SAN FRANCISCO With the economy slowing, motorcoach operators might be tempted to convert some of their employees, especially drivers, to "independent contractors" rather than lay them off.

Before taking such a step, operators need to be certain the arrangement would stand the test of legal scrutiny.

A new U.S. Court of Appeals decision -- in a case involving several taxi companies -- may be seen as a list of the things an employer should not do if it is trying to maintain an independent-contractor relationship.

The judges for the U.S. Ninth Circuit held that taxi drivers for several related companies were employees rather than independent contractors for purposes of the National Labor Relations Act. The cab companies, which were under common ownership, operated in the Oakland, Calif. area.

In opposing an effort by the Teamsters Union to organize the drivers, the owners of the taxi companies argued their drivers were independent contractors rather than employees. The National Labor Relations Board found them to be employees, and the court, applying various common-law factors used to distinguish employed individuals from contractors, agreed.

Here are some of the key factors the court took into consideration:

The drivers leased their cabs from the company on week-by-week leases; they did not own them.

The drivers paid weekly fees calculated at the discretion of the company, but based at least loosely on safety records and experience.

Drivers were expected to follow the companies operating procedures, which included certain rules on how they were to drive, and were required to attend an annual training class on those procedures.

Although not obliged to wear uniforms, the drivers were to wear specified types of clothing on the job.

Drivers were not able to work for other cab companies, nor, while on the job, were they free to turn down dispatched runs.

The drivers were not permitted to sublease their cabs to other drivers, and were obliged by the companies to carry ads on their vehicles advertising third parties.

With these circumstances and others in mind, the court had little trouble in upholding the NLRB decision that the drivers were the employees of the companies and subject to the National Labor Relations Act.

The one test the Internal Revenue Service has consistently applied in deciding whether motorcoach drivers are employees or contractors is "whose equipment is being operated?"

If the driver brings the coach, there is at least the initial basis for a contractor relationship as long as the driver can choose trips and drive for other companies. If the company furnishes the coach, charters and instructions, the driver is most likely an employee.