Since the emergence of the “gig economy” in the last decade, courts and government agencies have grappled with the question of whether gig workers should be classified as employees or contractors. The answer to that question has enormous consequences for how these workers are treated under various federal and state employment laws, ranging from anti-discrimination statutes like Title VII to wage-and-hour laws like the Fair Labor Standards Act.
Generally, these laws cover only “employees” and exclude “contractors,” but those terms are not susceptible to quick and simple definitions.
The National Labor Relations Board recently took an important step to provide clarity for businesses operating in the modern gig economy. The NLRB’s Division of Advice, part of its Office of General Counsel, issued a memo explaining why Uber drivers are deemed to be contractors, and not employees, for purposes of the National Labor Relations Act.
The immediate effect of this memo is that Uber drivers do not enjoy the protections of the NLRA, including the right to strike and organize with fellow employees to try to improve wages and working conditions.
A Multi-Factor Test
Like other employment laws, the NLRA applies only to employees, and expressly excludes independent contractors from its coverage. When a worker’s classification as an employee or contractor is in question, the NLRB applies a multi-factor test that is rooted in the common law of agency. Of the many factors that may be considered (the list is non-exhaustive), the NLRB focuses on the extent of control exercised by the purported employer over the worker and the extent of “entrepreneurial opportunity” of the worker. The greater the worker’s entrepreneurial control, the more likely the worker will be considered a contractor, rather than an employee.
According to the memo, Uber drivers are contractors for two core reasons. First, Uber does not exert a sufficient amount of control over drivers to be consider their employer. The drivers have “near complete control” of their schedules, and can log on or off the platform at any time for any reason. Uber does not assign rides to particular drivers, provide cars or other equipment (drivers supply their own cars), or supervise drivers while they are logged into the app and working, which is essentially outsourced to the passenger rating system. Indeed, Uber has a “hands off” approach to its drivers.
Second, the system created by Uber for drivers generally allows them to control their own entrepreneurial destiny. Uber’s lack of control provides room for drivers to serve their own economic objectives and interests (i.e., the more you work, the more you can potentially earn and vice-versa). Notably, Uber’s rules allow drivers to use other ridesharing apps or pursue other transportation-related business opportunities in addition to driving for Uber.
Due to Uber’s lack of control over drivers and the entrepreneurial freedom drivers enjoy, the General Counsel concluded that the drivers are contractors who should not be afforded the protections of the NLRA. For this reason, the Division of Advice ordered that the driver’s complaints be dismissed.
The drivers can appeal to the NLRB’s General Counsel or withdraw their complaints prior to formal dismissal. It is expected that the General Counsel would agree with the conclusions of the Advice memo. While the memo is technically not binding on the NLRB, the General Counsel’s office controls exercises a gatekeeping function in deciding which cases are brought before the NLRB. As a result, without a case on which to rule, the NLRB cannot “overrule” it. Significantly, the memo’s proposition that Uber drivers are contractors is also supported by recent Board precedent.
The SuperShuttle Precedent
In SuperShuttle DFW, 367 NLRB No. 75 (2019), which was decided before the Uber memo, the Board found that drivers of a shared airport ride service were independent contractors, not employees, and thus were not covered by the Act. There, the Board reverted back to the 10-factor common law test for determining independent contractor status and re-established the importance of “entrepreneurial activity.” Although the SuperShuttle decision did not concern drivers for rideshare companies, it is still expected to have an impact on gig economy companies reliant on a freelancing and/or sporadic workforce. In fact, in finding that SuperShuttle drivers were independent contractors, the Board relied on several facts about their work that are also true for Uber drivers (e.g., Uber drivers decide when to work and what hours to work, which trips to accept and when to turn on the device that alerts them to an available trip).
Together, the Advice memo and the SuperShuttle decision clarify Board precedent in this area and are likely to influence future disputes stemming from the gig economy as a whole. And while the opinion may be limited to the NLRA, similar multi-factor tests are applied by courts and other agencies in the context of a host of other employment laws (Title VII, FLSA, FMLA, etc.). Therefore, this memo may be cited, or its arguments may be relied upon, in a wide range of future disputes over employee/contractor status.
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