In Uber’s ongoing battle over whether its drivers should be classified as employees or independent contractors it found a new ally in the National Labor Relations Board (NLRB), which recently issued an opinion letter confirming that from now on they will be considered contractors as far as federal labor law is concerned.
The NLRB’s General Counsel’s office issued an Advice Memo holding that drivers providing personal transportation services using Uber Technologies Inc.’s “app-based ride-share platforms” were independent contractors and not employees. The counsel’s office also directed NLRB regional directors in San Francisco, Chicago and Brooklyn to dismiss unfair labor charges that were filed in 2014, 2015 and 2016.
The board’s memo was issued less than a month after the U.S. Department of Labor (DOL) made public an Opinion Letter that took a similar position, and which had been sought by an unnamed company that by its description strongly resembles the Uber and Lyft operations.
The new NLRB memo relies on a decision voted on by the full board earlier this year declaring that SuperShuttle van drivers were independent contractors. In the decision, the NLRB held that the question of whether a worker is a contractor should be based on what is generally termed “the common-law agency test.”
Before radical changes were made five years ago by the Obama-era NLRB, the board had for years applied the traditional common-law agency test to determine whether a worker is an employee or independent contractor under the National Labor Relations Act. But that was before the Obama Administration agencies mounted a concerted assault on independent contractor status.
This stemmed from both an ideological distaste for the independent contractor concept in general, which they believe is inherently exploitative, and as a means for the Obama Administration to extend support for its labor union allies, who legally can only organize employees, not contractors who are considered independent businesses under antitrust law.
The common-law agency test the NLRB now relies on incorporates careful consideration of a number of factors regarding the contractor relationship, including:
● How much control the contracting company exercises over the worker.
● Whether the worker’s services fall outside the company’s core competencies.
● Whether the contracting company provides the tools, equipment and place of work.
● How long the worker has served that company.
● How the worker is paid.
● Whether the worker has significant “entrepreneurial opportunity,” i.e., if the situation affords the worker significant room to generate his or her own profits or alternatively, to recognize losses.
The NLRB General Counsel’s Advice Memo notes that the analysis of these factors is qualitative and not “strictly quantitative” and that there is “no shorthand formula,” points out Steven M. Swirsky, an attorney with the law firm of Epstein Becker Green. The memo also notes that the board believes the question of whether the worker is assuming “the opportunities and risks inherent in entrepreneurialism” when combined with the other factors will be likely to lead to a finding of independent contractor status.
Keeping Options Open
What this means for businesses, Swirsky says, is that the NLRB “will continue to place great emphasis on whether an individual is taking risk in return for potential gain, finding that this is more consistent with an independent contractor relationship than an employer-employee relationship. However, the Advice Memo also indicates that the NLRB will continue to assess each situation based on its own unique facts.”
It is unclear at this point what impact the NLRB opinion letter may have regarding ongoing efforts to classify Uber and Lyft drivers as employees that have been taking place in the states and some metropolitan areas. For example, a law passed a few years ago by the Seattle City Council requiring Uber drivers to join the Teamsters union is still undergoing challenges in the court system.
DOL in its recent Opinion Letter issued in April similarly held that workers in the gig economy can be considered contractors when it comes to federal wage and hour regulations under the Fair Labor Standards Act (FLSA), most of which deal with enforcement of the federal minimum wage and overtime regulations.
DOL concluded the company that had sought the letter “empowers service providers to provide services to end-market consumers” and merely provides a referral service. According to DOL, “as a matter of economic reality, they are working for the consumer,” not the company providing the platform.
The company that sought the letter was not named in the published Opinion Letter, but DOL said the primary purpose of the unnamed business is “to provide a referral system that connects service providers with consumers,” which sounds a lot like Uber and Lyft. That letter also is seen as having a wider impact because both Uber and Lyft are now considered classic exemplars of the gig economy, which is often used to describe a wide variety of other kinds of independent contractors.
Although the DOL opinion letter is not binding on courts, they may choose to defer to an agency’s interpretation of the law in certain situations, observe attorneys for the law firm of Ogletree Deakins. In addition, if circumstances are similar enough, the law firm says employers can sometimes rely upon opinion letters like this one as a good faith defense to claims arising from the FLSA.
Another issue to keep in mind is that both the NLRB and DOL actions are administrative directives and unlike completed rulemaking proceedings they could be quickly changed when a new Administration takes power.
Secretary of Labor Alexander Acosta indicated in a September 2018 interview that DOL would be looking more closely at the employee classification issue after the department issues its recommendation on changing the standard on joint employer status. DOL officially opened a joint employer proposed rulemaking this April.
With the state legislature in California poised to codify into law a state Supreme Court decision last year that outlawed most traditional categories of independent contractors, including owner-operator truck drivers, and states elsewhere making it more difficult to classify workers as contractors, the only thing certain is that this conflict born years ago will continue for some time to come.