HIGHLIGHTS:

• The National Labor Relations Board's (NLRB) General Counsel released an Advice Memorandum that concludes that drivers for a ride-sharing app are independent contractors and, therefore, not covered by the National Labor Relations Act.
• The General Counsel's analysis focused on the traditional common law factors for assessing whether a worker is a contractor or employee.

The General Counsel's office of the National Labor Relations Board (NLRB) released an Advice Memorandum on May 14, 2019, concluding that ride-share drivers with the mobile ride-sharing app Uber are properly classified as independent contractors. The General Counsel issued the Advice Memorandum on April 16, 2019, in connection to three unfair labor practice charges filed against Uber Technologies Inc. The Advice Memorandum focused on "whether drivers providing personal transportation services using the Employer's app-based ride-share platform were employees of the Employer or independent contractors."

In determining that Uber drivers are independent contractors, the General Counsel evaluated the relationship between Uber and the drivers under the traditional common law 10-factor balancing test set forth in the Restatement (Second) of Agency and recently applied by the NLRB in SuperShuttle DFW, Inc., 367 NLRB No. 75 (Jan. 25, 2019). (See Holland & Knight alert, "NLRB Restores Common Law Agency Test for Independent Contractor/Employee Status Under NLRA," January 30, 2019.) The General Counsel gave particular weight to the degree of independence that the drivers exercised in performing their work and whether the drivers faced risks and opportunities inherent with entrepreneurialism in their work.

The General Counsel found that the drivers were free to decide how to best serve their individual economic objectives through choosing their work schedules, their work locations, which rides to fulfill through the Uber app and whether to work with a competing ride-sharing service. These factors provided the ride-share drivers significant control over their earnings and therefore encouraged entrepreneurship. The General Counsel also determined that Uber's "surge" pricing amplified entrepreneurial opportunity by providing variable fare pricing and promotions aimed at encouraging drivers to work during peak times.¹Despite a commission-based compensation model traditionally indicating an employment relationship, the General Counsel concluded that this form of compensation model was immaterial where the company did not exert control over the drivers' work. Ultimately, the General Counsel concluded that the drivers had near-absolute autonomy in performing their daily work without supervision, which supported the conclusion that Uber drivers are independent contractors.

Takeaways and Considerations

The Advice Memorandum provides further clarity for gig economy companies by clarifying when workers are properly classified as independent contractors or employees. Notably, the Advice Memorandum is consistent with the U.S. Department of Labor's April 29, 2019 Opinion Letter on the same issue. (See Holland & Knight alert, "DOL Issues Guidance on Independent Contractors in 'Gig Economy'," May 6, 2019.) Unfortunately, state laws on proper classification of gig economy workers remains inconsistent.

Although the Advice Memorandum is not a decision of the NLRB, its impact nevertheless is significant. While the Advice Memorandum remains in force, the NLRB's regional offices will analyze similar gig economy workers under the Advice Memorandum's approach.

Notes

¹ Subsequent to the drivers filing the unfair labor practice charges at issue in the Advice Memorandum, Uber has removed "surge" pricing. The General Counsel limited its analysis and conclusion to the time that the charges were brought.