
opportunities to make decisions which involve risks
taken by an independent businessman which may re-
sult in profit or loss.
In sum, we find substantial support for the conclu-
sion that the consumer marketers are employees and
not independent contractors. Accordingly, we shall
remand the case to the Regional Director for Region
9 for the purpose of conducting an election pursuant
to his Decision and Direction of Election, except that
the payroll period for determining eligibility shall be
that ending immediately before the date of the issu-
ance of this Decision on Review.2
2 [Excelsior footnote omitted from publicaton.]
1252