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

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 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 leasing7 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.

In the course of establishing its leasing operation the Companies transferred no 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 existed15 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 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.

Before reaching an analysis of the merits of the petitions before us it is appropriate to point out why in this particular case little deference is due to the Board's decision.17 The Board's treatment throughout the years of the distinction between "employees" and "independent contractors" in the area of vehicular, and especially cab, leasing has been marked by an unusual degree of confusion and vacillation. The Act covers "employees" but not "independent contractors" by virtue of an express statutory provision: "The term 'employee' . . . shall not include . . . any individual having the status of an independent contractor . . . " 29 U.S.C. § 152(3). As discussed below,18 the criteria for distinguishing between these two types of workers is based on an "all of the circumstances" test. Given such a standard, one would expect a somewhat irregular, case-by-case approach to elaborating the controlling distinctions. The Board, however, has surpassed itself in clouding what need not have been an unusually confusing development of the law. Not only has the NLRB repeatedly reached diametrically opposite conclusions on the basis of virtually identical fact situations, Compare Checker Cab Company and its Members, 141 NLRB 583, 588-590 (1963); 153 NLRB 651 (1965), Aff'd 367 F.2d 692 (6th Cir. 1966); Blue Cab Company and Village Cab Company, 156 NLRB 489 (1965); Association of Independent Taxicab Operators, Inc., T/A Diamond Cab, 164 NLRB 859 (1967); John Himmer Transfer, Inc., 221 NLRB 52 (1975) and Local 814, I.B.T. (Santini Brothers), 223 NLRB 752 (1976); Greater Houston Transportation Company d/b/a Yellow Cab Company, 208 NLRB 1020 (1974); Barwood, Inc., 209 NLRB 19 (1974); Columbus Green Cabs, Inc., 214 NLRB 751 (1974), but moreover, it has done so in a series of opinions which typically offer no explanation for their result other than a recitation of the pertinent facts, E. g., Greater Houston Transportation Company and All other Employees d/b/a Yellow Cab Company, supra, 208 NLRB at 1022 ("In our opinion, these facts conclusively show (that the lessee drivers are independent contractors)"); Columbus Green Cabs, supra, 214 NLRB at 752 ("Based on the entire record, we conclude (that the lessee drivers are independent contractors)").19

This process of ad hoc and inconsistent judgments in which the only determinative elements seems to be the composition of the NLRB panel which happens to hear the case20 has descended in the instant case almost to the point of absurdity. Yellow and Checker Cabs not only took into account their own legal analysis of the most recent NLRB opinion on the subject, Columbus Green Cabs, supra, but also in formulating their leasing plan actually consulted with other cab companies whose leasing programs had been held by the Board to create independent contractors rather than employee drivers. Nevertheless, the Board has now determined, seeking to dismiss Columbus Green Cabs as an aberration,21 that the Companies' drivers are in fact employees because "in regard to Columbus Green Cabs, Inc. suffice it to say that it and similar cases must be narrowly construed in order that employees not be denied the protection of the Act through an undue extension of independent contractor status."22

The vacillation of the NLRB in regard to the question of the status of cab leasing makes an attitude of judicial deference to its decision especially inappropriate. The Board cannot, despite its broad discretion, arbitrarily treat similar situations dissimilarly, E. g., Carnation Company v. NLRB, 429 F.2d 1130 (9th Cir. 1970); Burlington Truck Lines v. United States, 371 U.S. 156, 83 S.Ct. 239, 9 L.Ed.2d 207 (1962); NLRB v. WGOK, Inc., 384 F.2d 500 (5th Cir. 1967); Burinskas v. NLRB, 123 U.S.App.D.C. 143, 357 F.2d 822 (1966). When it both fails to distinguish contradictory decisions rendered in similar cases and also misapplies accepted principles of law, it errs doubly, NLRB v. Metropolitan Life Insurance Co., 380 U.S. 438, 443, 85 S.Ct. 1061, 13 L.Ed.2d 951 (1965). An agency in its deliberations is under an obligation to follow, distinguish, or overrule its own precedent, Brown v. NLRB, 462 F.2d 699 (9th Cir.), Cert. denied, 409 U.S. 1008, 93 S.Ct. 441, 34 L.Ed.2d 301 (1972); May Department Stores Co. v. NLRB, 454 F.2d 148 (9th Cir.), Cert. denied, 409 U.S. 888, 93 S.Ct. 116, 34 L.Ed.2d 144 (1972); Carnation Co. v. NLRB, supra. The NLRB has clearly failed to discharge this obligation here, and its actions indicate that lack of reasoned articulation and responsibility that vitiates the deference we would otherwise show to its very considerable expertise in strictly labor matters. NLRB v. Madison Courier, Inc., 153 U.S.App.D.C. 232, 472 F.2d 1307 (1972); Office and Professional Employees International Union, Local 425, AFL-CIO v. NLRB, 136 U.S.App.D.C. 12, 419 F.2d 314 (1969).

The issues here are not peculiarly confined to labor matters. While the Board does have a great many cases that involve this same question so do the state and federal courts generally and a number of other agencies. Basically the issue involved calls for applying general principles of the law of agency the distinction between employees and independent contractors to undisputed facts. On such an issue we must affirm the administrative decision only if it is supported by the record considered as a whole, Universal Camera Corp. v. NLRB, 340 U.S. 474, 488, 71 S.Ct. 456, 95 L.Ed. 456 (1951); Brown v. NLRB, supra. Since the problem is essentially the interpretation of the common law in which the courts themselves are expert, See Davis, Administrative Law § 30.09 (1957) we need not accord the Board's decision that special credence which we normally show23 merely because it represents the agency's considered judgment.

In sum, because of the Board's history of vacillation and the basically legal nature of the question before us, it is inappropriate for this court to extend any great amount of deference to the Board's disposition of the problem of whether or not Yellow and Checker's lessee-drivers are employees or independent contractors.

Under the right-of-control test which the NLRB and numerous courts have adopted for distinguishing between employees and independent contractors for purposes of the NLRB, the Board is instructed to apply the same general agency principles as would the courts in determining whether or not an individual is an employee or an independent contractor, Lodge 1858 v. Webb, 188 U.S.App.D.C. 233 at 242, 580 F.2d 496 at 505, n. 25 (1978); NLRB v. United Insurance Co., 390 U.S. 254, 256, 88 S.Ct. 988, 19 L.Ed.2d 1083 (1968); See also Brown v. NLRB, supra; NLRB v. Lindsay Newspapers, Inc.,, 315 F.2d 709 (5th Cir. 1963); News Syndicate Co., Inc., 164 NLRB 422 (1967); Kheel Labor Law § 14.04(1)e (1978); Werne, The Law of Labor Relations 63 (1951).24 Although this test essentially requires an "all of the circumstances" approach and no one factor is determinative, E. g., Frito-Lay, Inc. v. NLRB, 385 F.2d 180, 187 (7th Cir. 1967); NLRB v. A. S. Abell Co., 327 F.2d 1, 4 (4th Cir. 1964); News Syndicate Co., Inc., supra, the extent of the actual Supervision exercised by a putative employer over the "means and manner" of the workers' performance is the most important element to be considered in determining whether or not one is dealing with independent contractors or employees, Lodge 1858 v. Webb, supra, 188 U.S.App.D.C. 233, 241-245, 580 F.2d at 504-508; Carnation Co. v. NLRB, supra; Independent Owner-Operators, Inc. v. NLRB, 407 F.2d 1383, 1385 (9th Cir. 1969); NLRB v. A. S. Abell Co., supra, 327 F.2d at 3; New York University, 205 NLRB 4 (1973); 4 Kheel, Labor Law § 14.04(1)e. As the NLRB has stated,

Where the person for whom the services are performed retains the right to control the manner and means by which the result is to be accomplished the relationship is one of employment; but where control is reserved only as to the final result the relationship is that of an independent contractor.

Checker Cab Co. and its Members, 141 NLRB 583, 587 (1963). In the case of cab drivers, the control over the "manner and means" of performance has specifically been limited for purposes of distinguishing between employees and independent contractors to that "control which . . . the (cab company) exercised over the drivers during the period they were in possession of the cabs," Party Cabs Co. v. United States, 172 F.2d 87, 92 (7th Cir.), Cert. denied, 338 U.S. 818, 70 S.Ct. 62, 94 L.Ed. 496 (1949).

The NLRB in this case, much as in previous decisions in which it has found cab lessees to be employees, E. g., Checker Cab Ass'n, 185 NLRB 182 (1970); Buffalo Cab Co., 189 NLRB 410 (1971), identified some thirteen factors indicating that Checker exerted a control over its drivers inconsistent with its assertion that they should be considered independent contractors.25 While acknowledging that the cab companies have substituted "economic controls" for the more usual forms of direct control typical of an employer/employee relationship, the Board echoed the dissent in several recent NLRB opinions stating that to hold cab-lessees to be independent contractors and to overlook the drivers' lack of any meaningful independence from Checker or Yellow would be "to ignore economic realities."26

The Board, although it did not articulate any reason for doing so, laid particular emphasis on the facts that the drivers had no investment in their cabs; that the leases offered were of extremely short duration; that the Companies had complete discretion to refuse renewal of these leases; and that by requiring that their drivers comply with the host of applicable municipal regulations the Companies in fact were able to control a great deal of the drivers' behavior while in the cab.27 While conceding that the drivers when operating their cabs under lease were "on their own and are free to prospect for fares when and where they choose,"28 the Board dismissed this freedom as it had in Checker Cab Ass'n, Inc., supra, as being "inherent in the nature of the work" rather than indicative of independent contractor status.29 While acknowledging that a number of recent NLRB cases had found taxicab lessees to be independent contractors rather than employees, the Board remarked that it was significant that none of these cases had explicitly overruled previous Board authority to the contrary,30 and asserted that it was important to limit the holding of the more recent cases narrowly to their specific facts.

We share the Board's solicitude to avoid depriving Employees of the benefits of the Act by Unjustifiably expanding the concept of "independent contractor." We feel, however, that the Board in distinguishing between employees and independent contractors has failed to do so in any reasonable or consistent pattern and moreover has tended to rely on a variety of factors some of which are of only marginal relevance while glossing over the fundamental question of whether or not the putative employer has the right to control the driver during the course of his operation of the cab in the manner and means in which he earns his income and whether the drivers can be most aptly described as working for themselves or for a wage they receive from companies.

"( T)he employer-employee relationship exists only where the person, for whom the work is done, has the right to control and direct the work, not only as to the result to be accomplished by the work, but also as to the details and means by which that result is accomplished . . . (I)t is the right and not the exercise of control which is the determining element." Williams v. United States, 126 F.2d 129 (7th Cir.), Cert. denied, 317 U.S. 655, 63 S.Ct. 52, 87 L.Ed. 527 (1942); Carnation Co. v. NLRB, supra, 429 F.2d at 1134. Control exercised over the "manner and means of performance," NLRB v. A. S. Abell Co., supra, 327 F.2d at 3, not merely the economic controls which many corporations are able to exercise over independent contractors with whom they contract, Carnation Co. v. NLRB, supra, 429 F.2d at 1134, is the identifying characteristic of an employer/employee relationship.

The Restatement (Second) of Agency in listing factors relevant to distinguishing between employees and independent contractors refers to "the extent of control which, by the agreement, the master may exercise over the Details of the work" Restatement (Second) of Agency § 220 at 485 (emphasis added).31 The reference to "details" indicates the extent to which the supervision typical in employment relationships regulates the actual activities undertaken by the employee in the course of his occupation rather than merely the general objective or context of this work. See Associate Independent Owners-Operators, Inc. v. NLRB, supra, 407 F.2d at 1385; National Freight, Inc., 146 NLRB 144 (1964). "The right to control the physical movements of the employee is the most important single element in most of these (employment as opposed to independent contracting) situations," Seavey, Agency 142 (1964).

In the instant case, there is virtually no control imposed by Yellow or Checker over the lessee-drivers, independent of municipal regulations, which are themselves beyond the companies' control. Certainly such company regulation as does exist does not so "overshadow considerations of the worker's right to assert his own prerogatives" that an employment relationship can be said to exist, Kheel, Supra at 14-139. Once a driver leases a cab, Checker and Yellow not only do not assert, but have no interest in asserting, control over his conduct, except to ensure that the cab is not sub-leased and the companies' liability is not enlarged.

As for the Board's argument that the extensive regulation of taxi-drivers by municipal ordinance de facto gives the companies control over the drivers' conduct on the job, the NLRB's position is not only inconsistent with precedent, but also evinces a misunderstanding of the effect of state regulation on the nature of the employer-employee relationship. The Administrative Law Judge pointed out that not only is extensive municipal regulation typical of the cab business in most metropolises,32 but also such regulation had been present in a number of cases in which the Board found that the drivers were independent contractors.33 Furthermore, regardless of whether or not the Board has dealt with the presence of municipal regulations consistently, in terms of substantive principle the existence of legal restrictions on the performance of an occupation are relevant but not necessarily controlling on the question of whether or not a given individual is an employee or an independent contractor.

Government regulations constitute supervision not by the employer but by the state.34 Thus, to the extent that the government regulation of a particular occupation is more extensive, the control by a putative employer becomes less extensive because the employer cannot evade the law either and in requiring compliance with the law he is not controlling the driver. It is the law that controls the driver. Thus requiring drivers to obey the law is no more control by the lessor than would be a routine insistence upon the lawfulness of the conduct of those persons with whom one does business. The effect of state regulation is a far cry from such restrictions as cause "the actor's physical activities and his time (to be) surrendered to the control of the Master," Restatement (Second) of Agency § 220, comment at 487-488 (emphasis added). In the situation before us, whatever control is exercised is not the master's but that of the local government. That the state has chosen to so regulate cab drivers that those who lease cabs can be reasonably confident of the conduct of the drivers while in their cabs does not mean that the lessors thereby "control" this conduct. That government regulation has made supervision or control by the lessor unnecessary is not the equivalent of the presence of actual supervision or control. Looking at the "realities" of the situation, as the NLRB explicitly insists one must,35 leads to the conclusion that to the extent that municipal ordinances prescribe the conduct of lessee drivers they are regulated by law, not supervised or controlled by Checker or Yellow and in this context it is significant that the lessor does not control, or have the right to control, the lessee in the performance of those functions that are free of local regulation.

The Board itself has noted that incorporation of government regulations into a contract does not alone establish an employer/employee relationship, Local 814, IBT (Santini Bros.), supra; Portage Transfer Co., Inc., 204 NLRB 787 (1973); Reisch Trucking and Transportation Co., Inc., 204 NLRB 953 (1963), and this view has been adopted in some courts, E. g., Sida of Hawaii, Inc. v. NLRB, 512 F.2d 354 (9th Cir. 1975). Indeed the NLRB stated only recently that it is only where "pervasive control" by the putative employer "(exceeds) governmental regulations to a significant degree" that employee status will be found, Teamsters Local 814, supra, 223 NLRB at 753; See also NLRB v. Deaton, Inc., 502 F.2d 1221 (5th Cir. 1974), Cert. denied, 422 U.S. 1047, 95 S.Ct. 2665, 45 L.Ed.2d 700 (1975); NLRB v. Cement Transport Inc., 490 F.2d 1024, 1027 (6th Cir.), Cert. denied, 419 U.S. 828, 95 S.Ct. 47, 42 L.Ed.2d 52 (1974); Ace Doran Hauling & Rigging Co. v. NLRB, 462 F.2d 190, 194 (6th Cir. 1972). In this case, far from exerting "pervasive control" in excess of municipal regulations, Checker and Yellow have required only such minimal measures as are normally used to protect themselves "from civil or criminal liability resulting from the operation of the cabs."36

It appears that the cab companies' chief method of controlling their drivers in the past has been through the use of a "trip sheet" on which the driver was required to record all his rides and on the basis of which his commission was calculated. The companies evidently are prepared to concede that if they still made use of trip sheets to force drivers to account for their income, their drivers should be considered employees.37 Under the Companies' leasing plan, however, trip sheets are not required as they would serve no purpose. The driver who leases a cab is not required to produce any revenue and the company receives the same amount of money irrespective of the amount the driver receives. The absence of a trip sheet or any other means of holding drivers accountable for their income is a significant indication of the lack of company control over the drivers.38

The Union points out that the City of Chicago itself has recently promulgated a regulation requiring all cab-drivers to maintain a trip sheet whether or not they operate on a lease or commission basis.39 This additional municipal regulation, however, no more changes the nature of the cab company/driver relationship than did any of the other regulations alluded to above. Although a lessee-driver now presumably must fill out much the same records as a commission cabbie, the company does not use these records to exert any financial control over the drivers. The formality is required by the ordinance, but this does not involve control by the company. It is not the simple fact of having to fill out a trip sheet, but the use made of that sheet by the employer which is relevant to the inquiry as to whether an individual is an employee or an independent contractor. In this case, the Companies make no use whatsoever of the trip sheets. They can be very useful in law enforcement and to that extent the city may legitimately require them. If they were required for other purposes the ordinance might be of doubtful validity.

As additional evidence of the control in fact exerted by Yellow and Checker over their drivers, the Board makes much of the short-term of the leases offered by the cab companies, the brevity of their duration creating the possibility of swift disciplinary action (by refusal to renew a lease) and keeping the drivers dependent on remaining in the good graces of the company. The length of the lease has been acknowledged as pertinent to the inquiry as to whether or not a lessee is sufficiently controlled by the lessor to be deemed an independent contractor, See, e. g., NLRB v. A. S. Abell, supra, 327 F.2d at 3, but this fact alone is not determinative of the issue, Cf. Frito-Lay Inc. v. NLRB, supra, 385 F.2d at 187. Even in the trucking field where the Board has appeared more reluctant to find independent contractors than among cab-lessees the right of the putative employer to terminate a driver on short notice has not proved fatal to the latter being found to be an independent contractor, Local 814, I.B.T. (Santini Brothers, Inc.), supra. The shortness of the lease term thus could be no more than one of many factors relevant to categorizing the drivers as employees or independent contractors.

Moreover, conceptually the length of the lease term does not reflect on the nature of the lessor/lessee relationship During the term of the lease. Regardless of how short the leases under which Yellow and Checker drivers operate may be, the fact remains that once they have obtained a lease they do not within limits designed to prevent subleasing40 and to ensure compliance with the applicable laws have to account to the cab company for the operation of their cabs. Rather than working for and at the command of Yellow or Checker, the drivers essentially work for themselves and merely pay the companies for the service of providing the use of a cab and medallion. The companies for a price provide the instrumentalities of the drivers' livelihoods, and also reserve the right to review at short intervals whether or not they desire to continue to supply a given driver. Having done so, however, they do not supervise or control or, indeed, have much interest in, how the driver goes about his business of transporting persons for hire. The length of the lease term in no way affects this fundamental characteristic of the relationship between Yellow and Checker and their drivers while the latter are operating leased cabs.

The Board also remarked upon,41 and the Restatement, Second, mentions,42 the importance of a lack of investment in the instrumentalities of one's occupation as tending to indicate employee rather than independent contractor status. However much importance this factor should in general have in the determination of employee as opposed to independent contractor status, it does not support the Board's position here. Although the Board drew support from "the drivers hav(ing) no investment in the instrumentalities of their work," in fact, it appears that the Board has been deceived by the brevity of these agreements. To be sure, the amount paid for each day of leasing is not large $22 per day, $16 per night and $31 for a twenty-four hour lease43 but when aggregated over a years' driving, it comprises a substantial investment on the part of the driver, amounting to somewhere in the neighborhood of $7,000.00.44

The drivers do not acquire any equity interest in the cars they drive, but in this respect they are no different from a shopkeeper who rents commercial space. The leasehold interest of the drivers is as legitimate a property right as the title retained by Yellow and Checker and is equally the product of an investment by the drivers, See generally I American Law of Property Chapter 2 (Casner ed. 1952).

The extent to which the lessee-drivers do indeed have a legitimate investment in their cabs is accented by a comparison between this case and situations in which an undoubted employer/employee relationship exists. In the usual employment relationship, the employer not only owns the instrumentalities of labor, but also supplies them free of charge to the worker. Rather than leasing out tools so that the "employees" can pursue Their chosen ends, the typical employer hires the employees to operate his machines in order to accomplish His chosen ends. The relationship of leasing drivers to their cabs is radically different from that of the ordinary employee using or operating his employer's tools. The lessee uses the instruments which he leases to produce as much income for himself as possible; the latter merely collects a wage for operating instrumentalities to produce wealth for his employer.

It would be unjustifiable to claim that the NLRB was incorrect in claiming that the cab-lessees in question did not have some of the characteristics of employees. These characteristics,45 however, are of only minor importance compared with the crucial factors that go to determine whether or not cab companies have such control over their lessee-drivers that these drivers should be considered employees rather than independent contractors. When a driver pays a fixed rental, regardless of his earnings on a particular day, and when he retains all the fares he collects without having to account to the company in any way, there is a strong inference that the cab company involved does not exert control over "the means and manner" of his performance. This conclusion is justified because under such circumstances, the company simply would have no financial incentive to exert control over its drivers, other than such as is necessary to immunize the proprietor of a cab from liability which arises from its operation by virtue of the lessor's ownership. However the driver conducts his occupation, the company has received its financial reward and the cab driver's self interest in the success of his venture and the municipal regulations are some assurance that the cab service will continue to be attractive to customers.

Not only do cab companies have no financial incentive to impose controls on their lessee-drivers, but also it would be anomalous for them to try to do so. This is true because one of the motivations behind the institution of leasing was an attempt to enable the companies to be less involved in the routine difficulties of directing the daily operation of their cabs.46 Moreover, to the extent that the companies' assertion of control would likely be resented by potential drivers, to the extent that the company sought to assert such controls beyond those required to guard against liability, it would be acting against its own best interests. In sum, once financial accountability is no longer important, Yellow or Checker have little business justification for seeking to continue to hold their drivers accountable in other matters.

The surrender of the right to make the drivers account for their earning causes a fundamental change in the relationship between the companies and their drivers which will usually remove the latter from the category of "employees." Even though the appearance of the leased cabs might be identical to that of commission cabs, such similarity of appearance has elsewhere been dismissed as unimportant, See Sida of Hawaii, Inc. v. United States, supra; Greater Houston Transportation Co. and all Other Employees d/b/a Yellow Cab Company, supra. Furthermore, the economic realities of the commission and leasing operations are quite different. The Court of Claims, in the context of another statute but in the course of applying the same common law principles explicitly embraced by the Act47 has succinctly stated the nature of this difference:

. . . There (under a leasing rather than a commission system), each taxicab driver rented a taxicab from the owner at a flat daily rental; the driver also defrayed the principal expense involved in the operation of the taxicab (i. e. the cost of the gasoline in both cases, and also the cost of the oil in Party Cab Co.); and the driver kept all the fares that he was able to earn through the operation of the taxicab. Thus, each driver was, in essence, a small businessman, either making a profit of sustaining a loss on his activities, depending on the relationship between the total amount of the fares collected, on the one hand, and the total amount of the expenses incurred, on the other hand.

Morish v. United States, 555 F.2d 794 at 800 (1977); Cf. Penn Truck Painting and Lettering Corp., 215 NLRB 843 (1974).

When, as in the case of lessee cab drivers, an individual's labor does not benefit his lessor beyond the sum received for leasing equipment, it is stretching the traditional concept of "employee" to categorize such individuals as servants, I. e., employees. At the very least such lessees do not fit into the usual understanding of employees, and there is clear evidence that Congress did not intend that an unusually expansive meaning should be given to the term "employee" for the purpose of the Act. In 1947, the National Labor Relations Act was amended with the specific intent of overturning two then recent Supreme Court cases, United States v. Silk, 331 U.S. 704, 67 S.Ct. 1463, 91 L.Ed. 1757 (1947) and NLRB v. Hearst Publications, 322 U.S. 111, 64 S.Ct. 851, 88 L.Ed. 1170 (1944). These decisions had broadly construed "employee" as used in the act.48 Given the clear intent of the legislative history, we are not permitted to agree that lessee-drivers who are practically uncontrolled by the cab companies in the manner and means that they operate their cabs should be considered as "employees" within the scope of the NLRA.49

The Internal Revenue Service has ruled that if a cab lessee pays only a fixed rental for the cab and the company from which he leases does not require an accounting of its drivers' receipts, that the lessee will be considered an independent contractor, I.R.S. Rev. Ruling 71-572, C.B. 1971-2 p. 347. The I.R.S. ruling was rendered under the Internal Revenue code rather than the NLRA, and the Board is not compelled to follow that decision, E. g., Lorenz Scheider Co., 209 NLRB No. 16 (1974). On the other hand, in issuing its ruling the service explicitly applied the same "usual 'common law rules' applicable in determining the employer/employee relationship" that govern this case, Rev. Ruling 71-572, C.B. 1971-2 p. 34. In doing so, the IRS reasoned that one should look mainly to the presence Vel non of "controls" which are not economically beneficial to the lessee's interests in seeking to determine whether or not a true lessor/lessee relationship exists, as controls which are mutually beneficial to both the cab company (by making its cabs easier to lease) and the driver (by making cab leasing more profitable) are not "repugnant" to the existence of a valid leasing arrangement, See Las Vegas Sun, Inc., 219 N.L.R.B. 889 (1975).

Pursuing this line of analysis, the IRS found that the most important difference between employee cab drivers and lessee cab drivers to be the fact that the latter paid a fixed rate for their car and that their company "has no right to obtain, for its own benefit, an accounting with respect to the fares collected for operation of the taxicabs by either the owners or the lessees." Rev. Ruling 71-572, C.B. 1971-2 p. 34. This analysis mirrors our own, and we consider it to be a true statement of the law. There are two important elements here which determine that the lessee drivers are independent contractors and not employees. First, is the lack of control by the lessor in the manner and means in which the drivers carry on their business after they leave the garage. Second, is the fact that the compensation (rent) that the Company receives for the lease of the cab is not related to the amount of fares collected by the lessee-driver. Therefore the drivers must be considered independent contractors and beyond the reach of the Act.

Not only are the cab lessees in this case independent contractors for the reasons set forth above, but also, they are, as discussed above, in a virtually identical situation to those that the Board found to be independent contractors in Columbus Green Cabs, Inc., supra. This decision continued the movement begun in Greater Houston Transportation Co. and All Other Employees d/b/a Yellow Cab Company, supra and Barwood, Inc., supra, away from previous NLRB law, E. g., Checker Cab Ass'n, supra; Buffalo Cab Co., Inc., supra, which had held cab-lessees to be employees.

Had the Board continued the decisional pattern of earlier cases without embarking on the new course seen in the Barwood-Columbus Green Cabs line of cases,50 its decision in this case would at least have had the merit of consistency. As it is, however, not only did the board indicate by the Barwood-Columbus Green Cabs authority that cab-lessees would be considered independent contractors, but moreover, Yellow and Checker also as mentioned above explicitly relied on these decisions in formulating their leasing plan.51 In such circumstances, an element of estoppel enters this particular case.

Although an agency may change its policy as it determines is in the public interest, E. g., NLRB v. Wentworth Institute, 515 F.2d 550 (1st Cir. 1974) when, as here, it announces no principled reason for such a reversal, its action is arbitrary and the courts should be quick to so declare. We have previously held that "an agency changing its course must supply a reasoned analysis indicating that prior policies and standards are being deliberately changed, not casually ignored," Greater Boston T. V. Corp. v. FCC, 143 U.S.App.D.C. 383, 394, 444 F.2d 841, 852, Cert. denied, 403 U.S. 923, 91 S.Ct. 2229, 29 L.Ed.2d 701 (1971); International Union v. NLRB, 148 U.S.App.D.C. 305, 317, 459 F.2d 1329, 1341 (1972) ("It is an elementary tenet of administrative law that an agency must either conform to its own precedents or explain its departure from them"); Public Service Commission v. FPC, 167 U.S.App.D.C. 100, 115, 511 F.2d 338, 353 (1975); Garrett v. FCC, 168 U.S.App.D.C. 266, 270, 513 F.2d 1056, 1060 (1975); See NLRB v. International Union of Operating Engineers, Local 925 AFL-CIO, 460 F.2d 589, 604 (5th Cir. 1972); NLRB v. Silver Bay Local Union, 498 F.2d 26 (9th Cir. 1974); See Atchison, T. & S. F. R. Co. v. Wichita Board of Trade, 412 U.S. 800, 808, 93 S.Ct. 2367, 37 L.Ed.2d 350 (1973). In this case, whether or not it would be proper actually to work an estoppel against the government, See generally, Davis Administrative Law in the Seventies 399-404 (1976), the vacillation of the Board's approach compels its demand. We deny enforcement of the Board's order because we are able to determine that the lessees in this case were independent contractors, but even were this not possible on the record before us, we would not grant enforcement without first having received from the Board an intelligible rationale for the distinctions they have drawn between employees and independent contractors.52

IV. THE DECISION TO LEASE AS A MANDATORY SUBJECT OF BARGAINING

The NLRB concedes that if cab-lessees are not employees, Yellow and Checker have not committed an unfair labor practice in instituting their leasing program.53 The Union, however, advances the alternative argument that the decision to commence leasing was a mandatory subject of bargaining in that it affected the commission drivers' "wages, hours, and other terms and conditions of employment."54 Thus, even if the companies were within their rights in not recognizing the Union as representative for the lessee-drivers, the Union contends that the companies nevertheless were guilty of an unfair labor practice by their unilateral creation of a leasing option.55

The companies' response to the Union's alternative theory is two-fold. They assert that there was no proof that the mere creation of an opportunity for those who desire to lease cabs to do so affected the "conditions of employment" of the commission drivers. Moreover, even if such an effect was demonstrated, Yellow and Checker argue that the decision to begin a leasing operation was not an unfair practice because it constituted a basic change in their corporate operation and thus was within their managerial discretion.56 They also raise the additional defense even if the leasing decision was a mandatory subject of bargaining, that the Union itself was the party that refused to bargain by refusing to negotiate for the Commission employees unless the companies first recognized the Union as the representative of the lessee-drivers.

The Administrative Law Judge found that there was no evidence that the institution of leasing affected the conditions of employment of the commission drivers, but we feel that we must defer to the Board's expertise in this regard and concur in its rejection of this position. Despite the Union's inability to point to any specific decline in the commission drivers working terms, the Board's argument that any decision which virtually inevitably reduces the size and hence the strength of an employee-group's bargaining unit affects its conditions of employment seems persuasive.57

The fact that an employer's decision affects conditions of employment does not necessarily imply, however, that it is a mandatory subject of bargaining. The law draws a distinction between those decisions "primarily about the conditions of employment" which must be made a subject of bargaining and those which, while affecting the employees' working conditions, are entrepreneurial judgments "fundamental to the basic direction of a corporate enterprise" U.A.W. v. NLRB, 152 U.S.App.D.C. 274, 276, 470 F.2d 422, 424 (1972) or which substantially alter the way in which the business is conducted, Gorman, Labor Law 516, 521 (1976). The latter need not be submitted to bargaining.

At the same time that the law has been careful to insist on preserving the integrity of collective bargaining by mandating bargaining on certain issues, the courts have also been careful not to "significantly abridge (the management's) freedom to manage its own affairs." NLRB v. Adams Diary, 350 F.2d 108, 111 (8th Cir. 1965). "In each case the interests of the employees and the purpose of the National Labor Relations Act . . . must be carefully balanced against the right of an employer to run his business," International Ladies Garment Workers Union v. NLRB, 150 U.S.App.D.C. 71, 78, 463 F.2d 907, 916 (1972), Citing NLRB v. Royal Plating & Polishing Co., 350 F.2d 191, 195 (3d Cir. 1965); See Allied Chemical & Alkali Workers of America v. Pittsburgh Plate Glass Co., 404 U.S. 157, 179, 92 S.Ct. 383, 30 L.Ed.2d 341 n. 19 (1971); Fibreboard Paper Products Co. v. NLRB, 379 U.S. 203, 218, 85 S.Ct. 398, 13 L.Ed.2d 233 (1964) (Stewart, J. concurring). Accordingly, major shifts in the capital investment or corporate strategy of a company are not mandatory bargaining subjects, even though they may well have profound effects on the "conditions of employment," E. g., NLRB v. Drapery Mfg. Co., 425 F.2d 1026, 1028 (8th Cir. 1970); NLRB v. Transmarine Navigation Corp., 380 F.2d 933 (9th Cir. 1967). Indeed even when the change involved affects only a small, but not insubstantial portion of the employer's business operation, it may still be considered sufficiently "fundamental" to be within entrepreneurial discretion if the decision amounts to a business judgment based on economic considerations rather than an action motivated by antiunion animus, NLRB v. Johnson, 368 F.2d 549 (9th Cir. 1966); NLRB v. American Mfg. Co., 351 F.2d 74 (5th Cir. 1965).

The leading case concerning what is and what is not to be considered so fundamental a change as to lie outside the scope of mandatory bargaining is Fibreboard Paper Products Co. v. NLRB, supra. The ambiguity of this opinion is reflected by the fact that both parties in this, as well as other cases, cite the decision in support of their mutually contradictory positions, E. g., UAW v. NLRB, supra, 152 U.S.App.D.C. at 276, 470 F.2d at 424. In Fibreboard, the Supreme Court decided that when a company replaced its current maintenance employees with those of an independent contractor by contracting out the work involved, it must bargain concerning its decision to do so. The court, emphasized that the "decision to contract out maintenance work did not alter the Company's basic operation" and that the employees of the independent contractor were engaged "to do the same work under similar conditions of employment" as the employees whom they replaced, 379 U.S. at 213, 215, 85 S.Ct. at 405. Moreover, the opinion specifically mentioned that its holding "need not and does not encompass other forms of contracting out or 'subcontracting' which arise daily in our complex economy," 379 U.S. at 215, 85 S.Ct. at 405.

The precise scope of the Fibreboard decision is unclear, See 5 Kheel, Labor Law 20-175, and the Courts of Appeals have applied a case-by-case approach to delineating what decisions are beyond the scope of compulsory bargaining, U.A.W. v. NLRB, supra, 152 U.S.App.D.C. at 276, 470 F.2d at 424. Given the ambiguity of Fibreboard and the "all of the circumstances" test the courts have adopted, it is difficult to say that any managerial decision short of absolute termination is obviously within the employer's discretion, but the factual difference between what took place in Fibreboard and the conduct of Yellow and Checker strongly suggests that the result in Fibreboard is not appropriate here.

The Fibreboard company essentially only replaced more expensive union labor with more economical outside workers. By no stretch of the imagination could it be said that the company underwent any basic change in its operations. In the case of Yellow and Checker, on the other hand, the entire point of the companies' going into leasing was significantly to alter what had become a low profit operation.

The institution of leasing in this case differs markedly from the usual case of subcontracting. The issue here might be much closer had Yellow and Checker merely subcontracted out their commission driving work to some chauffeur agency, E. g., U.A.W. v. NLRB, 127 U.S.App.D.C. 97, 381 F.2d 265, Cert. denied, 389 U.S. 857, 88 S.Ct. 82, 19 L.Ed.2d 122 (1967); Winn-Dixie Stores, Inc. v. NLRB, 361 F.2d 512 (5th Cir. 1967), Cert. denied, 382 U.S. 830, 86 S.Ct. 69, 15 L.Ed.2d 74 (1968); Torrington Construction Co., 198 NLRB 1158 (1972); Westinghouse Electric Corp., 150 NLRB 1574 (1965). However, to the contrary, the decision to lease did not merely change the identity of the persons employed, but rather the entire basis of the companies' income. Although the Board places great emphasis on how similar lessee drivers and commission drivers appear to the members of the general public, the simple fact of the financial exigencies that led the cab companies to offer a leasing option indicate that their relationship to the company itself is as discussed above significantly different from that of commission drivers, and that the decision to initiate a leasing program constituted a fundamental corporate change, See N.L.R.B. v. Dixie Ohio Express Co., 409 F.2d 10 (6th Cir. 1969); Compare U.A.W. v. N.L.R.B., supra ; Weltronic Co. v. N.L.R.B., 419 F.2d 1120 (6th Cir. 1969), Cert. denied, 398 U.S. 938, 90 S.Ct. 1841, 26 L.Ed.2d 270 (1970).

By moving into cab leasing, Yellow and Checker ceased to be concerned directly with the profitability of the transportation of persons for hire and instead assumed a position analagous to that of a car or truck rental firm.58 This alteration in the underlying nature of the business of the companies was unquestionably a change in the "basic direction of the corporate enterprise," See 5 Kheel, Labor Law 20-101, and when such changes are motivated by economic considerations there is no duty to bargain concerning them. UAW v. NLRB, supra; NLRB v. Drapery Mfg. Co., supra, 425 F.2d at 1028.

The instant case is similar in many respects to the decision in NLRB v. Adams Dairy, Inc., supra. In that case the Eighth Circuit reaffirmed in the light of Fibreboard59 its holding that a company's decision to abandon its own distribution service and rely on independent contractors was not a mandatory subject of bargaining. The court stated:

In Adams Dairy, on the other hand, a basic operational change did take place when the dairy decided to completely change its existing distribution system by selling its products to independent contractors. . . . The work done by the independent contractors, contrary to the situation in Fibreboard, was not primarily performed in the Adams plant for the benefit of the dairy. Adams was not directly concerned with whether or not any given distributor sustained a profit or loss, as would have been the situation with the driver-salesmen. The only major restrictions that Adams placed upon the independent distributors by contract related to sanitation matters and to the maintenance of high products standards and the maintenance of good will.

Contrary to the situation in Fibreboard, then, there is more involved in Adams Dairy than just the substitution of one set of employees for another. In Adams Dairy there is a change in basic operating procedure . . .

350 F.2d at 111.

Just as Adams Dairy no longer was concerned with the success of its independent distributors, Yellow and Checker are no longer concerned with the success of their lessees. In both instances a change was made in "basic operating procedure."

As in other areas of labor law, E. g., American Ship Building v. NLRB, 380 U.S. 300, 308-309, 85 S.Ct. 955, 13 L.Ed.2d 855 (1965) the factor of anti-union animus is germane to the determination of whether a proposed change in a company's operations is a mandatory subject of bargaining, UAW v. NLRB, supra; NLRB v. Johnson, supra; NLRB v. American Mfg. Co., supra, Gorman, Labor Law 515. In this case there was no proof whatsoever that Yellow and Checker were led into leasing by antiunion animus. Indeed, the prevalence across the nation of newly inaugurated cab-leasing programs60 is some indication that Yellow and Checker in adopting such a program were not motivated by hostility towards their particular union, but rather by recognition of the changing economics of operating taxi-fleets. The obviously compelling nature of the financial justifications for switching to a leasing operation forces a heavy burden of persuasion on anyone seeking to argue that other reasons were in fact at the root of the companies' decision. Neither the Union nor the NLRB has made anything like the requisite showing on this point.

Just as there is no indication that the companies acted from any anti-union animus, there is no reason to suppose that their purpose was merely to replace one set of employees with another an action which obviously would be a mandatory subject of bargaining, Fibreboard Paper Products Co. v. NLRB, supra; NLRB v. Kelly & Picerne, Inc., 298 F.2d 895 (1st Cir. 1962). On the contrary, the focus of their leasing program was not on personnel at all but on the financial structure of the business. The evidence was uncontroverted that the decision to begin leasing was motivated by economic reasons.61 Courts have traditionally been reluctant to require employers to bargain about such decisions, See, e. g., NLRB v. Neiderman, 334 F.2d 601, 604 (2d Cir. 1964); Jays Foods, Inc. v. NLRB, 292 F.2d 317 (7th Cir. 1961), Cert. denied, 379 U.S. 969, 85 S.Ct. 663, 13 L.Ed.2d 561 (1965)62 even when one is dealing with the usual forms of subcontracting which often do little to alter the basic operation of an enterprise and rarely approach changing the basic nature of a corporation's income to the extent that the institution of leasing affected Yellow and Checker's, See NLRB v. Rives Co., 288 F.2d 511 (5th Cir. 1961); NLRB v. Lassing, 284 F.2d 781 (6th Cir. 1960), Cert. denied, 366 U.S. 909, 81 S.Ct. 1085, 6 L.Ed.2d 235 (1961); 5 Kheel 20-70.

In light of the above analysis, it is highly probable we would decide that the decision to lease cabs was not a mandatory subject of bargaining. However, we cannot ignore the fact that determining which decisions affect "conditions of employment" and which of those that do constitute "fundamental corporate changes" is a procedure inevitably wrapped in some ambiguity, Compare Adams Dairy, supra, and Ozark Trailers, Inc., 161 NLRB 561, 565-570 (1966); Cf. I.L.G.W.U. v. NLRB, supra; United Electrical Radio and Machine Workers v. NLRB, 133 U.S.App.D.C. 115, 121, 409 F.2d 150, 156 (D.C. Cir. 1969); 5 Kheel, Labor Law 20-175. Accordingly, we prefer to rest our decision on the grounds that even if the decision to institute leasing was a mandatory subject of bargaining, the companies' unilateral action was not an unfair labor practice because the union itself made any negotiation impossible by imposing an improper condition as a prerequisite to bargaining.

The findings of the Administrative Law Judge, unchallenged by the Board, are sufficient testimony of the Union's preclusion of bargaining:As the lessees were nonemployees, the Union's demand was a nonmandatory subject of bargaining, if not improper, and the Companies were warranted in breaking off their discussions at this point. Therefore it cannot be found that the Companies acted unlawfully by unilaterally instituting leasing. The Union was given notice of the Companies' intention to go into leasing, and an opportunity to discuss the matter and bargain about its impact on the commission drivers, but the Union rejected the opportunity for such bargaining. (63

The Board argued that even though the Union's demand to be recognized as the bargaining agent for the cab-lessees prevented bargaining, this action was "immaterial" in view of the Companies' "preordained refusal to bargain about the decision to lease."64 What the Board failed to recognize was that the companies' attitude was itself in large part provoked by the Union's outspoken and unwavering rejection of cab leasing.

The Union did not directly respond to Yellow about the matter (leasing proposals) . . . Instead, the Union flexed its political muscles. At a meeting of the Chicago Federation of Labor on May 5, Union President Clark informed the press that the Union was opposed to leasing, accused the Companies of engaging in union-busting tactics by setting up Bell and Comet (subsidiaries through which Yellow and Checker initially had planned to lease a number of their cabs), and implied that the drivers might strike. In late May, Commissioner Carter informed Yellow that he would not approve transfer of the license; and, in fact, Yellow's application has never been acted upon. (65

In the face of such overt hostility by the Union, there could be no reasonable expectation of real negotiation on the subject of leasing.66 Indeed, set against this background, the fact that the companies informed the union that they were considering leasing and "invited discussion Before their final decision"67 (emphasis added) evinces a greater commitment on their part to the collective bargaining process than was reflected by the Union.68 When, in addition to its vitriolic attacks on leasing, the Union proceeded to refuse to engage in any negotiations despite the companies' explicit invitation to do so until it was recognized as the bargaining agent for the lessee drivers, it is hard to see what options Yellow and Checker had left other than to initiate their leasing program. It would make a mockery of the labor law for this court to hold that The Company had committed an unfair labor practice by refusing to bargain when the Union gave a public demonstration of its intransigent opposition to a management proposal, attempted to thwart the realization of this proposal by political action, and conditioned any bargaining on an illegal recognition of it as collective bargaining representative. To uphold such conduct would be a distortion rather than a vindication of the Act, See NLRB v. Kelly Bros. Nurseries, Inc., 341 F.2d 433 (2d Cir. 1965); NLRB v. Tex-Tan, Inc., 318 F.2d 472 (5th Cir. 1963).69

V. THE UNILATERAL IMPOSITION OF A CAB "TAKE-HOME" FEE

An additional point, having nothing to do with the leasing problem, concerns the companies' unilateral imposition of a $10 per week charge to commission drivers for the privilege of taking their cabs home with them at night.

In January and February of 1975, some six months before the beginning of their leasing operations, the companies decided that their rule prohibiting overnight privileges was impossible to enforce and instead of prohibiting the practice altogether elected to impose a take-home charge. In doing so, it made no attempt to consult with the Union.

The Companies do not address in their briefs the question of whether or not failing to bargain concerning the imposition of a take-home charge was an unfair labor practice,70 nor did Checker except to this finding before the Administrative Law Judge.71 Accordingly, they may be deemed either to have conceded that the Board's determination that they committed an unfair labor practice was justified or to be barred on procedural grounds from here challenging this decision. Whether or not one or both of these arguments for dismissing the companies' petition to review this aspect of the Board's order has merit, it is clear they did indeed commit an unfair labor practice by not bargaining concerning take-home charges.

There appears to be some dispute as to whether or not it had been the established custom of the companies to allow drivers to take their cabs home at night,72 however, whatever the past practice may have been, the imposition of unprecedented take-home fees was a change from such practice, and thus was a mandatory bargaining subject because it affected the drivers' conditions of employment, See United Electrical Radio and Machine Workers of America v. NLRB, 133 U.S.App.D.C. 115, 409 F.2d 150 (1969); NLRB v. Detroit Resilient Floor Decorators Local 2265, 317 F.2d 269, 270 (6th Cir. 1963) ("All emoluments of value or other benefits accruing to employees out of their relationship with their employer" are mandatory subjects of bargaining.).

Leasing fees for company houses have consistently been held to be a mandatory subject of bargaining, E. g., NLRB v. Lehigh Portland Cement Co., 205 F.2d 821 (4th Cir. 1953), enforcing 101 NLRB 529 (1952); NLRB v. Hart Cotton Mills, Inc., 190 F.2d 964 (4th Cir. 1951); American Smelting and Refining Co. v. NLRB, 406 F.2d 552 (9th Cir.), Cert. denied, 395 U.S. 935, 89 S.Ct. 1998, 23 L.Ed.2d 450 (1969), and leasing fees for company cars seems only marginally different.73 In fact, a change in policy governing the right to take a company car home at night has specifically been held to be a mandatory subject of bargaining, particularly where, as here, those granted the privilege are thereby enabled to earn additional income,74 See Wil-Kil Pest Control Co. v. NLRB, 440 F.2d 371, 374-375 (7th Cir. 1971).

There can be no question that an employer violates section 8(a)(5) of the Act, 29 U.S.C. § 158(a)(5)75, by unilaterally changing the conditions of employment without giving the union an opportunity to negotiate concerning the change, NLRB v. Katz, 369 U.S. 739, 743, 747-748, 82 S.Ct. 1107, 8 L.Ed.2d 230 (1962); NLRB v. C & C Plywood Corp., 385 U.S. 421, 424-425, 87 S.Ct. 559, 17 L.Ed.2d 486 (1967), regardless of what the employer's motives in instituting such a change may have been, NLRB v. Katz, supra, 369 U.S. at 742-743, 82 S.Ct. 1107.76 We see no basis for disputing the Board's decision that the actions of Yellow and Checker in this respect amounted to unfair labor practices. Obviously, however, in requiring the Companies to bargain concerning the imposition of the take-home fees, we do not suggest that they cannot impose such charges, but only that they must negotiate in good faith with the Union before doing so,77 See, e. g., NLRB v. American National Insurance Co., 343 U.S. 395, 72 S.Ct. 824, 96 L.Ed. 1027 (1952); NLRB v. McLane Co., 405 F.2d 483 (5th Cir. 1968); NLRB v. American Compress Warehouse Division of Frost-Whited Co., 350 F.2d 365 (5th Cir. 1965), Cert. denied, 382 U.S. 982, 86 S.Ct. 558, 15 L.Ed.2d 472 (1966); Radiator Specialty Co. v. NLRB, 336 F.2d 495 (4th Cir. 1964).

The final question presented here concerns the appropriateness of the remedy ordered by the Board. The Union submits that as the imposition of the take-home fee without bargaining was an unfair labor practice the Companies should reimburse all those who had paid that fee.78 The Board refused to order such relief on the grounds that no showing had been made that the drivers who had paid the ten dollar fee had been injured by doing so.79 Although there was testimony that some drivers were allowed to take their cabs home at night before the companies instituted the take-home charges,80 most of them were prohibited from doing so.81 Thus, many of those who paid the $10 fee may in fact have been making a profit in doing so, depending on how many additional fares they could obtain while driving to and from their homes.82

In such circumstances of ambiguous injury, it was clearly within the Board's discretion to decline to order reimbursement. Not only is the Board directed by the Act to impose only remedial, not punitive relief, See Local 60, United Brotherhood of Carpenters v. NLRB, 365 U.S. 651, 655, 81 S.Ct. 875, 6 L.Ed.2d 1 (1961); NLRB v. Seven-Up Bottling Co., 344 U.S. 344, 346, 73 S.Ct. 287, 97 L.Ed. 377 (1953), but also it is well settled that the Board's discretion in the selection of remedies is exceedingly broad, See NLRB v. J. H. Rutter-Rex Mfg. Co., 396 U.S. 258, 90 S.Ct. 417, 24 L.Ed.2d 405 (1961); NLRB v. Gissel Packing Co., 395 U.S. 575, 612, 89 S.Ct. 1918, 23 L.Ed.2d 547 n.32 (1969); Fibreboard Paper Products Co. v. NLRB, supra, 379 U.S. at 216, 85 S.Ct. 398; Virginia Electric & Power Co. v. NLRB, 319 U.S. 533, 540, 63 S.Ct. 1214, 87 L.Ed. 1568 (1943)83; United Steelworkers of America, AFL-CIO v. NLRB,141 U.S.App.D.C. 178, 179, 436 F.2d 908, 909 (1970) Cert. denied, 403 U.S. 905, 91 S.Ct. 2205, 29 L.Ed.2d 680 (1971); Amalgamated Clothing Workers v. NLRB, 125 U.S.App.D.C. 275, 281, 371 F.2d 740, 746 (1966). The Board's selection of remedies will not be disturbed absent a clear showing of abuse, and given the doubt as to whether there has in fact been any injury to be remedied we cannot hold that the Board abused its authority in denying reimbursement of the take-home fees that had been paid.

The Union's other challenge to the remedy imposed by the Board is vitiated by our finding that the companies did not commit an unfair labor practice in refusing to recognize the Union as representative of the lessee drivers, Yellow and Checker cannot be held liable to the union for those "dues and initiation fees which (the Union) certainly would have received"84 had it been recognized as the representative of the lessee-drivers.

In accordance with the above analysis, we grant Yellow and Checker's petition to review in respect to its challenges to the Board's decision that the companies' lessee-drivers are employees and not independent contractors and that Yellow and Checker committed an unfair labor practice by refusing to bargain concerning their decision to institute leasing. We deny the Union's petition for review of that part of the Board's order that refused its claim for "dues and initiation fees," "take-home fees" and "interest." We grant the NLRB's cross-application for enforcement only insofar as the Board found that the unilateral imposition of a cab take-home fee violated section 8(a)(5) and (1) of the Act and ordered its rescission.

So ordered.

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

PER CURIAM.

Upon consideration of respondent's petition for rehearing, and of the response filed thereto, it is

ORDERED, by the Court, that respondent's aforesaid petition for rehearing is denied for the reasons set forth in the opinion for the Court filed herein this date.

Opinion for the Court filed by MacKINNON, Circuit Judge.

The Board and the Union (hereinafter "petitioners") petition for rehearing contending that the court must defer to the Board's decision that the lessee cab drivers were "employees" within the meaning of the Labor Act, and that the panel's failure to do so was "revolutionary."1 Specifically, petitioners make the following arguments: (1) the panel exceeded the scope of its judicial authority by conducting a "De novo review" of the Board's decision; (2) "the Board's history of vacillation and the basically legal nature of the question"2 should not reduce the amount of deference due the Board's determination; and (3) the panel ignored substantial evidence supporting the Board's finding that the lessee cab drivers are "employees" rather than "independent contractors." In addition, petitioners argue that the panel opinion is inconsistent with Fibreboard Paper Products Corp. v. NLRB, 379 U.S. 203, 85 S.Ct. 398, 13 L.Ed.2d 233 (1964).3 Since these arguments misinterpret both the panel opinion and the relevant decisional and statutory law, a response is appropriate.

* Petitioners describe the court's opinion as constituting a De novo review, and cite a number of cases which hold that courts should not engage in De novo review of administrative decisions. Of course, De novo review of the Board's decisions is ordinarily inappropriate,4 and should not be indulged in "as an original matter."5 The flaw in petitioners' argument is their assertion that the court's decision is a product of De novo review. It is not.

The term "do novo review" is often used loosely. Losing parties tend to apply it to unfavorable court decisions as an epithet. But actually, it has a rather precise meaning.

We must always be conscious of the distinction between a de novo trial, where the case is tried a second time and the record is made up in the district court, and a court's review of findings of an administrative body, where the record is solely that of the administrative body.

Globe-Union, Inc. v. Chicago Telephone Supply Co., 103 F.2d 722, 728 (7th Cir. 1939).6

In light of this definition, it is clear that the court did not engage in objectional De novo review. It did not re-examine the Board's findings of fact. Rather we considered whether the Uncontroverted facts, when they were applied to the settled law, were sufficient In law to warrant the Board's conclusion that the lessee drivers are employees rather than independent contractors. Following that standard the opinion pointed out that the Board's findings of fact did not support its Conclusion of law,7 that the lessee drivers are employees. The defects in the ruling were set forth in considerable detail, and the Board's decision was therefore reversed.8 In sum, while De novo review would have been improper, that rule is not relevant here because our decision is not a product of a De novo review. Rather it is a product of the responsibility placed on a court that reviews the action of an administrative agency to "fully review . . . administrative decisions." In our view the facts of record are insufficient to support a conclusion of law that the lessee cab drivers are employees, and, as we develop below, to so hold would violate the "statutory mandate" and the "congressional policy" underlying the statute.

195 U.S.App.D.C. at ---, 603 F.2d at 872. Petitioners acknowledge that there is some tension between the Board's early decisions holding lessee cab drivers are "employees" and its more recent decisions finding that lessees are "independent contractors."9 The Board contends, however, that neither its vacillating record on this issue, nor the basically legal nature of the question, reduces the extent to which courts must defer to the Board. This argument substantially answers itself and we are not in any doubt that when an agency on a particular legal issue, without giving any Reasoned decision for changing, arrives at three different interpretations within a few years, where there has not been any demonstrated change in decisional law, statute, or circumstances to justify changing the law, then a court is justified in examining more closely the basis for the unexplained shift in the Board's decisions.

* We recognize that the Board's decision is not subject to De novo review merely because it was "a determination of pure agency law involv(ing) no special administrative expertise that a court does not possess." NLRB v. United Insurance, 390 U.S. 254, 260, 88 S.Ct. 988, 991, 19 L.Ed.2d 1083 (1968). We also recognize the "authority of the Board to modify its construction of the Act in light of its cumulative experience . . . ." Beth Israel Hospital v. NLRB, 437 U.S. 483, 508, 98 S.Ct. 2463, 2477, 57 L.Ed.2d 370 (1978).10 Beth Israel related to a new law applying the labor act to non-industrial public hospitals for the first time. However, the instant case merely called for an application of settled common law principles of agency law to uncontroverted facts under a statutory definition that has not been changed in any respect since it was significantly amended in 1947 to correct the construction that was applied in NLRB v. Hearst Publications, 322 U.S. 111, 64 S.Ct. 851, 88 L.Ed. 1170 (1944).

We also recognize, as the Supreme Court stated in NLRB v. Weingarten, Inc., 420 U.S. 251, 265, 95 S.Ct. 959, 967-68, 43 L.Ed.2d 171 (1975), that:

The use by an administrative agency of the evolutional approach is particularly fitting. To hold that the Board's earlier decisions froze the development of this important aspect of the national labor law would misconceive the nature of administrative decisionmaking.

The instant decision, however, is erratic rather than evolutional. In Weingarten the Board carried out its obligation to explain the shift by pointing to "significant developments in industrial life . . . ." 420 U.S. at 265, 95 S.Ct. at 967. Here the Board points to no significant developments, and refuses to recognize the precedential nature of its prior decisions. It tersely states: "suffice it to say that (cases coming to the opposite conclusion that such lessees are not employees) Must be narrowly construed. . . ."11 (Emphasis added). That statement, and the factual recitations which lead merely to the conclusory judgment, fall far short of the reasoned analysis or satisfactory explanation that an agency must give when it seeks to ignore a line of precedential decisions and change the law established by judicial decisions.

We are not disposed to argue whether the Board has ignored prior precedent or whether the Board's decisions on this issue have, as it states, created a situation where, "Significantly, none of the later cases (arriving at a different result) overruled any of the prior cases."12 Either situation requires us to examine its decision with especial care. An agency has an admitted discretion in matters of Policy, but the principal issue here is a matter of decisional law, not policy. As we indicated previously, the only significant development that impacted on the Board's current decision is the recent change in the composition of the Board that reversed the decision of the Administrative Law Judge and "narrowly construed" the latest existing precedents to the point of extinction.13 Such erratic decisionmaking is unacceptable particularly as to Issues of law. While the Board is authorized to change its mind, when it does so it must at least carefully explain its reasons, justify the change and follow controlling law. Otherwise previously created propositions of law based on factual determinations operate as precedents, Stare decisis. Republic Aviation Corp. v. NLRB, 324 U.S. 793, 65 S.Ct. 982, 89 L.Ed. 1372 (1945), C.f., Matter of Peyton Packing Co., 49 N.L.R.B. 828 (1943). Radio Officers' Union v. N. L. R. B., 347 U.S. 17, 74 S.Ct. 323, 98 L.Ed. 455 (1954). As Professor Davis wrote with respect to the Interstate Commerce Commission:

(An agency) not only may but must take notice of applicable law, whether the law is embodied in the Constitution, a statute, judicial decisions, or administrative decisions . . . That those decisions rested upon findings which in turn rested upon evidence, is no reason for saying that the (Interstate Commerce) Commission was not bound to follow them or to distinguish or overrule them.

K. C. Davis, Administrative Law Treatise § 15.04 at 376 (1958) (hereinafter Davis). While the Board may change its mind it cannot change the statutory and decisional law as fixed by court decisions following the express mandate of Congress. The Board's failure here to follow, not its own vacillating decisions, but the decisions of the federal courts cannot be condoned.14

Our decision does not depend on the niceties between various standards of review and our conclusion that the Board's decisionmaking has been unacceptably erratic is not necessary to the result we reach. On the contrary, even if the Board's decision followed prior Board precedent, it would be necessary to reverse the Board's determination that the lessee cab drivers are "employees" under the National Labor Relations Act because it does violence to the intent of Congress and established principles of agency law as enunciated by the courts. The operative facts here fall considerably short of the amount and character of control necessary to a finding that the lessees are employees.

The Supreme Court has consistently stated that reviewing courts should Not Defer to the Board when the Board's decision is inconsistent with the statute that is supposedly being applied.15 A recent decision to this effect is NLRB v. Brown, 380 U.S. 278, 85 S.Ct. 980, 13 L.Ed.2d 839 (1965) where the Labor Board held that an employer's lockout of striking employees was a violation of the Act. The reversal of the Board by the Court of Appeals was affirmed by the Supreme Court despite the Board's claim, as here, that "the Court of Appeals exceeded the authorized scope of judicial review." The Supreme Court stated:

This proposition rests upon our statement in Buffalo Linen (353 U.S. 87, 77 S.Ct. 643, 1 L.Ed.2d 676) that in reconciling the conflicting interests of labor and management the Board's determination is to be subjected to "limited judicial review." 353 U.S., at 96, 77 S.Ct. 643. When we used the phrase "limited judicial review" we did not mean that the balance struck by the Board is immune from judicial examination and reversal in proper cases. Courts are expressly empowered to enforce, modify or set aside, in whole or in part, the Board's orders, except that the findings of the Board with respect to questions of fact, if supported by substantial evidence on the record considered as a whole shall be conclusive. National Labor Relations Act, as amended, §§ 10(e), (f), 29 U.S.C. §§ 160(e), (f) (1958 ed.). Courts should be "slow to overturn an administrative decision," Labor Board v. Babcock & Wilcox Co., 351 U.S. 105, 112, 76 S.Ct. 679, 100 L.Ed. 975, but they are not left "to 'sheer acceptance' of the Board's conclusions," Republic Aviation Corp. v. Labor Board, 324 U.S. 793, 803, 65 S.Ct. 982, 89 L.Ed. 1372. Reviewing courts are not obliged to stand aside and rubber-stamp their affirmance of administrative decisions that they deem inconsistent with a statutory mandate or that frustrate the congressional policy underlying a statute. Such review is always properly within the judicial province, and courts would abdicate their responsibility if they did not fully review such administrative decisions. Of course due deference is to be rendered to agency determinations Of fact, so long as there is substantial evidence to be found in the record as a whole. But where, as here, the review is not of a question of fact, but of a judgment as to the proper balance to be struck between conflicting interests, "(t)he deference owed to an expert tribunal cannot be allowed to slip into a judicial inertia which results in the unauthorized assumption by an agency of major policy decisions properly made by Congress." American Ship Building Co. v. Labor Board (, 380 U.S. 300, 85 S.Ct. 955, 13 L.Ed.2d 855) Post, at 318, 85 S.Ct. 955.