NLRB General Counsel Advice Memorandum Is “Uber” Favorable For Gig Economy Companies Utilizing Independent Contractors (US)
In a recently-released Advice Memorandum dated April 16, 2019, the National Labor Relations Board’s (“NLRB”) Office of the General Counsel (“GC”) determined that drivers utilizing Uber Technologies’ smartphone application-based rideshare platform are independent contractors, not employees, under the National Labor Relations Act (“NLRA”). In arriving at this conclusion, the GC utilized the independent contractor test announced earlier this year in the NLRB’s decision SuperShuttle DFW, Inc., which we reported about here. In SuperShuttle, the NLRB reinstated the common law agency test, a ten-factor test in which no one factor is determinative. Applying those factors in the Uber memorandum, the GC noted that the overarching principal to consider under the SuperShuttle test is a worker’s “entrepreneurial opportunity” – workers who have significant control over their profits and losses are likely independent contractors. For commercial transportation companies, the GC noted that entrepreneurial opportunity can best be assessed by analyzing the company’s control over how workers perform their work, and how worker compensation relates to the fares collected.
Key factors in the memorandum’s conclusion were Uber drivers’ control over their vehicles, work schedules, and work locations, and their ability to work for competitors. Specifically, Uber drivers use their own vehicles and essentially provide all of their own work tools; drivers are allowed to choose how often they work, where and when they log into the Uber app, and for how long; drivers are not required to accept any more than one rideshare a month to remain active, and they are not only allowed to, but frequently do, switch back and forth between Uber and competitor apps to determine which fares they will accept (or reject – Uber drivers are also free to reject trips, in their discretion).
On the other hand, the GC assessed that some factors demonstrated a certain amount of “control” by Uber over drivers’ work, such as requiring driver cars to be approved before use, rules requiring professional behavior and return of items left behind by riders, limited amounts of training, and rider ratings, but concluded that these were minimal controls designed to protect the Uber brand. The memorandum also noted that these requirements did not significantly diminish drivers’ economic opportunities.
The GC noted that the fee arrangement between Uber and its drivers was a neutral factor, neither in favor of or against a finding that Uber drivers are independent contractors. Uber, which charges all riders directly through the app, takes a percentage of each fare and provides the remaining fare to the driver. The GC stated that it has traditionally found that arrangements like this are akin to a commission, a structure more typically associated with employees, whereas a flat-fee-for-fare paid by the driver to the transportation company, an arrangement used by some other transportation services, would be a more typical independent contractor structure. However, the GC noted that despite these characterizations, in this case, Uber’s payment structure provided drivers with more control over their own economic opportunities, for example, by charging higher rates to riders in periods of high demand, thereby incentivizing drivers to drive when they will receive the increased fare. The memorandum noted that it is not the payment structure itself, but the actual impact that the structure has on the workers’ entrepreneurial opportunity, that is determinative of how the structure impacts the employee or independent-contractor status.
The memorandum noted that although the fact that Uber drivers do not require special training before becoming an Uber driver and that the services provided are integral to Uber’s business weighed in favor of the drivers being characterized as employees, these factors were outweighed by other factors and the overall assessment that Uber drivers have significant control over their economic opportunities. Therefore, the memorandum concluded that Uber drivers are not employees covered by the NLRA, and that the unfair labor practice charges filed against Uber, which relied on a finding that the drivers are employees under the NLRA, must be dismissed. In reaching that conclusion, the GC further essentially ruled that Uber and similarly structured companies may not face union organization or other implications of the NLRA for the largest part of their workforce.
As a reminder, just last month, the United States Department of Labor (“DOL”) also concluded that gig economy workers are independent contractors, and thereby, under applicable federal wage laws, are not legally entitled to federal minimum wage and overtime. As we discussed in our post on this development, using an analysis similar to the NLRB’s in SuperShuttle, the DOL also focused on the “economic dependence” of a purported independent contractor, which the DOL explained includes an analysis of the individual’s ability to determine their own profit and loss, independently from the decisions of the prospective employer. Notably the “virtual marketplace company,” described in the DOL’s opinion letter strongly resembled the structure used by Uber, Lyft, and many similar smartphone app-based rideshare companies. Thus, the NLRB GC’s Uber advice memorandum is just another sign of the protection of this fast-growing business model, allowing companies and workers to enjoy the benefits of this structure.